CCA - Removal of KVD is a positive step for agriculture.

[joedales]

Removal of KVD is a positive step for agriculture



For Immediate Release: February 11, 2008



Calgary, AB – The Canadian Cattlemen's Association (CCA) supports the announcement by the Honourable Gerry Ritz, Minister of Agriculture and Agri-Food to fully remove kernel visual distinguishability (KVD) as a requirement for western wheat variety registration.



“Wheat producers have been significantly impacted by the restrictions KVD has imposed on them. KVD has also impacted the livestock sector by limiting the development and registration of new, higher-yielding varieties that are suitable for feed and biofuels at a time when the cost of feed is at an all-time high,” states Hugh Lynch-Staunton, president of the CCA.



The CCA has advocated for the removal of this system for some time and recently completed a report titled Feed grains and forage research and commercialization in Canada (available on the CCA website www.cattle.ca) to investigate the current situation of feed grains and forage research and commercialization in Canada and factors that hinder competitiveness. The report indicated that the removal of KVD could significantly benefit the Canadian beef industry.



The report also indicated that the full removal of KVD would increase farm revenue by $60 to $200 million per year. In addition, plant breeders estimate that the value lost in existing varieties due to KVD restrictions is over $3.75 per tonne of production – equating to over $86 million per year.



“We applaud the decision by the federal government to remove KVD,” says Lynch-Staunton. “This will give grain producers more choice in the variety of wheat they grow and these new varieties will provide benefits and options to the livestock sector. Until now, Canada was the only wheat-producing country that used KVD as a segregation tool and it is time we found an alternative if we are to remain competitive in the global market.”



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Theresa Keddy

Communications Manager



Canadian Cattlemen's Association

#310, 6715 - 8th Street NE

Calgary Alberta T2E 7H7

Ph: (403) 275-8558

Fax: (403) 274-5686

Email: keddyt@cattle.ca

Website: www.cattle.ca

[rkaiser]

So I guess old Hughy figures that the few thousand extra bushels of grain produced by new varieties will bring world grain prices back in line so that the feedlots can once again profit. ;-)

Seems to me that it will simply mean a few more thousand bushels of high priced grain heading for the bio fuel plants or competing with corn for those same plants at the same world price.

I guess it could work if some die hard feedlot boy out in Bushelbush Saskatchewan a feedlot owner in Southern Alberta with millions tied up in infrastructure decides and a new variety will allow his custom lot to survive.

[grassfarmer]

I'm all for this change if larger crops can be grown without increasing inputs - it would be an efficiency improvement. As for it's effect on the cattle industry and specifically the feedlot sector the benefits are less clear. Is the ambition held by CCA/ABP of regaining our "competitive advantage" over the US by having the lowest cost of gain really the best we can aim for? Given that we will still be constrained by having a packing infrastructure (with no competition) owned by the US what benefits can Canadian beef producers look for? Won't cost of gain improvements be overridden by the difference in the value of the dollar?
Wouldn't we be a whole lot smarter trying to set up our own, differentiated production system, targeting a higher value product and a higher paying marketplace?

[smcgrath76]

In my mind this relates to the whole topic of conversation over the last several years on here. KVD should give the farmer/feeder an advantage of greater production on fewer acres for the same input cost, thus reducing his cost of production. It should also do the same for the Canadian feedlot. It does provide us some improved competitiveness in the commodity business.
In my mind it does not add value to that production. Basically I think reducing the cost of feed may help live cattle prices a little bit, but it does not add value. Differentiation adds value.
I think FS brings this point to a head, about needing more for live cattle, but what really differentiates live cattle to make them different from any other live animal.
There are some obvious things like, no nuts, no horns, good health protocol, maybe superior genetics, etc. but in the commodity game, one live calf is as good as another. If the production budget is $1000 and feed is going to be $500 then the calf will be $500. If we can drop feed to $400, then the calf might be $600, so in that respect KVD removal is probably a good thing.
We have to differentiate to add value. A good example is Laura's Lean. These cattle are the anithesis of what many producers want, but they are differentiated and command a premium when marketed into the LL program.
Without differentiation a calf is a calf is a calf.

[DiamondSCattleCo]

This is all fine and dandy, but it still pits grain farmer against beef rancher. I occasionally have coffee in town on coffee row, and it never fails that when the grain farmer is doing well, the cattle producer is suffering.

Why is this?

Because of improper government meddling in the system. Our government has a cheap food policy that effectively caps the price of food in the store, all the while allowing a mass amount of concentration in both the grain and beef industries which limits competition on the raw resource bidding side.

The CCA really wants to make a difference? Lobby government to break up the grain and beef monopolies, enforce existing competition laws by breaking up competing protein sales within a single organization and abandon the cheap foods policy. People may end up paying a little more for their food in the end, but at least the producer won't feel disproportionate hurt when temporary supply stresses unbalance the system.

Rod

[grassfarmer]

I don't agree with your "cheap food policy" comments Rod. I hear these comments often from producers that are irate because they are only receiving a pittance for the product they raise and deliver to processors and retailers. The feedlot steer that sold for $1100 being retailed for $2400-$2800 does not sound like cheap food to me. I just do not agree that we are poor because the consumer is not paying enough for their groceries - remember they are also the taxpayers footing the bill for our bailout packages so pay twice for their food. Which Government policy do you say "effectively caps the price of food in the store"? I would suggest that the retail sector is subject to the same lack of competition as the processing sector - but this allows stores to set high prices, not low ones.
I certainly agree with your comments on needing effective monopoly laws in Canada and feel that should be applied to the retail sector also.
Whatever you believe the time of rising food costs are with us - maybe a 5-10% increase in grocery prices over the next couple of years due to shortage?

[smcgrath76]

I think there is lots of money in the food business. I appreciate that grain farmer is pitted against livestock producer, but I also have to admit that we didn't voluntarily offer to pay more than market price for any feed grains we bought during low price periods for the grain guy. Conversely, there are not a lot of producers willing to enter into long term arrangements for feed production (either buying or selling). We all like to speculate.
The issue of monopolies and market control is very real, but the solution in my mind is not more controls on the controllers.
I think there is limited opportunity for differentiation in the commodity game and thus he with the lowest cost (not neccesarily best quality) wins.

[DiamondSCattleCo]

"Which Government policy do you say "effectively caps the price of food in the store"?"

We have dozens of government programs designed to reduce inflationary pressures of food products. Here are just a few:

1) Demand side policies such as reduced tariffs during times of packer "need". Import quotas in this country are a joke.

2) Input subsidies

3) Direct farmer subsidies

4) CAIS

5) Any form of disaster relief is a form of cheap foods policy.

6) Interest free or low interest loans designed to increase supply.

There are more, but I'm sure you get the drift. All of the above are considered cheap foods policies by the majority of economists.

If government was really concerned for producer welfare, they'd reduce their interference in some areas, and increase it in other. In addition to what I've already posted:

1) Increase import tariffs or completely close the border to those countries who social welfare does not equal our own.

2) Break up the oil and gas consortium. While collusion has never been proven, government has allowed gouging for too long.

3) Allow single desk marketers to use monopoly practices and change producer revenue from a bid system to a cost plus system.

If the system was allowed to function as it should, with true competition in all areas, food prices in the store would rise, packer profits would go down, producer welfare would increase.

[grassfarmer]

Rod, I would have to disagree with you again(and the majority of economists?). The policies you describe do not subsidise the consumer by providing him with cheap food - they subsidise the processing and retailing sectors by artificially lowering the price they pay for their raw materials.
The processor/retailers can procure their raw materials below the cost of production because we, the producers are subsidised to stay on the farm. The consumer's food supply is thus not priced artificially low - the retail price of beef etc is well above the cost of production. Proof that food prices are not artificially fixed low at retail level is fast approaching - as already seen in Europe etc where they have risen by 40-60% on some items in a year to reflect the rise in grain prices and shortage of food around the world. It will come to Canada too.

I agree again with your solutions though, they point the way ahead.
I particularly like "3) Allow single desk marketers to use monopoly practices and change producer revenue from a bid system to a cost plus system."
I discussed this with a friend recently who was disappointed that the B5(-1) group had not brought this forward as a proposal - of course it makes sense. Unfortunately I guess you would not be able to sell it to western cattle producers because the majority have been brain washed by the anti-cwb propaganda fueled by the grain handling multi-nationals who want to get the stranglehold on the grain sector that Tyson/Cargill have on the beef supply. A Canadian Cattle Board would allow as you say "the system to function as it should, with true competition in all areas, food prices in the store would rise (rise slightly or remain the same in my opinion), packer profits would go down, producer welfare would increase."
I take it you mean producer wealth would increase rather than welfare - welfare is the thing we are trying to get off LOL !!

[blackjack]

...excellent posts guys...but beware there are preferred farmers and companies in the board system as well...the answer is pretty simple to me...as long as we cannot export our product at a profit(farm level of industry}...we need to produce something different...just like any other business would have to...

[smcgrath76]

Can't think of too much worse than a marketing board for beef. I do think we need to address competition, but tell me how much innovation, differentiation, value added has the CWB spurred in the last 20 years. We are still exporting commodity wheat.
1. A monopoly board would be countervailable. This means we are effectively stepping out of the export arena and thus have a few too many cows.
2. a board would require producer compliance to be successful and thus would stifle innovation. For example, if the CWB ran beef marketing, I would have to buy my calves from myself at the pool price, plus pay freight, in order to harvest them in a plant and value based program that I have personally invested in. That also goes for organic, grass fed, direct marketers, or any other attempt at value adding.
3. Why try to improve? A calf is a calf under a board system. Is there a seperate pool or premium for preconditioning, age verifing, etc.
4. A monopoly pool has monopoly power. Anyone who thinks legislators or CFIA wouldn't encourage that please step forward. They could demand age verification, or preconditioning and pay no premium at all, because that would be the required norm to sell.
I think my personal viewpoint is pretty evident here. I do think we have to address the issues with large multinationals and competition, but let me know if we are going to have a marketing board, so I can get out.
I would be interested to see what the proposed solutions to some of the issues I have with a board are. I have been known to change my mind before. A voluntary alliance of producers who market cattle together has much more merit in my mind (see Consilidated Sell). A value chain entered into in good faith by all parties who wish to enter is even better.

[DiamondSCattleCo]

"The policies you describe do not subsidise the consumer by providing him with cheap food - they subsidise the processing and retailing sectors by artificially lowering the price they pay for their raw materials."

Yep, exactly, and since the processing sectors operate more on a cost plus basis than they do on a bid basis, artificially suppressing input costs carries the same effect as reducing (or maintaining) retail prices. This phenomenon has been documented dozens of times over the years with the start of the welfare system in Great Britain back in the 1800s. Government economists are well aware that subsidizing inputs will put a downwards pressure on retail prices. Whether those retail prices drop or not is subject to other downward and upwards economic pressures of the time, but don't doubt for a moment that subsidies have a direct and measurable effect on retail prices.

SMcgrath,

I realize that the present CWB is not exactly a sterling example of what single desk marketing is capable of, but again they are hamstrung by politics and a border of governors who don't really seem to know what the hell they are doing.

However if you look into the past when the CWB was allowed to freely practice monopoly pricing, stockpiling, and any other practice designed to raise the price of raw product, you will see that it was very effective.

I'd like to see a single desk beef marketing board that would differentiate between "classes" of beef and NOT pool producer proceeds but rather operate strictly as a single point sales agent between cow/calf producers, feedlots and processors. I don't agree with single desk sales of breeding stock or anything along those lines.

Rod

[grassfarmer]

Sean I was very surprised with your comments - this is what I expected of western producers in general though. You jump to all the conclusions I expected based on opinions of what the CWB has/hasn't achieved. Most of them are not applicable to the cattle board I had in mind. Your later comments about a voluntary alliance are more in line with what I envisage.
1. A monopoly board would be countervailable. - would it? the US has had many attempts at attacking the CWB this way over the years to no avail. Why should we build our policies around WTO or NAFTA standards anyway? are you naive enough to believe that if we do others will also comply? We must fight and defend our right to trade but not by unilaterly complying with schemes our trade competitors would like to handicap us with. No need to give up exports. Trade agreements are not really about levelling the playing field for producers in different countries anyway they are about making shipping of product by transnationals around the world easier - so these imports can be used to de-stabilise the domestic price and supply raw materials to said transnationals at below the cost of production.

There is no reason why a board could not be set up along the same lines as the outfit marketing fat cattle in S. Alberta today - achieving better returns by uniting producers to fight a stronger sales hand with the packers. There are certainly opportunities to market a range of different product types eg grassfed, organic, hormone free. In no way does a central marketing board preclude this.
There would also be cattle sold of different grades and values so the incentive to produce better, and get paid for it would still be there. I think this proposal deserves further consideration, especially in conjunction with the B5(-1) group's current proposals.

[smcgrath76]

I am not oposed to a voluntary organization with a cooperative spirit. I appreciate how difficult it is to get like minded primary producers to sing from the same songbook. I have a problem with mandatory anything, and can see huge challenges in working with people who don't share the same spirit of cooperation.

[northfarmer]

so, there are people in the cattle business that would prefer to have some salary paid "beuracrats" sell their beef under a monoposny (the cwb is a monopsony as they by now means control the supply of wheat in N America never mind the global market of which 75 % of the production is epxorted to)......or better yet like the CWB where the majority of the export sales are made by agents of the board....the national grain cos, JRI, Cargill, Viterra...using their terminal and port facilities where the most profitable handle/blending rev they get is off the cwb trade......

we have almost $20 MGEX wheat and here in Canada Canola and Pea acres on the climb with wheat planned acres relatively flat and barley expected to be down even though corn is better than $5 and the supposed new crop malt quopte is close to $7...

grassfarmer, I do not agree with your perspective on the the CWB, but you make other excellent points, our food policy does not necessarily create cheaper consumer food......it does ensure that certain elements of the value chain make much greater margins....as long as producers, grain and cattle, sell a largely undiffrentiated commodity product the only way to maximize returns is through lower cost per unit of production......

I have cattle and grain, the cattle business margins are poor, grain is the best it has been in twenty years.....my plan is the inverse will hold true in time....there will be great value buying opportunities in beef in the coming years(we have not bottomed out yet???) and I will expand that part of my business and continue to move to a lower cost forage based cattle system with a differentiated marketing strategy....

as for removal of KVD, good on Ritz and do not stop there there are many more changes needed!!