I'm posting here the article by Christoph Weder that appeared in last weeks Grain News. It lists the contact information of the retailers that are doing us no favors by selling imported beef in increasing quantities. So get at it folks - if this makes you mad let them know!
“Beef 2010 - The Good the Bad and the Ugly”?”
Christoph E. Weder – SVR Ranch Consulting
So it’s a new year and the optimists that still have cattle are thinking this will be the year!!! Last I checked, there were still a few cows in our back forty and so I guess we must be one of them…Not that I am a market analyst, but here are my two bits……. “Weder’s - The Good the Bad and the Ugly”.
The Good: The Herd Size….The whole world is liquidating/reducing breeding cow numbers because returns have not kept par with expenses….(now isn’t that an interesting phenomena?). From Australia to New Zealand to Brazil to Argentina and even our neighbors to the south all are retiring their spurs and replacing them with flip flops and enjoying the good life. Even my 4 year old can figure out that with fewer cows you get less calves, which would eventually mean less beef…. True for the most part but Big Pharma is mitigating this with TBA Implants, Beta Agonists and other tools of the trade, so even though we have less cattle they all die at a heavier weight, or at least they do so in North America. This said there is only so far that Big Pharma can grow carcasses and eventually beef supply goes down…however, countering the effect of the economics 101 supply/demand curve is that the demand curve is slumping as well… or at least it is for the high valued cuts. It’s now minute steaks, quick roasts and hamburgers instead of NY strips, ribs and filet mignon. To raise the value of fed cattle we need the middles to rally. Till now that simply has not happened. Or another way to look at it is simply the retailers should just share more of the pie. At least the argument that cattle prices are in the tank because there are too many will no longer be there....it’s just that everyone is too cheap and some aren’t sharing.
The Bad: The Canadian Dollar… if our dollar at present were equivalent to the value April 2003, our fats would be $1.30 / lb on the hoof. Is the dollar value going to change anytime soon…I doubt it… its Bad because its implications by far overshadow any gains made by reductions in herd sizes…
Not only does a high dollar make exports more expensive but it also makes imports cheaper to buy. The George Morris centre reported that last October beef exports were down by nearly 5% on a year to date basis. Total beef imports were up by more than 11% and Australia and New Zealand exports increased by a whopping 40% and 50% respectively. The main reason given, was that Canada’s domestic production of lean manufacturing beef has steadily declined as cows headed to the grass heavens. At the same time the domestic market for manufacturing and grinding beef has gained ground as a recession induced diet of hamburger helper fuels the fire. In fact right now this supply /demand curve on cull cows is actually working… there are less of them, the packers have a good demand for the products that come from them and rail prices for culls have grown by twenty cents since Christmas.
Will cull cows continue gaining value? I believe to a point but after spending a bit of time researching it, I think they will eventually hit a limit where it will be cheaper to import more grinding material than to pay more to kill Canadian cows…. That is unless global demand shorts the global supplies of grinding type products.
The other bad on the horizon is if you like feeding excessive amounts of grain to cattle for extended periods of time. The US ethanol industry has not lost its shine yet and in fact the mandatory inclusion rate of ethanol into the US fuel industry is about to increase. Likewise oil is hovering in and around $80 / barrel and so all of the fundamentals will work at keeping the demand for corn strong, which of course will keep barley up there….. The wild card as always will be the weather…. In a nutshell I don’t see any bargain basement feeding costs.
The Ugly: Canadian Retail…. As I mentioned in my last column our primary beef producers, both at the cow/calf and feeder level have been completely naïve when it comes to the disproportionate revenues generated at retail levels and what is reflective at the farm gate. Last week I checked out, “my home town advantage” / local retailer… lean ground beef $8.45 / kg….packer values for 85 lean trimmings were $3.25/ kg….Does it cost $5.25/kg to truck, grind, stock and make a small profit on ground beef?....Likewise bone in ribeyes….$22.49/kg….Packer price - $8.35 / kg!!!! Retailers complain about shop lifters….. I would like to ask who is calling the kettle black? Our equity is being robbed not by packers but by retailers!!!
Making the matter worse is the high CDN dollar…estimates are that this year well over 150,000 tons of US beef will hit the Canadian market….Much of that destined for Canadian retail. Now I don’t want to sound hypocritical and I know we export to the US but there we face COOL costs and discounts, while US product heads north easier than migrating geese... exacerbating the situation are retailers that spin doctor it so that it makes the consumer feel they are buying Canadian. I have to shake my head every time Erika and I go to Grande Prairie and walk into a save on Foods store….splashed all over the beef section are smiling pictures of B.C and Alberta ranchers and the idea that by buying this beef the consumer is supporting western ranchers…. the truth is far from it.
So who are the retailers without a maple leaf heart? Across Canada it starts with Loblaws (Superstores), in Quebec and Ontario it is Metro and in the west as I had mentioned the Overwaitea Food Group (Save on Foods). Now with the high dollar the advantages of bringing in US Beef are stronger than ever and I think the trend will get worse. This will undermine opportunities for our industry on this side of the border. BIC is trying to do their part, however the biggest way to make an impact is by hitting these guys in the pocket books and by making a little noise. I had to laugh at the last Cattlemen magazine. The front cover story was about, “Bringing Wolves out Into the Open”, get real guys if you think you are losing money to 4 legged predators figure out what you are losing to the 2 legged ones. We need mandatory COOL here and our industry organizations need to learn how to quite volunteering photo ops and do a little more lobbying to swing the pendulum.
Since your industry is not making a whole lot of noise about this, maybe you should; let them know how much you appreciate their support and their unselfish sharing of the consumer pie : Loblaw’s –Rodney Koning 905-459-2500 / rodney.koning@loblaw.ca; Metro – Claude Jauvin 514-328-8000 / cjauvin@metro.ca or Marcel Boulianne 416-234-6120 / mboulianne@metro.ca , Overwaitea Food Group – Ken Clark -604-888-2079 / ken_clark@owfg.com ext 2317 or Norm Gill 604-881-3452 / norm_gill@owfg.com.
The positive is that there are less cattle and eventually people will want to eat steak… the negatives are the high dollar, feed grains and retailer attitudes….Some things I know we have control over and other things we don’t….
My New Year’s resolution to rob from the rich and give back to the poor…in other words increase the amount of jingle coming from consumers into my pockets rather than leaving it at the retail level…. What’s yours?
Dr. Christoph E. Weder is a purebred Angus breeder in the Peace region of Alberta and also runs SVR Ranch Consulting. He is also a founding member of Prairie Heritage Beef Producers For additional info check out www.spiritviewranch.com
“Beef 2010 - The Good the Bad and the Ugly”?”
Christoph E. Weder – SVR Ranch Consulting
So it’s a new year and the optimists that still have cattle are thinking this will be the year!!! Last I checked, there were still a few cows in our back forty and so I guess we must be one of them…Not that I am a market analyst, but here are my two bits……. “Weder’s - The Good the Bad and the Ugly”.
The Good: The Herd Size….The whole world is liquidating/reducing breeding cow numbers because returns have not kept par with expenses….(now isn’t that an interesting phenomena?). From Australia to New Zealand to Brazil to Argentina and even our neighbors to the south all are retiring their spurs and replacing them with flip flops and enjoying the good life. Even my 4 year old can figure out that with fewer cows you get less calves, which would eventually mean less beef…. True for the most part but Big Pharma is mitigating this with TBA Implants, Beta Agonists and other tools of the trade, so even though we have less cattle they all die at a heavier weight, or at least they do so in North America. This said there is only so far that Big Pharma can grow carcasses and eventually beef supply goes down…however, countering the effect of the economics 101 supply/demand curve is that the demand curve is slumping as well… or at least it is for the high valued cuts. It’s now minute steaks, quick roasts and hamburgers instead of NY strips, ribs and filet mignon. To raise the value of fed cattle we need the middles to rally. Till now that simply has not happened. Or another way to look at it is simply the retailers should just share more of the pie. At least the argument that cattle prices are in the tank because there are too many will no longer be there....it’s just that everyone is too cheap and some aren’t sharing.
The Bad: The Canadian Dollar… if our dollar at present were equivalent to the value April 2003, our fats would be $1.30 / lb on the hoof. Is the dollar value going to change anytime soon…I doubt it… its Bad because its implications by far overshadow any gains made by reductions in herd sizes…
Not only does a high dollar make exports more expensive but it also makes imports cheaper to buy. The George Morris centre reported that last October beef exports were down by nearly 5% on a year to date basis. Total beef imports were up by more than 11% and Australia and New Zealand exports increased by a whopping 40% and 50% respectively. The main reason given, was that Canada’s domestic production of lean manufacturing beef has steadily declined as cows headed to the grass heavens. At the same time the domestic market for manufacturing and grinding beef has gained ground as a recession induced diet of hamburger helper fuels the fire. In fact right now this supply /demand curve on cull cows is actually working… there are less of them, the packers have a good demand for the products that come from them and rail prices for culls have grown by twenty cents since Christmas.
Will cull cows continue gaining value? I believe to a point but after spending a bit of time researching it, I think they will eventually hit a limit where it will be cheaper to import more grinding material than to pay more to kill Canadian cows…. That is unless global demand shorts the global supplies of grinding type products.
The other bad on the horizon is if you like feeding excessive amounts of grain to cattle for extended periods of time. The US ethanol industry has not lost its shine yet and in fact the mandatory inclusion rate of ethanol into the US fuel industry is about to increase. Likewise oil is hovering in and around $80 / barrel and so all of the fundamentals will work at keeping the demand for corn strong, which of course will keep barley up there….. The wild card as always will be the weather…. In a nutshell I don’t see any bargain basement feeding costs.
The Ugly: Canadian Retail…. As I mentioned in my last column our primary beef producers, both at the cow/calf and feeder level have been completely naïve when it comes to the disproportionate revenues generated at retail levels and what is reflective at the farm gate. Last week I checked out, “my home town advantage” / local retailer… lean ground beef $8.45 / kg….packer values for 85 lean trimmings were $3.25/ kg….Does it cost $5.25/kg to truck, grind, stock and make a small profit on ground beef?....Likewise bone in ribeyes….$22.49/kg….Packer price - $8.35 / kg!!!! Retailers complain about shop lifters….. I would like to ask who is calling the kettle black? Our equity is being robbed not by packers but by retailers!!!
Making the matter worse is the high CDN dollar…estimates are that this year well over 150,000 tons of US beef will hit the Canadian market….Much of that destined for Canadian retail. Now I don’t want to sound hypocritical and I know we export to the US but there we face COOL costs and discounts, while US product heads north easier than migrating geese... exacerbating the situation are retailers that spin doctor it so that it makes the consumer feel they are buying Canadian. I have to shake my head every time Erika and I go to Grande Prairie and walk into a save on Foods store….splashed all over the beef section are smiling pictures of B.C and Alberta ranchers and the idea that by buying this beef the consumer is supporting western ranchers…. the truth is far from it.
So who are the retailers without a maple leaf heart? Across Canada it starts with Loblaws (Superstores), in Quebec and Ontario it is Metro and in the west as I had mentioned the Overwaitea Food Group (Save on Foods). Now with the high dollar the advantages of bringing in US Beef are stronger than ever and I think the trend will get worse. This will undermine opportunities for our industry on this side of the border. BIC is trying to do their part, however the biggest way to make an impact is by hitting these guys in the pocket books and by making a little noise. I had to laugh at the last Cattlemen magazine. The front cover story was about, “Bringing Wolves out Into the Open”, get real guys if you think you are losing money to 4 legged predators figure out what you are losing to the 2 legged ones. We need mandatory COOL here and our industry organizations need to learn how to quite volunteering photo ops and do a little more lobbying to swing the pendulum.
Since your industry is not making a whole lot of noise about this, maybe you should; let them know how much you appreciate their support and their unselfish sharing of the consumer pie : Loblaw’s –Rodney Koning 905-459-2500 / rodney.koning@loblaw.ca; Metro – Claude Jauvin 514-328-8000 / cjauvin@metro.ca or Marcel Boulianne 416-234-6120 / mboulianne@metro.ca , Overwaitea Food Group – Ken Clark -604-888-2079 / ken_clark@owfg.com ext 2317 or Norm Gill 604-881-3452 / norm_gill@owfg.com.
The positive is that there are less cattle and eventually people will want to eat steak… the negatives are the high dollar, feed grains and retailer attitudes….Some things I know we have control over and other things we don’t….
My New Year’s resolution to rob from the rich and give back to the poor…in other words increase the amount of jingle coming from consumers into my pockets rather than leaving it at the retail level…. What’s yours?
Dr. Christoph E. Weder is a purebred Angus breeder in the Peace region of Alberta and also runs SVR Ranch Consulting. He is also a founding member of Prairie Heritage Beef Producers For additional info check out www.spiritviewranch.com
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