Free Enterprise FS ?

[wd40]

MINNEAPOLIS, MINNESOTA, U.S. — Cargill, Inc., announced on April 14 that it had net earnings for the quarter ended February 29 of $1.03 billion, up 86% from $553 million in the same period last year. Earnings in the first nine months totaled $2.9 billion, a 69% increase from $1.71 billion last year.

What a kick in the face with a wet boot.

[per]

It is not against the law to make a profit. That is what we are all trying to do. I don't like that some of that profit is likely at our expense but Cargill is involved in more than the packing industry. Big numbers to be sure. Kinda sucks to be us but we need to find a way not to be dependent on Cargill.

[wd40]

One thing for sure the multi-nationals don't have a social conscience.

[farmers_son]

WD40: By F S I presume you meant me. I am not quite sure what you meant by your post, I am guessing you think Cargill made too much money at producers expense. That may or may not be true, Cargill is a private corporation and they do not publish their annual report. We do not get to see where their profits came from.

I certainly do not intend to defend Cargill, their actions as well as the actions of other beef processors during the period from May 2003 to when live cattle exports resumed was unforgiveable and I have not forgotten.

You may not be aware that I have consistently advocated producers owning their own packing plants. It is not a matter of if that will happen but when and how it will happen. However that is not to say we want to replace Cargill as Cargill does bring considerable resources to the beef industry but there is a need to ensure that these multinationals pay a fair price for our live cattle and for that to happen producers must have an alternative to market their production, for instance a properly structured and properly financed producer owned packing plant. That would truly be free enterprise.

[grassfarmer]

F_S, I note you think the actions of Cargill and other beef processors were unforgiveable "during the period from May 2003 to when live cattle exports resumed"
Do you believe their current actions to perpetuate the captive supply situation by their strategic policies of owning/controlling fed cattle are a factor in holding live cattle prices down in Canada?

[farmers_son]

Are our live cattle prices really down? Please see:

Historical Live CME Futures
http://www.tfc-charts.w2d.com/chart/LC/M

Live cattle futures in the U.S. are at record high levels. In 2001, which is the year most of us Canadian producers would consider to be our last good year, U.S. live cattle futures were as low as 63 cents. Yesterday August futures closed at 97.62 cents and all the trend lines suggest even stronger prices. What has changed though since 2001 is our Canadian dollar which I do not think Cargill can influence and the price of barley which I suppose Cargill can influence but has been mostly influenced by the U.S. ethanol policy. If our dollar was still at 63 cents like it was in 2001 we would be getting over $1700 for a fat steer today. We would have never had it so good. But the dollar did change and high barley prices are knocking at least $200 off of the price of every weaned calf and that comes right out of your and my pocket. Feeder calf prices are down due to high feed costs. That is the market reality we find ourselves dealing with. If you want a kick in the face with a wet boot just buy a load of barley these days.

Packers do own/control cattle. Presently in the U.S. there is a important debate regarding the U.S. farm bill and packer controlled cattle. I hope that debate goes on for a while more because as long as they are arguing about packer controlled cattle it means the implementation of COOL may be delayed, which is what really should be the focus of Canadian producers. COOL is the number one issue before us today.

[smcgrath76]

I don't disagree with you FS. A couple of things I think about...
1) when cargill was recruiting at U of S I heard a statement that "Cargill is the largest family farm in the world". This is actually true, depending on your perspective of things. It is good to have different perspectives.
2) cargill is huge and plays in a lot of arenas including mining, fertilizer, ag inputs, food, transportation, etc. I actually don't think that given the size and depth of cargill's business and the strength in all the commodities that their profits are all that good. I certainly don't think it was built on my back.
3) ag has been the forgotten cousin for a long time. This has allowed groups like cargill and tyson and ADM to develop with somewhat less competition than if the industry were cool and sexy like software, oil and gas, etc have been. While these companies have probably fortified their positions, it is also apparent as ag prices increase, investors are more attracted to the business than at any time in the last 20 years. This will create competition for these mainstay players and new opportunity for those willing to look for it.
4) COOL is a huge concern. I think long term it could help to force differentiation and movement in the Canadian industry, but there are going to be a lot of people hurt in the interim.
5) I think we are going to have to work to get the grain out of our production systems. Like it or not grain costs a lot. I know we had a bunch of feeder calves this winter that should have been on a high gain ration based on their genetics and all they got was hay after we were done with doing math. I think we need to rely on the rumen as it is our unfair advantage.
6) I think traditional agriculture is dead we just haven't realized it yet. The standard business mopdel we have been operating under doesn't work long term in the commodity business, largely because it limits growth rate and economies of scale.
7) We may see opportunity for Canadian owned processing moving forward. It is difficult to say with the Gencor thing, and the JBS aquisition, and several of the other changes to our industry. I get pissy about this one, because everyone talks the talk, but no one seems to want to put up the money. We talk about producer owned plants, but how many have actually sunk $ into one and/or committed cattle? Yet in that same time frame, a lot of producers may have gone and bought a new truck that actually took a larger investment than the plant required.

Kind of a rambling post, but this topic is actually many sided and integrated into a lot of the discussions we have here on agri-ville.

[smcgrath76]

PS. I agree that the dollar is killing us, particularly when inputs like feed are priced locally, and product is priced globally.

[per]

SM76 you nailed the true reality of the industry. Imagine a family that has worked together and included many generations to build a dynasty like Cargill. You talk about unfair advantage and are also correct that the rumen is there already for us to properly utilize. I have been a grass fed producer for several years and using tough selection and observation these cows can live in our environment just fine with out heaps of grain. Our back grounded calves haven't had grain for many years and do very well when they hit the grass. No new pickup here but I have lost money in a failed plant in Armstrong and would be willing to step up to the plate again. Cargills family model could be useful in our industry. Working together is the best way to reclaim our place. Bottom up not top down.

[smcgrath76]

I have not lost my money yet, but there is a producer owned plant in SK that I have invested in that is still in business and struggling to make a go. They are very flexible and are open to custom killing for interested groups, selling shifts, or inviting new shareholders. They are federally inspected and EU certified. They have also been screwed over by CFIA, CBGA, XL, etc. and are doing it with no Gov't help (Albertans take note).
I think they have potential to work with/for groups such as Canada Gold, and others if they are interested.