Province Takes Over Alberta's Cattle Industry

[farmers_son]

The Alberta Agriculture Minister has announced a new program that will see the cattle industry change from a market oriented business to a governemnt controlled and mandated business that caters to the needs of the big packers who will not be required to pay producers for valuable information.

Producers will be required by law to record all pertinent information including age verification, premise identification, vaccination, animal welfare practices, and process of rearing and breeding information to get any further payments from the program.

It also means the packers get age verification information for free. The announcement also contained a provision to subsize automation equipment for the big packers.


This announcement will significantly change the cattle industry in this province and dramatically increase the involvement of government in our affairs. From here on we will be required to dance to the government's tune or there is no more subsidy money.
Basically we are looking at a government takeover of the cattle business in this province.

See:

http://www.gov.ab.ca/acn/200806/236915962D304-B91F-45D9-1E2802D0075952C0.html

Alberta unveils long-term strategy for livestock industry

Government acts as catalyst to major change

Edmonton... The provincial government unveiled a long-term strategy and investment of $356 million to stabilize and strengthen Alberta’s livestock industry.

“Alberta’s livestock industry is facing significant challenges and needs a major and fundamental change,” said George Groeneveld, Minister of Alberta Agriculture and Rural Development. “Albertans want a competitive and sustainable livestock industry, but this will not happen until we start doing things radically different. The industry needs to regain its competitive advantage and although these changes will not be easy, they are necessary.”

Mandatory traceability and the development of a new Alberta Livestock and Meat Agency, are key to implementing this new strategy. The government will invest $56 million this year to create the agency, which will report directly to the Minister of Agriculture and Rural Development. Included in that amount is $40 million that will be redirected from the ministry’s existing budget. The Alberta Livestock and Meat Agency will support the livestock industry with a focus on directing funds, resources and programs towards strategic priorities.

The Alberta Livestock and Meat Strategy outlines eight priority initiatives developed to achieve significant change in the industry. These changes will redirect resources to key priorities, revitalize the livestock industry, enhance the value chain and refocus efforts to achieve a sustainable and competitive livestock industry.

To assist in stabilizing the industry during the first phase of this transformation, producers will receive $150 million in immediate funding. An additional $150 million will be available in January 2009 once certain conditions have been met. This second payment will be issued only after age verification and premise identification practices have been adopted and verified for each individual producer.

“Government will work closely with the livestock industry throughout this transformation process,” said Groeneveld. “Producers who are unable or unwilling to transform their business by meeting these new verification and identification conditions may need to consider ways to exit the industry. It is vital that producers believe in the sustainable future of this industry.”

The challenges facing the livestock industry include persistent labour shortages, restricted access to foreign markets, packing plants operating significantly under-capacity, lack of a shared strategic vision, lack of product differentiation, overdependence on the U.S. market, lack of an integrated federal-provincial government policy framework, and increasing environmental impacts.


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Backgrounder attached.

June 5, 2008
Alberta Livestock and Meat Strategy: key priorities and funding

Edmonton...The Alberta Livestock and Meat Strategy outlines eight priority initiatives to achieve significant change in the livestock sector. The provincial government is investing more than $356 million to help strengthen the industry.

Priority 1: Shared Vision
Establish common goals for the livestock industry and create the Alberta Livestock Information System and the Alberta Livestock and Meat Agency.

The Alberta Livestock and Meat Agency will:
Report directly to the Minister and will be governed by an independent board of directors.
Act as a catalyst for industry to ensure transition to a sustainable and competitive industry.
Coordinate various government funds and resources to ensure they are aligned with the strategic direction.
Measure industry and government performance to ensure the strategy is being achieved.
Priority 2: Animal Health and Food Safety
Expand animal health surveillance and diagnostic capabilities.
Increase prion research to eradicate BSE, CWD and Scrapie.
Set better standards for testing food pathogens, adopt preventative food safety systems and pro-active detection of food safety hazards.
Priority 3: Alberta Livestock Information System (ALIS)

Build a mandatory traceability system for disease management.
Provide value-added information sharing to all members of the value chain.
Record all pertinent information including age verification, premise identification, vaccination, animal welfare practices, and process of rearing and breeding information.
Facilitate the development of unique products that are consumer driven by using the data captured in ALIS.
Priority 4: Differentiation Initiatives
Develop the Alberta Ingenuity Centre for Livestock Genomics Technology.
Create a system to have Alberta-branded livestock products.
Provide certification for hormone-free, range-fed, grass-fed and naturally raised products.
Introduce voluntary certification programs for humane animal care and environmentally sustainable practices.
Priority 5: Marketing and Diversification Initiatives
Develop a new trade strategy that helps open key export opportunities and increase overall world-wide market access.
Attract foreign investment that helps secure the long-term commitment of international customers.
Review all current government marketing grants and funds to ensure complete accountability and alignment of goals.
Priority 6: Environmental Stewardship
Develop an environmentally sustainable livestock industry that supports the production of ecological goods and services through the Institute for Agriculture, Forestry and the Environment.
Support existing carbon offset programs to further reduce greenhouse gas emissions.
Develop policy recommendations for the Bio-Energy Strategy that supports biogas technology adoption.
Priority Initiative 7: Cost Reduction & Regulatory Barriers Initiatives
Establish an industry cost-shared automation program to buy new meat processing equipment.
Review and harmonize provincial and federal regulations.
Establish an Alberta Feed Grain Centre of Excellence.
Evaluate the feasibility of establishing an unsubsidized Cattle Price Insurance Program.
Priority 8: Industry Governance and Transition
Align all government funded livestock research and development programs with the Livestock and Meat Strategy to focus resources on commercialization opportunities.
Evaluate the establishment of an agriculture research and development endowment fund model for Alberta to invest in research infrastructure, capacity, and funding agriculture and food research projects.
Establish the Alberta Livestock and Meat Agency.
Funding: Alberta Farm Recovery Plan II (AFRP II)
Stabilize industry with $300 million in recovery funding made in two installments.
Producers will receive the first payment ($150 million) immediately and the second payment in January 2009 once they comply with new mandatory age verification and premise identification requirements.
Payments are based on the producer’s 2006 livestock information and a proxy used to calculate the cost of feed.
Livestock and meat producers who were in business in 2006 and 2007 are eligible.

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Media inquiries may be directed to:
Alberta Ag Media Line
780-422-1005
Cathy Housdorff
Communications Director
Agriculture and Rural Development
780-422-7099



To call toll free within Alberta dial 310-0000.

[smcgrath76]

What an announcement...
We age verify our calves, we are premise identified, we are verfied beef producers, we have an environmental farm plan, we have DNA'd our entire cowherd, we have invested in a processor and it appears our entire competitive advantage will be wiped out in one fell swoop.
I have a personal hate on for mandatory anything because there is no incentive to provide VALUE. I also get tired of being screwed for being an early adopter. I agree in principle that some of this stuff needs to get done, but I can't see how this approach is going to get me more money. If people don't want to do something, it is better to let them stew in their own juices. You can't legislate progessive management.

[smcgrath76]

The last comment is not as a moderator/facilitator of this site, it is as a pissed of rancher who tends to be fairly competitive.

[smcgrath76]

Points 3 and 4 look particularly expensive for a one time payout. 300 million one time payout spread over pigs and cows is not that much money.
I think the feedgrain centre of excellence is long overdue. Interesting to see how they get on with registration of new varieties.

[grassfarmer]

Only had a quick scan through this but I think there are some very good points contained.
Hell, there’s even 3 resolutions that I raised at my local fall producer meeting approved in here – who needs ABP? In fact will we need ABP after this or are they history?
I have long argued that we need a credible traceability program for disease risk – thank goodness that has been recognized at last because that one scared the crap out of me. Try promoting the Alberta Beef image to consumers with a million cattle in feedlot alley piled up for burning with foot and mouth because you had a micky mouse “age verification” and outdated brand inspection program.

Other excellent moves that stand out in my opinion “Expand animal health surveillance and diagnostic capabilities. Increase prion research to eradicate BSE, CWD and Scrapie.”
“Develop the Alberta Ingenuity Centre for Livestock Genomics Technology.
Create a system to have Alberta-branded livestock products. Provide certification for hormone-free, range-fed, grass-fed and naturally raised products. Introduce voluntary certification programs for humane animal care and environmentally sustainable practices.” - Forward thinking moves in my opinion.
“Develop a new trade strategy that helps open key export opportunities and increase overall world-wide market access. Attract foreign investment that helps secure the long-term commitment of international customers.” Much needed – certainly worth a try.
I certainly agree about the “ lack of a shared strategic vision, lack of product differentiation, overdependence on the U.S. market” hopefully this can address these issues.
Sean, I think you are over reacting your entire competitive advantage won’t be wiped out in one fell swoop. You are still a sharper operator than most, with better genetics by all accounts. The Government is not buying folks cows here it will still be a free market and with plenty of opportunities for the enterprising rancher. I am less scared by this because it sounds more like the EU system – more paperwork for sure but still opportunities. I think it will be easier to make money exploiting Government programs than trying to fleece Cargill or Tyson of some extra dollars. But this will only be a top up – you must still be a good producer first and foremost and your decisions on cow size, feed system, genetics, land base, marketing decisions will still be critical to your success.

I would have liked to see more in here that would indicate an acceptance that monopoly control of much of our production capacity is substantially to blame for our current troubles. Much of this seems to be an expansion of the Canada Gold program – if that is the case well done guys on selling that to the minister.
I can’t comment on the $ values being committed as I have no backgrounder on current payouts. I do wonder how producers in other provinces will be feeling though – is this a case of being left out of Alberta’s oil money once again?

[smcgrath76]

I think my main problem is with the mandatory tracking etc. I don't see where/how the primary producer is going to extract any extra $ from the system from these moves.
I think the feedgrain centre is a great idea, I think the genomic centre is an OK idea (although I have reservations about how well AB has ever actually implmented anything into industry).
The problem I see is that this is not industry driven, does not promote value chains and provide a lot of have to dos without any have to pay mores.
I can see costs going up with no benefit.
I agree with you about disease surveillance. There is nothing stopping a producer now from moving their program forward, but if they don't see any benefit for the cost now, I don't think they will moving forward.
I guess I will be a hypocrite now if I take the money, and if I don't I will be at a disadvantage, because you can bet the people who take it will bid it into inputs.

[grassfarmer]

I have read the whole plan in more detail and am more impressed than I was before. I really think they may be offering the tools to unlock greater potential returns for our beef through accessing new, differentiated and higher priced markets. The big IF in my mind is whether the packer monopoly will continue to pocket the majority of any potential upturn in prices. It certainly is a slap in the face to the ABP strategy of maintaining the status quo of being the least cost supplier to the US market. I guess the following could be said to refer to the ABP? "Alberta livestock industry organizations must also evolve to adequately support the changes required to return to competiveness.
Alberta will engage with key industry organizations to address issues of accountability, representation and effectiveness and will create opportunities for industry and government to work together in a more effective partnership."

I think farmers_sons comment that we will see the cattle industry change from a market oriented business to a governemnt controlled and mandated business that caters to the needs of the big packers who will not be required to pay producers for valuable information is way off base.
If you read the details it is all about catering to supplying customers needs more closely and supplying higher value products to expanding markets. Sure the Government is getting more involved but maybe that was needed to get around the "herding cats" problem. The current system seems to have served the packers well f_s but getting hung up on whether we get paid a few dollars for age verification really is small beer compared to the opportunity to build a more modern, world beating, successful beef producing and marketing industry.

One thing that makes no sense to me is the old chesnut about the CWB.
"Marketing Choice - Pursue the removal of Canadian Wheat Board monopoly control over wheat and barley." Now if this program is about supporting the livestock industry in Canada and the CWB acts to keep grain prices low in western Canada as some claim shouldn't the AB government be campaigning to keep the CWB monopoly to help the livestock farmers. Or is it an admission that they know removing the CWB monopoly will in fact lower grain prices rather than raise them?

[wilagro]

"Or is it an admission that they know removing the CWB monopoly will in fact lower grain prices rather than raise them?"...

A very interesting question you pose.

Time will tell...

[smcgrath76]

I am still ticked off this morning. It is still possible to market outside of the US. If anyone is interested I know an EU certified plant that would be glad to accept investment. I even have an EU protocol I can send you.
This is NOT a value chain, it is a government mandated cost structure.
The AB Gov has not created any new buyers, they have not eliminated the middle man, they have not opened any new markets. I think the existing oligpoly of processors will bid the percieved cost of providing the information out of the cattle going into the plant.
As I said before, I do like some of the items. I think we need real disease surveillance, and feed grain development. I am not sure LIS with funding and direction could not provide the new agency function just as quickly and rapidly as the new agency will.
I do support premise verification.

[farmers_son]

I agree with Smcgrath 76. I was getting paid $30 a head for age verified calves to the packer for the last 3 years. That money was important to me and gave me as a small feedlot an advantage I needed to operate. Now the government says the packers get that information for free. And any advantage I previously had as a cow calf operator with a small feedlot able to age verify my calves has disappeared. The advantage goes to the packers and the big feedlots.

I am already feeling burdened by paperwork, CAIS etc, but we just got ourselves another job if we want to collect any government money this year. According to information included in the press release Alberta has 5.56 million cattle and 1.68 million hogs. 150 Million dollars will amount to $20 per head if it is divided evenly. I was getting $30 per head before. Thanks for nothing.

For certain the industry needs the injection of money. However we have seen attaching conditions to Provincial money tried with municipalities where the Province would give the municipalities money with strings attached. The Municipalities were strong enough to put a stop to that practice but I doubt if producers are that well organized. The Province will be able to dictate to farmers how we operate.

If Government suppresses the marketplace and does not allow the marketplace to work then we will become increasingly dependent upon Government handouts to survive. And I think that is the idea behind this.

I am not sure, but isn't some of this money that was coming to us before anyway only now we have to do all this extra work.

One thing that producers should be concerned about is the ever increasing knowledge Government has about our business. CAIS was designed to give Government a very clear picture of every calf that was born, every cow that died, every bale of feed fed, every dollar spent. Now they will know every vaccination, how we handle our cows, which bulls we use and more. Our every move is being watched.

We needed the money but the marketplace should be dictating our production practices, not the Province.

[farmers_son]

Thinking about this some more...any money we get from this program will come off any payment we might have expected to receive from CAIS. But we lose any age verified premiums and have to do all this new work.

Make no mistake about it in the coming years the government money will be replaced with fines if we do not provide the government with what it wants.

The winners from this announcement are the packing plants who will save millions of dollars that they were paying for age verification, plus the governemnt will be buying processing equipment for Cargill and Tyson. The losers are the cow calf guys who have lost some of their freedom and the ability to earn some profit from the marketplace. The government gets what they want... control over the cattle industry, for no money at all if you consider that money was previously announced anyway plus a new revenue stream going down the road from fine and punishments handed out to cattle producers who do not tow the government line.

When it comes to providing the governemnt all the information they think they need savvy producers will just provide the governemnt BS numbers like they already do with Statscan. Anything else will be capitulating to a heavy handed government attempt to take over our industry.

[rkaiser]

Take it over from "Who" farmers_son?

[jensend]

exactly my thought. cattlemen are now going to have to pay the price for turning their industry over to the packers. who will be the more benign caretaker - govt. or cargill and tyson? perhaps if cattlemen get on the ball it will be a step along the road to taking back control (unlikely since we're talking about govt.) or making the industry viable again. probably the alberta govt. could see the cattle disappearing out of alberta as a significant economic factor unless something was done. abp and cca are taking a passive (to be charitable) stance while the industry suffers a slow death.

[grassfarmer]

Farmers_son (and Sean to an extent) I just do not understand your opposition to this. It seems you are having a total lack of vision of the potential here. Seeing the US as our only marketplace, always trading at a basis discount to US cattle with MCOOL about to be introduced does not fill me with high hopes of a prosperous future. On the other hand if this plan succeeds in uniting the AB industry, coming forward with new and exciting brands, backed by research and tracking from genome to plate level with Government backing both morally and financially might open a lot of doors for us. It might make us stand out as a country with a unique and high quality product to sell on the world stage. What if even some of our beef carcases can become worth $200 by accessing new markets? There is more to consider than losing $30 age verification premium on a few of the fat cattle kill. Open your eyes to the opportunities - isn't this supposed to be the Alberta way?
Sean, your packing plant may indeed have EU certification and protocols in place but how much beef are they currently shipping to Europe?

[farmers_son]

From here on in any money coming from the province to the cattle and hog industries is going to be conditional on producers following practices and jumping through hoops that are mandated by the Province not the market place. Previously we would occasionally receive support in times of need but producers remained free to manage their operations based on their understanding of the marketplace. It is my understanding that this new approach is not unlike we would see in Europe only without the same level of support but a similar level of government control. Even with CAIS we remained free to farm as we wished, not so any more. As I said this new Alberta model is much like my understanding of the situation in Europe. But it gets worse….

It is not clear to me how any of the proposed benefits from this scheme will trickle down to producers as the price of our live cattle will still be determined in the U.S. minus a basis only now Alberta producers have to bear the extra costs of the government mandated policies.

Our two Alberta packers do not operate under some kind of benevolent margin program where everything they make selling Alberta beef is passed down to Alberta producers minus some small stipend for the costs of operating their plants. Cargill and Tyson pay only the Alberta producer as much as it takes to keep the Alberta fat steer from going across the line and anything they make beyond that is theirs to keep. Anyone who believes different is dreaming in Technicolor.

Unless you believe Alberta Government can create a made in Alberta live cattle price, Alberta producers are going to have to shoulder extra costs with no benefit to them once the first year financial incentives end. We achieved significant benefits from being harmonized with the U.S. which was very important because our live cattle prices were established in the U.S. and we needed to operate under a similar cost structure. This new program may eventually, years down the road, create a competitive advantage for Alberta beef but not Alberta cattle producers. Unless the Province is prepared to establish a supply management system with artificially fixed prices in order to ensure the benefits get passed down to the Alberta producer we as the cow calf producer will not reap the rewards. The rewards will not trickle down past the packing plant. Alberta packing plants will never be required to pay Alberta cattle producers any more than it takes to keep that feeder or fat steer from going south of the border. The Province can make us do whatever it wants I suppose but I do not see how the price of our live cattle will change one cent. Actually it is going to change $30 a head, downwards, because with one stroke of the pen Groeneveld has made it so that money that used to come to me from the marketplace now stays in the packers hands.

Does anyone believe the province is willing to commit into perpetuity to pay producers $300 million a year to provide age verification, premise identification, vaccination, animal welfare practices, and process of rearing and breeding information or is it more likely that this will be one or two year program after which we will be fined, punished or as the Minister tells us… exit the industry.


There is no real financial benefit from this program anyway. Anything you get will be deducted off of your CAIS entitlement. Only this program is countervailable where CAIS is not.

Bottom line, this program only benefits the packers. The province is spending millions of dollars to upgrade processing equipment for the American owned packers, the packers no longer have to pay producers for age verification, or any of the other protocols, and there is simply no means established in this marketplace whereby any of the benefits that may very well accrue will ever be paid to Alberta cattle producers. Our two Alberta packing plants will continue to only pay producers just enough to keep cattle from going south. There is simply no reason they will ever pay more, especially now the Government says they do not have to. What producers will see however is more and more fines, more paper work for no pay and dramatically more Government involvement in the industry, ultimately fewer producers.

I see the potential and sure there are benefits from this but they all go to the packers.