Will Changes to GIPSA Impact the Canadian Cattle Industry? - Kevin Grier

[shaney]

The American market is very important to the Canadian cattle industry. Domestic policies in the United States can greatly impact the Canadian industry. Just think about Country of Origin Labelling (COOL) and the discussion in Canada in terms of mitigating its impact.

There are some proposed changes to GIPSA potentially coming and questions and several American stakeholders are pushing for and against. What sparked my interest from a Canadian perspective is that R-Calf is in favour of the proposed changes. Usually this means that it is not not good for Canada or the industry in general.

I chatted with Kevin Grier from the George Morris Center about the GIPSA changes and we ventured into an interesting conversation regarding the impact of captive cattle on the market price. R-Calf is of course pushing to remove captive cattle from the system which would include not only packer owned cattle but forward price contracting as well.

&lt;em&gt;If you are looking for more information on GIPSA, check out these &lt;/em&gt;[URL="http://audio.agritalk.com/wordpress/?p=2209"]<em>AgriTalk interviews with R-Calf and NCBA.</em>[/URL]

&lt;a href=&quot;http://www.georgemorris.org/GMC/Staff/KevinGrier.aspx&quot; target=&quot;_blank&quot;&gt;Kevin Grier works at the George Morris Center&lt;/a&gt; and is based in Guelph, Ontario. Kevin publishes a bi-weekly industry analysis entitled, &lt;a href=&quot;http://www.georgemorris.org/GMC/MarketSubscriptions.aspx&quot; target=&quot;_blank&quot;&gt;Canadian Cattle Buyer&lt;/a&gt;. I hope you enjoy the interview and Kevin's comments.

If you cannot see the embedded video below, &lt;a href=&quot;http://www.youtube.com/watch?v=CAYsNA9QHkg&quot;&gt;click here&lt;/a&gt;

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[grassfarmer]

Who sponsored this weeks segment - was it Cargill or Nilssons?
You should read the NFU cattle report again before misquoting it - they didn't suggest no contract cattle they suggested only with fixed price contracts with public disclosure of terms.
So the feedyards are all happily dealing with the packers now and there aren't and captive supply arrangements? Really? what about all the stories post BSE about the packers having the feedlots by the short and curlies and pressuring them into becoming captive supply partners? Was that all made up too?
Grier's quote about under 20% of kill being captive supply - I'd like to see his data on that. While you are at it pull up all the reports from over the years that show that captive supply practices do not have a negative impact on cattle prices. But don't just pull them, pull the reports showing the opposite - of which there are many.
I guess you guys went trick or treating as fairies - because this is the biggest fairy story I've read for a while anyway.

[jensend]

what a load of tripe. when grier says contracts take supply out of the market why doesn't shaney have the balls or brains to say but it also takes demand out of the market. haney has to learn all the a/v equipment in the world won';t make him a critical thinker and that's what he needs to be if he thinks he's going to produce anything of value. otherwise he's just lobbing softballs to whoever will give him the time.

[wd40]

Shawn can't help it, he's got "hostage syndrome" genetically.

[shaney]

Since some of you think I am some sort of packer
honk, here is Troy Marshall's commentary on GIPSA
and the position of the packer on the subject.


Opinion: It’s Too Bad That The Packers Don’t Care
Nov 5, 2010 11:41 AM
The proponents of the GIPSA rule are always talking
about the packer lobby, and how packers are
opposed to the proposed GIPSA rule. Certainly,
there are elements of the GIPSA rule that would
alter how packers do business and, yes, they
adamantly oppose the provisions that seemingly
could open them up to a steady stream of inputs.
Yet, it’s a monumental mistake to assume that the
packing industry is leading the charge against
GIPSA.

Admittedly, the great conspiracy is harder to sell
when one realizes that those most adamantly
opposed to the rule are cow-calf producers and
cattle feeders, just like the ones supporting it. The
harsh reality is that increased regulatory burdens
almost always benefit the big and established.
Obviously everyone doesn’t look at the value-based
marketing revolution in the same light, but it’s
important to understand who the opposition and
proponents of GIPSA truly are.

It would be a serious mischaracterization to say
that the packing or feeding sectors are supportive
of the GIPSA rule, but in the end they really don’t
care and likely will benefit from its implementation.
Everyone I’ve talked to believes implementation of
the GIPSA rule will force prices to the lowest
common denominator where everyone is paid a
similar but lower price. There will be premiums
paid, but far fewer than in the past due to the
burden of having to prove justification.

The interesting thing is that discounts will largely
go away; there is just too much risk. Prices will start
and largely end at the lower end of the price
spectrum. Large packers, of course, will sort the
product and still capture some of the value.

Yes, packers worry about removal of the incentives
for quality – fearing it will eventually lead to falling
demand – but the bottom line is that size rules in a
commodity system. After adjustments are made to
business models – shifting away from the value-
added mantra of the last couple of decades back to
a commodity mindset – the packing industry will be
just fine.

Packers love the game where they pay the same
price for everything and then sort out the value on
the other side. While these are new rules that GIPSA
proposes, they are rules that will benefit economies
of scale and will allow packers to capture more of
the value of superior genetics and management.
-- Troy Marshall


Personally I find it hard to agree with RCalf and the
NFU on much. Have a great day and thak you for
your compliments. LOL

[shaney]

when Darren Qualman worked at the NFU he told me
that it is the NFU's position to remove all definitions of
captive cattle and return the market to a true open
cash market.

This would include forward pricing, basis locking, and
grid cattle and packer ownership. I share some of the
concerns on packer ownership but removal of
gridding, basis and forward pricing would be negative
to the feeder.

[jensend]

i don't know if you're a 'packer honk' or not. i think you put together lousy productions. you're so busy sucking up to whomever you interview that it doesn't seem like you even listen to what they're saying. as i said, critical thinking obviously isn't your long suit. why do you never ask hard questions where an interviewee would have to defend their position?

[shaney]

Sorry that you don't like my interview style jensend.
Thanks for listening. In my defence I was not
sucking up to Kevin Grier at all. I would say that his
points are very close to the majority of people that I
have talked to on the GIPSA subject unless you
believe in the R-Calf rhetoric. I have had numerous
discussions with ranchers and feeders on the topic
and all shared the same points as Kevin, the NCBA
and others.

And by the way I do listen to what people are
saying to me. Have a great weekend.

[grassfarmer]

Never mind tittle tattle Shaney here is the relevant paragraph outlining the NFU proposal contained in their cattle crisis document.

1.4.1 Executive Summary:
Solutions:
Deal with packer and retailer power

1. Ban packer ownership and control of cattle, and require that all cattle go through independent auctions or be sold by fixed-price contacts with full disclosure of terms. Putting a high proportion of cattle through open, independent auctions creates significant
benefits: increased bidding intensity, transparent price discovery, enhanced access for small farmers and independent feeders to important markets, opportunities for small processors to buy fed cattle, protection from packer retaliation, and increased trust within the system.
Further, not all cattle sold by auction need to make the physical trip to the auction yard. Some of that sale volume could take advantage of advancing technologies in satellite and
Internet auction sales, thus saving stress on the animals and transportation costs.

Though packers must be banned from owning cattle or using captive-supply contracts, some cattle will continue to be sold, under contract, directly to packers. Such contract sales reduce travel, handling, and auction costs. When contracts are used, however, their
terms must be submitted to a federal agency and made public within 48 hours of signature. Contracts must also contain firm prices. Fully disclosed, fixed-price contracting allows all sellers and buyers to determine real prices, increases fairness and
trust within the system, and helps balance power.

[grassfarmer]

Funny the talk of breaking captive supply practices being bad for the consumer because the packer won't be able to continue to supply the consumer with an ever increasing quality of product.

The whole "industry" has it's head in the sand on what domestic consumers want. I dropped off another $10k of beef to customers in Calgary yesterday and had half a dozen passers by want my business card while I was doing it. The consumers are clamoring for grass-fed, hormone and implant free beef. This market is growing at 50-100% a year,the demographic of our customers is a marketer's dream and almost everyone in the business is sold out of product this fall.
The consumer is turning away from your commodity product - they don't want the hormones, drugs and confinement reared animals. How will that affect the "Canadian Cattle Industry"?

[shaney]

Sounds like your hormone free business is going well. Thats great. I think that is a great market that will continue to grow for those that are early adopters.

[Ruken]

shaney, you may want to pass this link on to your readers.
GIPSA rule’s costs substantial, analysis finds
The article is found at
http://www.drovers.com/news_editorial.asp?pgID=675&ed_id=8127&news_id=207 12&ts=nl2