How do you value your beef?

[pandiana]

I just got a bill from my veterinary for semen checking some bills. First of all, the per animal price has gone up in the last 3 years from about $30.00 to about $47.00 per animal if you have more than 3. Second, they added a charge of $15.00 for cleaning up their facility after the bulls. Any surgery is also billed at an loaded rate plus each item including syringes, surgery packs, drugs etc are billed separately.
Now this all makes perfect sense if they value their labor at a loaded rate to cover the cost of overhead at say $100.00 per hour.
Your lawyer does this, also. They charge a loaded rate plus extra charges for each phone call, each document they process, each courier or mail charge etc.
Your banker also charges for each transaction that passes through their doors in addition to using your money at no cost to them.

Your mechanic also now charges an environmental charge for disposing of your old oil or tires or batteries.

In the end, this is proving a very efficient way of increasing the charge for services.

If cattlemen were able to charge for their input using a similar scale, what would the price of beef be? As cow/calf producers, wouldn't we be better off if we contracted our services to big corporations and were able to bill in the same way as other service industries or contractors do?

[topper]

If cattlemen could charge for inputs we would put ourselves out of business in short order.The market will eventually have to give us a fair price or do without beef. The cattle market has looked after producers quite well over the years and if left alone from government interference etc. it will continue to do so. at least that's my opinion. Producers have to look at beef production as a long term business not a short term venture.

[cowman]

I sort of agree with topper in that the beef industry can not absorb any higher costs. We are actually uncompetitive with any other source of meat right now. The only reason anyone buys beef is that the retail chains keep pork and chicken right up there with beef. I mean check out what the pig farmer gets for a pound of pork on the hoof?
And the day is fast approaching when vegetarian products will displace not only beef but chicken and pork...the new fungus product?
And if we still insist on beef the south Americans can supply it at a fraction of the cost. And I would suggest that when we get that grass fed Brahma beef the "fungus product" might look fairly good?

[wilagro]

Fungus sandwich...yummy. Maybe they will produce one that tastes like Alberta beef instead of S. American beef. We had some beef steak in Mexico a while back that tasted like yuk and it looked that way as well.

[cowman]

Actually they say this product is amazingly good. Some of the meat substitute products are pretty tasty. Not like the garbage they had twenty years ago. The younger generations are moving away from meat consumption and the aging baby boomers are cutting back.
You and I might not like it but that is the future.

[pandiana]

So....my question is: Why are primary producers (fishers, lumber, farmers) the only sector that cannot either charge for direct expenses or externalize their costs like virtually every other industry?

[wilagro]

Farmers are still paying retail prices for their inputs but sell their products at wholesale prices. The co-ops in their many forms were supposed to rectify this problem. Some worked and some didn't. Many of these co-ops got mismanaged or lost their main focus and diversified to money losing ventures. e.g. Alberta Wheat Pool and their purchase of that money losing white elephant brewery in Red Deer. I could list a dozen examples.
The main problems had to do with management where the owner/member let management get away with policy changes that were detrimental to the whole concept of the enterprise.

[cowman]

pandiana: The primary producer can't get paid a fair price because there are too many"value added" people down the line. They all want to make a living and I guess they should. Someone has to get screwed and it is the peasant growing the food who has always gotten screwed. That is just how it is in every society in the world since the beginning of time.
The solution is simple...don't be a peasant anymore!
Vets at $100...are they overpaid? Well I know what a good lawyer costs me $250/hr.! I hear that a surgeon makes in excess of $500,000/yr. which works out to about $250/hr. Even the lowly school teacher makes about $60/hr. Is it fair?
Well no it isn't. I see kids working service rigs for $18.50/hr. and they work harder than any of the above. Tough kids! But then they never went off to school with daddys money and they never sucked money out of the government. They are paying their own way and also the way of all the little educated parasites we have in the world.
And there is our problem in this country. We have too many "experts" and "parasites" and not enough actual "doers"!!

[pandiana]

cowman: Your response reminds me of one of Mahatma Ghandi's 10 Deadly Sins (sort of his take on the 10 commandments) which reads: Wealth Without Work.

I didn't mean to imply that a vet makes $100.00/hr. I am not sure what the actual figure is and didn't take the time to figure it out. I know they could make a lot more in small animal practice in the city but must keep their costs down to try to meet producers bottom line..or so they say. Nonetheless, I know of a few who consider a gun as the best option in today's market.

[pandiana]

topper; cowman: Why is it, do you think, that the beef industry cannot tolerate a rise in cost? Have you purchased tomatoes, lettuce, turnips or potatoes lately. Produce probably still does not cover cost of production, and export and is probably subsidized but I have seen lettuce at $3.00 head.
Are food products something that are not valued as highly as education and health care? What portion of your annual income goes to food?

[cowman]

I think your average consumer has been raised on cheap food and considers it their right. And if the old pay check is a little short this month then guess where the cut back occurs? You guessed it...a little less steak and a little more tuna helper! Lets face it beef is a luxury item, not a staple! Maybe Ian can give us some kind of idea about beef consumption in Britain. My mother, who travels to England quite often, says meat just is a very small part of the diet(especially beef!).
Personally I eat out a lot, because I have little time to cook, and I will admit I treat myself pretty good...or at least I did! Now I'm sort of on a "special diet" which truly sucks. Health reasons...I am not fat! Also my hobby is gardening and I am a prolific little veggie and herb grower! I give away a lot more than I ever eat but still you would not believe the tomatoes I grow!!

[topper]

Pandiana: It's not that I think that the beef industry should not get more for their product but I have problems with the method of price setting that you seem to be suggesting. If the individual producer added on extra charges for costs incurred he probably wouldn't sell too many cows. Therefore the only way of adding those costs would be to create a wheat board like marketing board or something like it. I still think that the market if not interfered with should in the end supply those costs and at the same time keep us efficient.

[pandiana]

I am not suggesting that we could realistically set prices that actually reflect input costs based on the fact that we have overhead and might be worth a salary. That is obviously the case. I guess the issue is, why? If food is valued, then it should provide leverage to demand higher prices as is seen in other sectors where services are valued.

[jmillang]

There are a whole host of reasons that agriculture does not command or set prices. The first has to do with the entire market. There are very few entry barriers to the ag industry (I know you want to say money but that is will all businesses). But more fundamentally we have an industry based on perfect competition at the cow calf level. We have many many sellers, and many buyers (although there are less and less each year). In perfect competition the market is driven to averages. Average selling prices where supply meets demand. There is always someone who can sell for less than you no matter how low you can go.

No one business can influence the demand or supply of the industry. If they should ever have much influence the market forces from outside this country trigger and we now have even more buyers and sellers trying to sell the same product.

Looking at the dairy industry that is what they try to due is to regulate supply and restrict supply, this causes a shift in the supply curve and an increase in price. The catch here is to be in the dairy industry you have to pay for that right (quota) to produce. But again they can not set prices. Years ago when milk was in the public utility regulatory system prices were set based on averages of costs and returns for the dairy farm. Even then not all the dairy producers all made the same amount of profit.

Another reason for ag commodities being a price taker is the goods and service that you produce are perishable. Grain will go bad eventually, beef gets too fat, old, discolored, rots etc. If your goods and services were able to hold their shelf life that would help with price stability. But remember food is traded on a global basis and some countries have no storage at all. Ask a canola grower about Argentina/ Brazil soyabean crops and how they flood the market when harvest is on for them.

Contrary to popular belief there is no such thing as a cheap food policy. There may be a food security policy but there is no such thing as cheap food.

In other posts it was mentioned that if the consumers paycheck takes a dip that ends the T-bone or prime rib for the week. This is very true ask the hotel and restaurant industry how things went when the stock market corrected a couple of years ago. The beef sales dived, demand (true economic demand) shrunk and we are back where we were 4 years ago.

There is no simple answer to the commodity business. Follow two basic strategies for commodities - least cost, or you concentrate on making your product different from the competition in either service (product) or price. The poultry industry has used the product concept (every chicken breast tastes the same every time I buy one from the grocery store). But our organic and free range people have decided to make a different product.

There is no easy answer and only you can decided how to run/manage your business when faced with these issues.

[cowman]

Personally pandiana I would like to see a system like the dairy industry. The original players in the dairy industry paid nothing for their quota. So likewise you and I would pay nothing. When they brought in the quota system they basically froze out the small guy. Now if they froze out all the little guys you and me would get a quota...which we could either keep, expand, or sell. Not so good for the little guy or the guy entering the business: but definitely good for you and me!
Supply management allows the price to be set that does reflect the true costs of doing business. Unfortunately we will never see it because the people who make the laws also work for the food corporations! The dairy and chicken thing work because the food corps. are massively subsidized by the taxpayer. Not enough money in the old coffers to subsidize beef consumption I'm afraid!