The Real, Real Issue

[smcgrath76]

I was kind of tired of scrolling down, so here goes.
First so everyone knows what sides I am on, I do support allowing testing, although I certainly am concerned about the potential consumer ramifications. I do not support mandatory testing.
I also tend to agree that testing is not the biggest issue of the day, although I applaud rtandy for pursuing the issue with the amount of focus it appears needs to be directed at it to produce meaningful change.
I think that cash flow probably is for many producers over the next couple of years a major issue, as is driven by the $, packer competition (or lack thereof), and feed prices.
I think we do need to find a new way for a new day, however I think that the vast majority will not change the way they do business to take advantage of new ways.
Why do I say this?
As an example, when a local meeting was hosted regarding investing in a processor that is federally inspected and a going concern, attendance was a mind blowing 2 people. Certainly not the type of interest you would expect from a population seeking overwhelming change.
I think a lot of producers are going to continue and only want to sell live calves (not even fed cattle), and will complain all the while. If you market a commodity, you should expect to participate in a commodity business, where economies of scale rule, and he with the lowest cost wins.
Without a major change in the nature of the people involved the struggle to value add, and pursue value chains will be a tough on on an industry wide scale. The 4 nickel (paradigm) change that is required is probably not going to come until too late for many producers.

[per]

Sad, accurate commentary. The cow calf guy will be left in the dust and some sort of opportunity will appear for the creative. There are no easy answers but then again there never were.

[rkaiser]

One tool in the box of change, that I personally consider an important one. Heard today that Creekstone has a pretty good chance at moving ahead with testing in early March. I guess we sit back and watch the Americans move ahead of us again hey.

Maybe not

- Another good round table meeting today. The testing issue is one of many tools we are not using, as Canadian producers, to supply the needs of willing and wanting customers.

[per]

Randy, do I assume that the Arrogant By Partisan (ABP) group had more pressing matters than the future of our industry to deal with today?

[farmers_son]

I agree with many of those comments, not all but many. I even with the comment about Rkaiser pushing for change. Differing views are good, they shake up the status quo and cause people to think. I personally have learned a lot from the conversation. I have made my views on BSE testing quite plain here yet I understand and respect that people have other views. I do think we have more pressing issues before us and that COOL needs to get a lot more attention. COOL is not a marketing problem it threatens our access to our NAFTA markets.

I think our live cattle access to the U.S. is critical to provide some competition for live cattle in this country. Our Canadian based packing plants have clearly shown they will not compete for our live cattle. Which is why I question all the interest in BSE testing to gain access to Asian markets. If we still are selling our cattle to Cargill at High River and Tyson at Brooks where is the benefit to us going to be? However COOL does have the potential to directly impact Canadian live cattle prices and that is what gets my attention.

On the topic of investing in packing plants and I am not trying to be controversial but just to point out what I see happening…Canadian producers may need to invest in and own packing plants in the United States so we can kill cattle down there if we cannot use NAFTA to get an exemption from COOL. COOL will undoubtedly reduce the number of U.S. packing plants that will process Canadian live cattle reducing the competition and our ability to get fair pricing. A number of U.S. feedlots that are buying our live calves right now will decide they no longer can. COOL is very, very serious and that needs to be recognized.

[smcgrath76]

I inadvertently left COOL out of my list of issues. I think with a presidential election and some of the commentary going on COOL will become a huge issue for producers.
There are a couple of things going on out there, for example Rancher's Beef was recently sold to an unnamed Canadian buyer. There is a plant in SK that is producer owned and EU certified, etc. For these groups BSE testing and even COOL may represent a market opportunity. It may be a challenge to grow the beef pie rather than just to take a piece of someone elses.
I think for the typical cow/calf business model these things weigh more heavily as a threat than an opportunity. The seller of live cattle at any stage is going to have a challenging few years and is going to have to focus on a)a specific market, b)cost cutting, c)a hedging/risk management strategy, d)economies of scale or e)a complete change in strategy and direction

[rkaiser]

Please go back and read the revamped proposal (manifesto if you like) set out by four of the five industry groups at the round table discussions farmers_son. This thing is growing a body and is being strongly considered by all five groups at the table.

A value chain with producers in the drivers seat and packers allowed to stay in this country, and make money, by working with this group in a custom manner.

A Canadian, producer owned, differentiated product that fits the needs of consumers in all parts of the world. I personally feel that the potential for working with the existing packers on a custom level may be becoming more of a reality every day.

The best way to fight cool is to use it. We can continue to sell our product as long as it is unique and special to American and domestic consumers and ad the export markets that we need. We NEED so that we can drive up value at the right end of the chain by saying to our current American customer, "Sorry we are all sold out of those cuts right now. If you would like to submit an order, this is the new price."

If any of you can think of a better way to differentiate our product rather than offer BSE tested product to the world in this continuing BSEconomic atmosphere ---- bring it on.

It will happen. Creekstone will be the first if we do not get our act in gear.

[farmers_son]

Sorry Rkaiser, still reads like a manifesto to me.

I am a firm believer that competition and the lack of it is what most influences the live cattle prices in this country. I tend to think the alliances that will be formed will be horizontal relationships between cattle producers in the major beef producing countries rather than vertical chains from the cow calf guy to the retail. I really think cattle producers in the U.S., Canada, even Australia and new Zealand can and will have to work together if they ever hope to compete with the global packing plants [significantly raise live cattle prices] and gain a fair share of the consumers food dollar. The wholesalers, packing plants, feedlots and cow calf producer are in competition with one another for a share of that consumer’s food dollar to far greater extent than the world’s cattle producers are in competition with one another. Excuse the bad pun but what we need to do is grow the cow pie not the beef pie. This notion that U.S. cattle compete with Canadian cattle which compete with Australian cattle is really nonsense. And when the global packing plants are successful in pitting U.S. cattle producer against Canadian cattle producer it is the packing plants that win not the cattle producer in either country. And make no mistake, COOL will only work to the benefit the global packing plants not the live cattle producer in either country. I have said it before but it bears repeating, live cattle producers in any country will not be successful over the long term in raising their domestic cattle prices by pursuing policies designed to lower live cattle prices in other countries when the same packing plants are buying cattle on a global scale.

Creekstone will not be successful in their attempts to BSE test to increase their packing plant profits any more than R-Calf was successful in their attempts to block Canadian live cattle and beef. Even a world super power like the United States must reconcile their food safety protocols with the OIE. Creekstone will not be successful in making food safety a marketing issue by implying non tested beef is somehow not as safe.

[rkaiser]

As far as Creekstone, I guess early March will tell us who needs to pitch their crystal ball.

The rest of your post is pretty darn good farmers_son, but certainly does not tell me that vertical integration beyond live cattle will not work. A beef marketing arm on the value chain being discussed at the round table meetings would bring competition to the marketplace.

Sometimes I think you want to argue - just to argue. Your whole post actually supports competition and that is exactly what producer owned brokerage - and or packing facilities like they have in the USA and especially New Zealand do. Create competition. Take a look at USBP farmers_son, or the Beef Alliance Group in New Zealand. Hell- what do you think IBP stands for. Iowa Beef Producers found a way to not only survive but be lucrative enough for Johnny Machine Gun to buy them out. Good for those original owners I would bet, but their good fortune was not so good for other in the industry once they cashed in.

You are exactly right about competition not being about country of origin, but guess what farmers_son, if we are to survive --- it bloody well needs to be. We need to identify our product unique. We need to brand Canadian beef rather than pump out a generic world wide Cargill or Tyson product. It seems that even the packers are seeing opportunity in this branding model, but why hold producers back from doing it themselves. Once this value chain is set up farmer_son, you will still have the personal opportunity to not join. That is one of the wonderful "free will" concepts behind the plan. Make it available to anyone, but allow those who would rather continue with the status quo, or try one of their own ideas, to opt out.

Shoot farmer_son, I will never send many cattle to this new value chain as mine is going well, and will be competitive to the new one formed. Albeit in a very small way if we get the kind of support from the five industry groups that this plan needs for critical mass. However four may have to do for now............

[rkaiser]

farmers_son - "making food safety a marketing issue by implying non tested beef is somehow not as safe."

Damn them Americans for making food safety a marketing issue hey farmer_son.

BSE is a marketing issue old boy --- period. Get it through your thick skull.

If it were not for those darn pesky Japanese companies over here asking for tested product lately, or the fact that they originally told us that they would buy our beef if we tested like them, I might just give up too old boy.

You git over there and tell them Japanese that testing is not a food safety issue.

[farmers_son]

Yes, we will not need a crystal ball about the future of BSE testing for marketing purposes once the appeal courts hear the Creekstone case. There is no doubt BSE will be a marketing issue if Creekstone is successful. BSE should not be a marketing issue, the food supply is safe, certainly in Canada and the U.S. where the incidence of BSE is very low. When BSE becomes a marketing issue instead of an animal health issue the logical response when a country finds a BSE positive would be to shoot shovel and shut up. The better response is make BSE a science issue, deal with the problem by removal of SRMs and carry on trade knowing the product is safe.

It is my opinion that it is not in cattle producers long term best interest to make food safety a marketing tool. When consumers make their food purchase decisions they need to believe all the food is safe, they will not pick between competing brands based on which is the safest. If there is any doubt they will quickly choose another product. No amount of marketing will persuade the consumer otherwise.

It is my belief that the same applies to the U.S. If U.S. producers hope to gain a marketing advantage by capitalizing on Canada’s BSE situation through COOL they will simply reinforce in the U.S. consumers mind that the U.S. has BSE too. The consumer will buy chicken and pork, they can choose to eat neither country’s beef. The pot calling the kettle black or calling your twin sister ugly is not good marketing and is just another example of where cattle producers in other countries have more to gain by working together than by trying to gain an advantage, one over the other.

I know there are examples of successful producer packing plants. I fully support producers moving up the value chain and reaping the benefits that are there for the successful run operation. There certainly was a time in 2004 and 2005 when any packing plant would be successful as Canadian live cattle prices were $400-500 below U.S. live cattle prices. We have come a long way since then. Producer’s ability to add value to each calf through value adding is directly related to fair live cattle pricing. If we are getting paid a fair price for the live calf there is really should be little opportunity to add value beyond what highly efficient global marketers can do, even if they are pirates. In effect the Canadian live cattle industry has added a huge amount of value for every producer (whether they owned shares in a packing plant or not) when we regained access to the more competitive U.S. live cattle market. And more work needs to be done in that regard and is being done.

I have said it many times in these threads, I sell live cattle not beef, and adding value to the live calf is what puts jingle in my jeans. Given the very unfortunate problems we have seen with some of the producer owned packing plants it seems that the quickest and surest way to add value for the cattle producer is to get the highest possible price for the live calf. Although I see so many advantages to integrating up the value chain, if the price of Canadian live cattle can be increased to a point where the packing plant business is kind of tight (for example through live cattle access to the larger more competitive U.S. market) that works for me too. That is where I am focusing my efforts right now.

[rkaiser]

Access is the word farmers_son. The only way anything will start to work again is access. But not only access to the American consumer. You have defined the very reason that ABP has not been successful in moving us away from the BSE problem. We need access to markets beyond the USA. We still do not have the same access to Mexico as the packers have given us to the USA. We need to get the CFIA out of the trade negotiation business and have our federal government build beef trade relationships with any potential importing nation including but not limited to the USA.

I am sorry to say that your dream of not having BSE become a trade issue is simply that farmer_son. A DREAM. It is and will now always be a trade issue. Creekstone decision or not. BSE could ---- COULD be a way to access more market. But as long as ABP restricts private industry on the issue of testing - we will never know. BSE testing worked to create domestic assurance in Japan. In other words BSE testing is already working as a trade issue - albeit trade within their own country.

Assurance means more demand. And more demand will not only bring up your calf prices farmers_son, but will allow the potential for producer owner plants (WHICH YOU SAY YOU SUPPORT) and this producer owned marketing arm of the Value Chain being created by the round table participants to thrive.

I will say it again farmers_son. If not testing - what can you bring to the table that will increase market access to countries beyond the USA. The USA is the largest beef importing nation in the world, but they have a whole world full of exporters knocking at their door alongside little old Canada.

If you truly think that Canadian producers can remain competitive selling live cattle to the Americans - I simply give up on arguing with you. We need to ad value in our country. Selling off primary resources is a job for simplistic third world countries farmers_son. Do you want to move back in history and remain a third world country?

[jensend]

i think this whole mantra of not making food safety a marketing tool is bogus. car makers promote safety features to market their production as do many other industries. food safety is one of the most important things we can offer the consumer. to say the american rancher would be unwise to capitalize on canadian bse is also mistaken because the united states has done a good job of sweeping bse under the rug other than org.'s like r-calf emphasizing canadian discoveries. i would like to know the per centage of americans who don't know there have been native bse cases discovered in the states. to say we shouldn't market food safety is like saying you don't care about the crash tests of cars or the csa sticker on an appliance. marketing proven safe product is one of the best ways we can differentiate our product from product from areas with lower safety standards or countries with endemic health problems.

[cakadu]

"It is my opinion that it is not in cattle producers long term best interest to make food safety a marketing tool. When consumers make their food purchase decisions they need to believe all the food is safe, they will not pick between competing brands based on which is the safest. If there is any doubt they will quickly choose another product. No amount of marketing will persuade the consumer otherwise."

Farmers_son, I'm a little curious about that statement. I know it is your opinion and I respect that. Consumers make choices based on what they feel is safe all the time - just look at how people feel about organic food. There is absolutely no evidence to support that it is nutritionally any better, yet people think it is and they buy it. We just have to look to last year when there was a horrendous food safety problem with organic lettuce and e-coli. Many of the people who buy organic food feel that it is safer than conventionally grown food. In fact, they pay a premium for it. Just tonight I saw organically grown orange peppers for $6.99/lb and there are people who pay that.

I'm also curious to know how one can add value to any product that is sold as a commodity, particularly when that commodity is sold out of the country. Any value that is added is captured by someone else, somewhere else.

It really doesn't matter what we think the consumer wants to buy, it is what the consumer is willing to pay money for and what they believe.

I guess that is the difference between selling and marketing.

[farmers_son]

People make some choices about what they feel is safe. Quite often though standards have been established so that people can just assume any choice they make is a safe choice. For example, the airline industry. No matter which airline you choose to fly with they all should be safe. Standards have been established and agreed to and as long as the airline you are flying with follows those guidelines you have a very high probability of having a safe flight. As a result air travel has grown to be a popular means of travel.

The importance of internationally recognized standards to facilitate trade cannot be emphasized enough. Just as there are international standards which ensure air travel is safe, the countries of the world have established internationally accepted standards to guarantee the sanitary safety of world food trade in animals and animal products. This is accomplished through the OIE and two other agenciesand its 158 member countries, including Japan. As a result world trade in food has increased dramatically.

It is widely acknowledged that without internationally accepted, science based, standards on food safety that individual countries would use food safety as a non tariff barrier and that world trade in food would be impacted. It is also widely know that Japan is a country which is very protectionist of its agriculture.

It appears to me that consumer confidence in North American beef is all too often taken for granted by cattle producers. Following the first cases of BSE in Canada and the United States (in the case of the U.S. the affected animal entered the food chain) there was a major, and I would say successful, effort to assure domestic consumers that the beef product was safe. But we can never forget the level of fear and hysteria that BSE can generate amongst consumers. In 2003 if companies had tried to capitalize on BSE as a marketing tool insinuating their product was somehow better than an untested product I think the consumer reaction to BSE in North America would have been very different than it was.

On the world trade front, if individual countries, such as Japan and South Korea, are successful in having the internationally developed and accepted science based system of ensuring food safety set aside (whether for protectionist reasons or not) world trade in food will be set back over sixty years to pre World War II days.

What would happen if Japan took a position that planes from Canada and the United States would not allowed to land in Japan unless they met a special safety standard that only existed in Japan? And that Japanese citizens would only be allowed to fly on North American planes that had performed some safety test that had no basis in science or fact. Do you think that would be right? How do you think the North American traveler would feel about flying? Would it make any difference if Creekstone Airlines or BIG-C Jet wanted to meet that special safety requirement? Isn’t the customer always right?

Well actually the customer is not always right. Sometimes the customer is being a little protectionist. If we move away from science based trade to a customer is always right based trade with no rules other than those established by the importing country, world trade in food will come to a screeching halt. World food trade is accomplished by science based photo sanitary standards agreed upon by all the trading nations of the world, including Japan. Those standards need to be upheld.

Whether we are thinking of food safety or air travel safety we do not want those standards to be established by the marketplace. There is just too much at stake.