Meat and Livestock Australia MLA

[farmers_son]

It is not just the Alberta Livestock Meat Strategy but elsewhere I see Australia's MLA being held up as an example of how our industry should be structured.

I have been very interested in Australia for many years now and frankly had looked at how we could restructure our industry along the same lines. However it has occured to me that if MLA is so good how come the price of live cattle in Australia is not higher than it is? No question Australia does achieve beef exports but has it benefitted their producers or has it been at the expense of their producers. The price of a fat steer in Australia is $300 less than the same steer sold in Alberta adjusted for differences in currencies. The price of their cows is somewhat closer to ours but wouldn't you think that if exports were the key to producer profitability that Australia would have significantly higher live cattle prices than we do.

[grassfarmer]

Come now farmers_son, you are trying to muddy the waters again by implying exporting is not a worthwhile venture. What is the Australian steer profitability related to their land and other input costs? Without knowing that and only quoting a $ value per steer the comparison is meaningless. A UK steer is currently worth around $850 more than an Alberta one. Does that prove we should allow our cow herd to collapse in size and become a net importer to ensure profitability?

[farmers_son]

I was trying to point out that if we model our industry based on what Australia does we should expect to get what they get. That is lower live cattle prices and increased beef exports. Not more for less but less for more.

I am sure exports are beneficial to some players in the beef value chain but if you look at the hard and fast facts in Australia it has not resulted in higher live cattle prices for the men and women actually producing the calf and cow. Their prices are lower; lower than Canadian live cattle prices, lower than in the United States, lower than in Europe (which is still regarded as a beef exporting nation).

If you look at it objectively, any success MLA has achieved in exporting Australia’s beef appears to have come at the expense of the actual producer. I think it is very much open to question whether Australia could maintain its level of exports if the price of live cattle in that region was on par with North American live cattle prices.

I noted a comment that Roy Rutledge made in one of the magazines to the effect that he did not think Alberta cattle producers could afford the Alberta government’s generosity.
Roy had it right.

At some point I think we need to start measuring the success or our industry in terms of domestic producer profitability not how much beef we export beyond North America. Will Verhoeven (spelling?) mentioned in another magazine article that no one believes in the trickle down theory anymore. I know I don’t. It is not a given that beef exports increase returns to producers and if we want proof of that we do not have to look any further than the major beef exporters like Australia, Brazil, Argentina. Producers need to be very careful about accepting a burden of increased costs, regulatory or otherwise with a promise and a hope from government that it is going to increase net returns at the farm gate level.

[grassfarmer]

Farmers_son, You didn't address the main point of my reply, the fact that vastly different production costs in competing exporting countries make a nonsense of comparing profitability on a sale price per steer basis. Contrasting the southern hemisphere almost totally solar powered (plus a few men on horses) model of grass based production to the Canadian model of feedlot production to the European model of production where nearly all the livestock are housed, including the mother cows just makes no sense.

I agree with some of the other issues you raise namely that we need to start measuring the success or our industry in terms of domestic producer profitability. And you don't believe in the trickle down effect anymore - that's good news, now if we could just convince a few more of your ABP buddies of that.
However in a further attempt to muddy the waters I see you slipped in the little adage about beef exporting beyond North America being good for some players in the production chain but bad for producers. Why single out North America? nowhere has blatant profiteering by other players in the production chain, to the detriment of primary producers been more obvious than right here in Canada. I guess that contradicts the ABP mantra of only having one market, the US, and changing the facts to suit the (fairy) story.

[per]

F_s, you seem to have a handle on what doesn't work. With such insight it should be easy to point out what will work. Here is a good spot, being it is your thread, to lay out a workable plan for the industry.

[farmers_son]

Grassfarmer: I do not believe I compared profitability between Canada and any other country. I pointed out that the price of live cattle in the world’s largest beef exporting nations is lower, even substantially lower, than the price of our live cattle.

Australia is a different animal than Canada. Australia would give anything to have live cattle trade with the U.S. like Canada does. Industry can export beef hither and yon but we producers get paid for live cattle and the price of our live cattle is set in the U.S. minus a basis. Any packer wishing to operate in Canada must deal with that fact and find a profit between what they have to pay to keep live fats from going south and what the packer can peddle the beef for. In that kind of market value chain any benefit that is realized from sales to Asia (and there are benefits if that can be accomplished) will stay with the packers. And saying that I acknowledge we need packers in this province and we need feedlots. But cow calf producers have to realize that the benefits of ALMS go mostly to the feedlots in the way of million dollar plus subsidy cheques and to the packers who reap all the benefits while the cow calf producer bears all the mandatory and regulatory costs.

Per: what I think would be better is if participation in the various initiatives was voluntary instead of mandated by the heavy hand of the Alberta government, then we could get paid by the marketplace and not all the benefits would stay with the packers. In spite of what the Alberta government leads you to believe, not all cattle in Australia are age verified with traceback and so forth. Obviously the big northern cattle ranches that herd cattle with helicopters and so forth are not out tagging the baby calves as soon as they are born. But if an Australian producer wishes to participate in a value added program there are requirements that need to be met and the producer realizes a return from the marketplace. Any comparison between that and what is being rammed down our throats by ALMS is simply wrong.

Government does not know best and government can not be counted on to do what is best for producers, in fact this government has consistently supported the packers and has been more than willing to sacrifice cow calf producers who are expendable like pawns on a chess board.

[grassfarmer]

No you are right f_s, you didn't compare profitability between Canada and any other country. To reach any worthwhile conclusion with your argument though you need to. To condemn the MLA program in Australia as failing producers you need to know how it has affected their profitability not what their steer sale price is. As the purpose of your post is presumably to discredit the AMLS using the MLA as ammunition there needs to be an assessment of profitability in the two countries.
As you said "At some point I think we need to start measuring the success or our industry in terms of domestic producer profitability"

Your solution appears to be the ABP dinosaur one - keep on doing what we've always done. This great live cattle trade with the US that we are "lucky" enough to be participating in is ruining us or haven't you noticed that?
We only had that trade because we were a cheap convenient supplier who could be turned to when US inventory was low and shunned when we weren't needed. The best we can ever achieve is US - basis. What is so great about that? In any case
those days are gone as we can no longer be the cheapest supplier due to their ethanol lunacy, on top of that there is the MCOOL problem and probably a lot of Americans that won't be buying a lot of steaks until their credit problems get sorted out. Instead how about markets where beef sells for twice the US price - why not look at them? No, I guess it's better to stick to the old familiar insanity - doing the same thing over and over and expecting a different result.

[farmers_son]

Grassfarmer: I think you would be very interested in this site:

http://www.mla.com.au/TopicHierarchy/MarketInformation/DomesticMarkets/Farm/Farm%20financial%20and%20physical%20data.htm

in particular:
http://www.mla.com.au/NR/rdonlyres/553C55C8-2CE4-4F1B-980E-32816A406330/0/Beefindustryreport08.pdf

Even in this time of high Australian exports taking advantage of the North American BSE situation and new markets in Russia, the Aussie farmer/rancher is loosing money mostly because of drought. The farms in Aussieland experienced the largest losses since records were first kept in 1977-78. As is to be expected in a country with no winter feed, or as they call it fodder, purchases are a minor expense. The average cattle farm in southern Australia realizes more income from grain than from cattle and nearly as much from sheep as from cattle.

I was particularly surprised to see how much debt the average cattle farm in Australia carried. There is an emphasis on larger farm sizes which might explain the debt situation as farms are forced to rapidly grow larger. Average Southern Australia farm debt was between 600,000 and 1,500,000 in 2006-07 but debt to equity was between 85-95%. In 2006-07, the average beef producer in northern and southern Australia used
between 11 and 12 per cent of farm cash receipts to service farm
debt obligations.

[malleefarmer]

FS you got the price comparisons for canadian versus aust cattle a tad wrong.Have a canadian girl here from dawsons creek with me at the minute helping out she been here april and goes home in feb 09 and she said cattle prices are on a par.

Her boyfriend came out who has a small herd as well 40 breeders and he said cattle are making about $50 per head more than at home.

He went home 3 weeks ago.

Weather in aust is crapola at moment another imoending drought

[farmers_son]

Thanks for that. The drought in Australia makes the world news.

It is difficult to compare live prices in Australia versus Alberta. Where I was getting some numbers was:

Alberta:
www.albertabeef.org

Australia:
http://www.mla.com.au/TopicHierarchy/MarketInformation/NLRS/LivestockSales/Cattle/default.htm