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.