The Future of Canada's Cattle/Beef Industry

[kato]

So where do the beef producers that do not live in Alberta fit into all this??? Over the many years we've been in this business, we've found that most things that were good for Alberta were not necessarily good for the rest of us!

Don't forget there are lots of other cattle producers out there who don't have the benefits of a rich provincial treasury to help smooth out the bumps. We're pretty much on our own, and wouldn't mind being remembered when future policy is set for our industry.

As for the future, I also see bigger herds. And fewer cattlemen. This may be as much a result of having no one to replace those retiring, as anything else. Also smaller feedlots and possibly less big time packers, but more smaller processing operations. Having more smaller feedlots rather than a few big ones is a good thing, in my opinion.

It could be an opportunity for smaller plants to expand. Making interprovincial trade easier, and helping existing provincial plants become federally inspected would help a lot. I think there is a brighter future for smaller existing plants to expand in a steady controlled manner than for big new plants to try and start from zero. The bigger new plants are easy targets for the internationals to shoot down. Transportation costs are reduced if the trade stays more local, and smaller plants can tap into the growing trend toward knowing where your food comes from. Never underestimate the effect a culture shift toward environmentally sound practices will have. This is something we can capitalize on.

The trend to using alternate feed will also increase. Ethanol byproducts are a lot more use to cattle feeders than hog feeders, so I think it's the hog industry that's going to be hurt the most by it. Cattle feeders are going to get a lot more creative over the next few years with what they use for feed.

In the long term, I don't think ethanol is going to be as big of a deal as it is now. Sooner or later the U.S. is going to follow the money, and drop their tariffs on South American sugar cane ethanol, and then it will be a whole new ballgame. Research is also moving forward to find alternate sources of ethanol, like wood. If they could figure out a way to make it from poplar or willow, they will do it. It's going to become politically incorrect to divert food to run SUV's before too long, and we will probably look back on the ethanol hype the way we look back on how the computer was supposed to make us a paperless society with more spare time than we can handle! ;-)

[Bez]

Just jumping into the fray.

The future?

Well, in the near future those who have their land paid for, have outside work or are using family for support - they will stay on unless an offer that cannot be refused comes their way.

Those who do not have land paid for, do not have outside work or do not have family support or a large bank account or a huge capability to handle the stress of big debt loads - well, many if not most of those will leave the industry. Why bother to watch literally thousands of dollars of equity go down the tubes?

There will not be many who return to the industry as profitability is the deciding factor.

Without it we literally cannot eat, pay taxes, fix equipment and so on .....

Despite many who loathe supply management, or some other program that would actually create a constant ability to make at least a 1% triple net profit - I am of the opinion the herds will get larger, the average age will get older and the industry will diminish in capacity to produce.

Simply because the actual number of producers will decrease. And that decrease will be substantial over the next 10 years.

The term factory farm is one I despise - however, they are coming - the family operation is soon to be a thing of the past - and if it does happen, all we have to do is look in the mirror to see where the blame lies.

Even if they fail - we can always import the food we need to feed this country. And that will come - hopefully not within my life time - but it will come.

If things do not change we are in for serious de-population of those who live in agriculture.

All because the main body of those in agriculture - speaking in this case of beef - tend as a greater portion to stick with the old ways that Gramps did. It worked for him and it may even be working for some today.

They also tend to sit on the fence posts and wait for someone to go down - after all it may present a buying opportunity.

Nothing like a few ravens, crows and vultures enjoying a nice meal at a fresh new auction - all the while shaking their heads in mock sympathy over the failure of the XXXX ranch / farm business.

Yet rubbing their hands with glee when they get home over the great steal of a deal they got on that new piece of equipment that old "Jonesy" only bought last year.

But the numbers do not lie.

There are less people today in the industry. There will be less tomorrow.

Why?

Because not only is it expensive to start, the risks are so high that there is very little financial support from any institution.

I know I can be argued with and will be argued with by some folks in a specific manner - usually because they themselves are surviving either through substantial monetary backing or family backing. Or perhaps both.

Or more rarely - they were one of the few who managed to get in at the right time and now are making it - barely, but they are making it.

But in fact they are the exception to the rule. And it is my opinion that many of them sit fat and happy - waiting to grow off the backs of others.

As a general rule we are definitely in a declining industry - simply because the vast majority refuse not only to see it, but also refuse to do anything about it - other than pay it lip service.

I see the main producers from Alberta driving whatever program we have in Canada - benefitting them and probably not many others.

I see the sale of animals being controlled by a system that allows price control.

I see vertical integration growing and squeezing the players - soon many will grow cattle like hog producers grow pigs. And then they will be squeezed.

I see very little hair that is not grey at the sale barn. And I see very little movement to save the industry. Nothing more than talk and cheap talk at that.

I see the average farm / ranch kid not being interested in working for years and never getting ahead.

It is basically every man for himself and that is why we are managing. We essentially told every organization out there to piss off and go away.

Presently they are more of a hinderance than a help.

I see all ag orgs fighting to the point and even - despite vehement disagreement from our own group here in pissant Ontario - actually sueing each other over issues that are divisive instead of uplifting.

To expand out - if ag orgs as a whole would at least guarantee to not hinder the processes of other orgs within the total ag family - at least there might be some progress down the road.

I know this is negative, but show me a time that profit was a constant over the past 20 years. Show me a time when fuel and tax and mortgages ate up nearly 80% of some operating money.

Show me a time when the basic producer demanded a price rather than took whet he got.

How many businesses work off business to support the business?

Show me a place where cattle orgs actually got together to do anything other than tells us packers are good and that we desparately need our southern neighbour.

Show me a time when I knew for certain I could get a price that would at least pay for the cost of raising that animal to sale or slaughter.

Show me a time when we actually managed to develop a program to sell to someone in Europe.

Times are changing and we are not changing with them - other than in very localized areas.

You want to see this industry succeed?

Then it is time for RADICAL change. Not some pissant initiative that might give the basic producer XXX bucks a head.

Show me how Verified Beef, Age Verification and producer owned plants are going to shake this industry up and create profits for the base producer.

In my opinion they are not!

In very specific cases they have. In general they have been nothing more than a band aide that fell off as soon as it got wet.

I would really like to see how the CCA, and every umbrella cattle producer org has proven their worth.

I am sorely disappointed with all of them - from coast to coast.

And yet we muddle on - if only because the vast majority of us are too stupid to change.

Our kids on the other hand will happily sell that land at a profit when we die - so there is a small satisfaction of "future profitability".

Rant over - excuse any spelling and grammatical mistakes - I did not proof it.

Bez

[smcgrath76]

I have posed this question before, but no one has really answered me. Does it matter if we lose producers, and if so how many?
Let me explain my thoughts a bit here...
I believe that the broad industry is made of many small producers (relative to the industry) making independent business decisions. If we independently pursue business as usual, we will see our costs increase (this is the basic law of inflation). Many of us reduce this cost by paying down debt, changing our practices (eg: grazing longer)but at the end of the day we still face inflation (rent, land taxes, diesel, feed, etc.) Conversely in the commodity business (with or without limited competition) price will continually be driven down (the cost/price squeeze) and in the context of WTO access to our markets by potentially lower cost producers will increase.
Basically, this to me spells out a couple of options...
1) get more cows. If margins are squeezed and it costs more to live all the time, then you need more cows. In the traditional model I figure I need around 1,000 cows and no hired labour to make a go of it (this assumes purchasing or renting a land base). The number may be less if the land base is largely secured.
2) add more value. If the commodity thing squeezes margins, then get into a business with better margins. This to me means value chains, niche marketing, etc.
3) do both.
The way I read it, unless more individual operations are willing and wanting to change, then option 1 becomes the defacto model across the industry, and the number of producers will continue to decline.

[grassfarmer]

Interesting discussion. A few comments on the latter posts - Kato I think your analysis of ethanols future is right on. They actually have a plant up and running (or very close to it) in Scotland burning wood, primarily derived from farmed "short rotation coppiced willow" another is being built in northern England so that technology is available now. It's a lot smarter than corn ethanol that's for sure.

BEZ, You make a good analysis of the situation at the moment, it was lacking in solutions though. I think there are still opportunities out there - growing crops for fibre or fuel is one, getting paid for carbon sequestration is the ones that excites me most. If we can achieve returns of $100/acre or even $50/acre in carbon credits for managing grass in a sustainable manner imagine the potential cash injection into Canadian agriculture on the land base we have. This would be great progress - essentially big business subsidising good management of grasslands, the shoe would be on the other foot for once!

But even in the beef sector there are opportunities - take the US grassfed beef market which has grown from 8000 head marketed in 2000 to 50,000 in 2006 with predictions that consumer demand would need 100,000 head to meet demand in 2007. Where will this end? will it happen in Canada too? these are possible opportunities with huge potential. Remember too none of this grassfed beef is going through the doors of Cargill or Tyson, this is small, local plant killed beef much of it being direct marketed.
How climate change effects agriculture around the globe remains to be seen and could also shape our destinies.

Sean, I think your #3 choice is where we are headed as there are many people working to gain a better portion of the proceeds of the beef they rear, some will succeed.
I don't think it really does matter that we are losing producers or that there is a critical number to get to, it's evolution and has been going on since every human on earth was growing/catching their own food. The important thing is that in almost every case when someone sells up, retires or goes bust someone will farm their land after them. The land remains in production and that will always be the case as the population continues to grow.

[ValueChainFX]

Been a while

We all know the challenges are many

1.) Producer groups need some sort of central communication/marketing effort. It isn't happening now!

2.) Until our Federal / Provincial governments establish an inter-provincial trade inspection system crossing our own provincial boarders will not happen.

3.) Success in the Asian market only happened when we worked close with our customers there, inspected every load when it arrived and had them working with us in our plants to provide the exact product they wanted (and paid for limited available product by buying less desired cuts that helped us balance loads)

4.) We had people on the ground in our customers country to ensure their every desire was met.

5.) Unless there becomes a way that the producer is the Canadian supply chain, they best be happy as producers win lose or draw.

6.) Producers need to align thier opinions rather than supply 2 or 3 for the same plan.

Manifesto .... Plan .... Objective ..... Vision or hollusination if whatever happens is not in alignment with the needs of producers across Canada there will be fewer and fewer every year.

Personally I wish them all well and presently keep up now and again with what is going on in the industry, I walked away when I found the leadership was more often than not doing the government business and not producer business.

Just an observation, hope I didn't stir the pot

[rkaiser]

Stir on ValueChainFX stir on. Don't give up on the present Alberta Government like ABP has. These folks are listening and deserve credit rather than the ABP disgust when they are pointing out truth, responsibility, and a need for a new long term strategy like the current Ag ministers office is doing.

[Bez]

GF

Solutions were not asked for in the initial question.

The question asked where do we see the industry going.

I have mentioned several in past posts - however the whining of the rancher / farmer has basicially driven me to run my own program.

I have no faith that there is an organization that is prepared to go out on a limb and seek radical change. Most have become very self serving.

We sell everything out the front gate now.

To hell with the buyers, sale barns, packers and their ilk.

A pox on the various orgs that would rather travel to exotic places and spend MY membership dues.

And the politicians? Well they are truly tired of hearing from us. I know several sitting members of parliament personally and they have all told me the ag groups as a whole are not well thought of.

Always asking for money and never managing to come up with true long term solutions.

You can argue that point any way you like - and in fact I would likely agree with those arguments - but we are not well liked for many reasons - in my opinion - mostly because we have created those attitudes.

The fact remains the pollies look for the vote - and we do not have that power when we sit at roughly 2% of the population.

Off to sell another couple to a small restaurant - have a good one.

Bez

[kato]

I know I'm showing my age here, but we started in cattle in the pre-loss of the crow era, when the beef industry in Canada was a lot smaller than it is now. Grain was paying the bills at that time, and most of the ones in cattle were those who did it because they had land suited to it, or just because they liked cattle and wanted to make a cow herd their life's work. Farms were a lot more diversified, and the average cow herd was a lot smaller than today. The loss of the Crow, and the disappearance of profit from the grain industry brought a whole lot of people to the beef business who would probably never be there otherwise. We saw an absolutely massive expansion in cattle numbers and producers.

I think a worst case scenario is that the Canadian beef industry drops back to that level.

Is that a bad thing? I'm not sure. I guess it's bad for the big packers and those in the export business, but on the other hand, this is one way to become less dependent on exports, as we are told we should do. Would a big multinational leaving the country open up opportunities for Canadians to take more control?

I think that as long as there is grain being grown, there will be byproducts that can only be used by cattle, so a smaller national herd could make good use of it, and at a more reasonable price than today. More byproducts from the expanded grain business, and less competition from the reduced number of cattle feeders could help our cost of gains a lot. Straw, DDG, screenings, light barley and oats all need a home, and can only really be used very efficiently by cattle.

The main question is who will go and who will stay? If this scenario actually played out, would life eventually get better for those who stay, assuming they survived long enough to see it?

So would this be a reduction in our industry, or a return to it's previous historical size?