Contracts...

[smcgrath76]

A lot of talk lately about prices, packer control, and ownership of cattle. It is interesting that a lot of grain producers are signing contracts well out into 2009, locking in higher prices, and signing input contracts.
Currently I am 99% sure that I will produce a calf crop this year and will into 2009 (OK maybe the bank isn't so sure), but there are no contracts available to sign. Perhaps as an industry we should be looking for something like this, rather than working towards strictly cash/spot marketings. Even direct marketers to feedlots/processors don't really have long term options.
It is possible to hedge production, feed, and the dollar on the commodity exchange (if you have cash for margin calls), but not to presell a specific type and quantity way out ahead of time. For example specialty canola varieties.
I think this speaks volumes of the largely undifferentiated, commodity business we are in, as well as the limited marketing alternatives. Perhaps we need to investigate this further.

[perfecho]

I will agree, although some will spew that this is much like the milk quota system, or the start of one. And though there seem to be many pushing to shut down the quota system, look at which ag sector makes decent living.
We are striking a team in our area, through Economic Developement, to look into the development of a small packer plant working on the 100 mile diet basis. I believe the only way to make it function properly, and to get procucers on board, will be to contract animals. It is a "pie in the sky" dream, but unless something changes in this industry, it is on the same path as the hog sector. At least groups like Kaisers and grassfarmers are trying.......instead of accepting the status quo!

[rkaiser]

Good on you perfecho. I even think I may be within a hundred miles of you - so keep us informed as to your progress......

[dalek]

smcgrath I have wheat and soybeans both sold for 2010 now.

[smcgrath76]

I think that is the challenge with beef. It is pretty hard to presell a crop a year or two out. It would certainly mitigate market risk, and calf production is probably a lower weather risk than crop production in terms of yield.
I would even used specific bulls if I could sign a contract out ahead of time. A lot of the value chains and alliances stateside use this long term strategy.

[per]

A doable challenge. Don't have to hedge the whole crop. Have to leave room for production problems and speculation. I am happy I went long on rye as it just hit $9.50. Received $4.30 for the presold production. It provided stability and allowed bill payment but doesn't always make the best price.

[perfecho]

sm76 wrote:"I would even used specific bulls if I could sign a contract out ahead of time." Although I can't disagree with the statement and the will to survive our current dilema, however this sort of comment does worry me. It concerns me in the sense of being very similar to the hog industry....soon told what to produce, when, what genetics,etc. As Angus Watt said, or at least what I took out of his presentation, at a local breakfast,
Canadians are losing their culture, their way of life.......and in speaking to him later, this applies to business and agribusiness.
We really should paint our own future, not what Corporate America wants to paint.

[Bez]

Quote -

I will agree, although some will spew that this is much like the milk quota system, or the start of one. And though there seem to be many pushing to shut down the quota system, look at which ag sector makes decent living.
We are striking a team in our area, through Economic Developement, to look into the development of a small packer plant working on the 100 mile diet basis. I believe the only way to make it function properly, and to get procucers on board, will be to contract animals. It is a "pie in the sky" dream, but unless something changes in this industry, it is on the same path as the hog sector. At least groups like Kaisers and grassfarmers are trying.......instead of accepting the status quo!

End quote.

perfecho - Good points. While I do not necessarily agree with your points - I support your action - you at least are formulating a battle plan.

Now, here's what you need to do when you get to that meeting.

First some dullard schitzen head is going to stand up and start ragging about "How This Will Not Work!!!!".

Heck - might even be me if you are lucky. ;-]

You stand your ground - look that damned sheeple headed - non imaginative - got the land from mom and dad and might just keep it if he gets another interest free loan from the government that is starting to hate us- frigging idiot - and ask him this question:

If you were God for a day how would you solve this problem and make the industry profitable for all that are in it?

If you get a blank stare (you will) - speak slower and ask that question again.

If you get an answer that has more than the following:

Uh, mmm, wellll, uh, I think the cattle orgs, um ummmmmmk and the government need to ummm get the prices under ummmmm, control and tell those ummmm Americans to straighten up .....

I will be surprized.

Tell him to sit down and shut up - he IS the problem.

All you have to do is look around.

They are everywhere and they all seem to sit at a board table and be called frigging experts.

Hell, even in Ontario they are starting to leave the cattle orgs and go their separate ways. I believe Perth county has already split.

They have split from the OCA into two groups - one staying the course and the other telling those old hands to take their org and shove it.

There will be some wailing and gnashing of teeth soon - after all these orgs depend on member dollars.

Watch them start crying the blues when the money walks and they can't take that nice trip to some exotic country.

Those old bastards running the shows in various provinces have all told us how it CAN'T work - but they have done nothing else.

If this were the 1800's I'd say string them up and cut off their nuts.

I am looking for some of them to stand up and tell us how it CAN work.

And yes - if supply management can work for the two most profitable sectors - poultry and dairy - it for damned sure can work for pigs and cows.

Figure it out and MAKE it work.

In the end one thing is for sure.

If something does not change soon, the industry will be dead and you will not see cows raised in this country by the folks who live down the road - those animals will come from somewhere else.

Even that idiot that got the land from mom and dad will be out on the street - and he will still be wondering how the hell cattle organization XXXX and the government of the day could have let it happen.

Funny thing is - they didn't.

The idiot is the reason it fell apart.

He believed in MORE efficiencey and interest free loans and packer owned cattle.

He forgot that there is NO trickle down effect - profit is everything and the shareholder is GOD - if a penny can be squeezed out of the producer and put into the bank of the packer it will.

If all plants can be owned by one company - coming soon - you will take what is given or ....

the plant will simply move to another country .....

and - yes - it can happen and is coming soon to a theatre near you.

Do not like the price - too bad. Take that price or get out of the business - or raise them for the packer - like the hog folks.

It worked real well for them. Right?

Not!!!

Have fun and good luck perfecho - I look forward to hearing how it went - eat local my friend.

Rant over,

Bez

[smcgrath76]

I don't support quota in beef. And I share the concerns with beef taking the industrial hog model. But there has to be some long term risk strategy for producers to play in the value added game, and to me, part of this solution is marketing contracts. The contract may be on specific genetics, it could be on requiring use of a specific breed of bull to play in a branded beef program (eg: Galloway).
I see opportunities out there, but I see limited numbers of producers seizing them, and this could be part of the solution.

[rkaiser]

As soon as I get some larger contracts for beef Sean, I will give you first crack at a delivery contract for breed specific calves. We're working on it man.

As for you Bez lighting. Great post.

[smcgrath76]

LOL. Thanks Randy. We are one of those freaks who have put money on the line investing in a processor and are trying to work into a value chain. I am always interested in pursuing added value and might even breed to a fuzzy black bull for the right deal (LOL).
We have hedged a bit and until the chain we are trying to work within gets fully sorted out we are still commodity guys for the most part. I would like to work across a couple of different options just for risk management purposes.
That said we just pulled the trigger on some calves yesterday and were pretty pleased with the price received. I am 100% convinced that we recieved a premium for the extra efforts we go to (not all of which cost money).

[rookie]

Bez..........

One of the finer posts , ( as usual)

I think I will put it up on my office wall for some daily motivation.

[SkeeterD]

If market power is the concern there are producers DOING something about it check out the guys at North West Consolidated Beef www.nwbcp.org.

[SkeeterD]

Sorry nmake that www.nwcbp.org.