Cost of Production

[smcgrath76]

I just got back from a trip to the Dominican, and in touring the local agricultural scene it really drove home the point that cost of production is not our advantage in Canadian Agriculture. While it is still very important to control costs, from a global perspective, we are not competitive.

While I appreciate that several beef producers probably do work for $9 a day, they would have a hard time finding labour for that price. If we looked at one person looking after 100 cows, that works out to $32.85 per cow labour cost for the year. Add to that no winter feeding period, and lower capital/land costs and you can see that we are not cost competitive on a global scale (and probably never will be).

If this is so, what are our competitive advantages as Canadians? How do we maximize these advanatages as individuals and an industry? Does the beef industry have a long term place in Canada, given the movements in other countries with lower costs of production?

Just a few questions, which I would like to hear your thoughts on.

Sean

[ianben]

I think too many producers are stuck in the "have to raise big cows, calve them in the cold winter, and finish them in a feedlot" paradigm. I raise elk and even in a horrible drought year like this one (looks like another bad dry year) am feeding them for a fraction of what my cattle ranching friends are. They are a product of natural selection for our Siberian type climate, and show their stuff when times are tough. I cannot imagine how people with those huge imported cattle types can possibly even break even in a year like this, given the real cost of raising an exotic large hay burning cow for a year.

If you don't work with your climate and land you're working against mother nature. I have never been to the tropics but try to put things in perspective: they have disadvantages too. We don't have their parasites, funguses, molds, insect/disease problems borne by hot climates. We need to work with what does well, naturally in our climate.

too many of us are still trying to fight nature. And nature has deep enough pockets to bust us all.

[cowman]

Sean: First off you can't compare Dominican beef to our beef. Now I've never been to the Dominican Republic but I have been to Costa Rica so I suspect the cattle are close to the same....I think I'd rather eat an old boot!!! So no way are they going to compete on quality.
Second...you probably aren't too far off on the 365 hrs. labor per cow/yr. Haying etc. should be considered as a stand alone enterprize...and surprize you actually make money at it!(if you do it right and keep those machinery costs down!!!)
But consider this... how come we even try? Let the consumer eat that old rubber boot beef from South America! Or maybe kangaroo from Australia (remember Jack-in-the-Box?). I'm not trying to be smart here...I truly don't know why we bother! My people have been raising cattle for centuries(literally) and I have no idea why? Maybe I come from a line of retards or something?

[smcgrath76]

Glad to see you are back on-line. I guess the thought can apply to South American beef, etc. There has been a big influx of Canadian semen into South America over the last several years, so perhaps their cattle aren't so far different anymore? As most are grass finished, perhaps they have the organic approach mastered as well?
I think your comments do focus on our advantages as Canadians though. Product quality, wholesome image, etc. I am not sure many Canadian farm managers ever stop to figure out a return on labour.
I am interested to hear further comments, and what everyone believes we should take as an industry direction to address our competitors and enhance our natural advantages.

[cakadu]

I just got back from Chile and had the opportunity to view a couple of beef ranches down there. The biggest one was 350 hectares (which by the way is considered a large landholding) and I would have to say that the cattle were not exactly looking like those we raise here in Alberta. Having said that though, they aren't using what they have to their best advantage either. One of the ladies on the trip with us who is into grassfed beef said that they aren't using any type of grass management at all and were throwing away a very valuable resource.

We ate beef for many meals down there and I would have to say it wasn't bad at all and the "salad bar beef" lady said that there was no difference in the way it tasted from what she raised at home.

I don't think that they are in any big rush to compete in the beef market, or at least we never saw evidence of that.

Sean does raise a good point though, exactly what is Alberta competitive at? We cannot play in the lowest cost producer game - it's one we just can't win because of our climate.

As far as pests go in Chile, from what we evidenced and were told, they don't have a problem with pests as they have the Andes to the east, have ocean all around the rest of them, Antarctica is to the south and there is desert in the North. This lack of a pest problem is helping them to get into the organic game in a bigger way and it is intended for the export market because they don't get a premium for it in their own country.

They are not unlike Alberta in that they are having to export a great deal of what they produce in order to survive and sustain themselves as they are overproducing in terms of domestic consumption. It seems to me that where they do excel is in their willingness to cooperate with one another in order to hit the export market. It is out of necessity, but they are getting in the game to stay.

[cowman]

Linda: You are right when you say we can't compete with these countries. The question is why would we want to? First of all, our only real market is the U.S.
What we really need are even stronger trade harmony with them. And if that means giving up some sovereignity, well who cares? That is the reality of where we are today! The whole idea of going to the lowest common denominator in any type of economic activity, is in the long term, a dead end street. I mean who will buy our expensive beef when they are making $3/day? We have to have some protection for our food producers or else they are out of business! Would it be so bad if we had a true supply management system? Only produce what our own rich country can consume?(and hopefully get the price up to a decent level) I mean I don't care if I produce 200 calves or 100 calves as long as the bottom line comes out the same.
The biggest problem would be to keep the government out of it as much as possible, so we could avoid a Gong show!

[cakadu]

You bring up a very good point, Cowman. We need to take a look at producing for our own market first and take care of what we need domestically. I'm not sure we need to go as far as trying to make everything supply management because it isn't a perfect system either.

However, I wonder how many of you take a look in the grocery store and see where the majority of these value added products are made. Not here in Canada and certainly very few are actually processed here in Alberta. We're in this big push to do everything for export, but what about looking after hearth and home?

You're right - on the labor front we cannot compete with some of these developing countries because their labor costs are well below what we have to pay. To pick tomatoes all day reaps you 5000 Chilean pesos, which is roughly the equivalent of $12.50 Canadian. I don't know too many who will work for that and still be able to feed their families.

I still question where this race to become bigger and better is going to have us end up in the long run. Rather than be concerned about which is better - organic or conventional means of growing things, I think we need to look at it from a holistic and integrated point of view.

We still need to figure out where and what we are competitive at and why we are trying to be competitive there.

[cowman]

Linda: If by holistic you mean basically sustainable I totally agree. As far as the "supply management" thing goes, I'm a little shaky on that one. I guess it's sort of a safe place, here, to express some radical ideas!!! I guess if I ever said anything like that to my "auction mart" buddies I would be looking at tar, feathers and a rail ride!!

[jdavis]

I would like to say here in Alta we have a real advantage if you can pass a few criteria. If you have an grazing lease on public land that costs between 1.39 to2.79 per A U M then on top of that you can sell the lease when you choose its a 10 yr renewable. The oil sector puts in about 40 Million $ to the 6000 or so lease holders or about $6600 dolars avg per lease . but only 3600 have any oil activity so 3600 share 40 Mil plus sisemic plus pipelines plus entry fees Ect so as you can see it is very profitable to have welfare cows in alta . But if you dont have this welfare for your cows it is hard to compete .