Province Takes Over Alberta's Cattle Industry

[farmers_son]

Jensend: I am not here to represent anyone other than myself, officially or unofficially. I am a big boy and I can have an opinion all on my own as I am sure you can too. And Cargill George’s announcement did have some positive aspects such as the creation of the Alberta Livestock and Meat Agency. I would not pin all my hopes on that as the Province tends to create some new branch or agency every time they want to appear to be doing something. The results to date have been underwhelming. There is the:

Industry Development Sector

Ag-Industry Development and Diversification Division

Agri-Industry Commercialization Branch

Agri-Business Strategies Branch

Business Diversification Branch

Competitive Livestock Production Branch

Livestock Product Quality Branch

Business Expansion and Commercialization Division

Livestock Products Branch

Processed Foods Branch

Business Commercialization Branch

Food Processing Development Division

Growth Strategy Secretariat

Growth Strategy Management Branch

Meat Products Theme

Planning and Competitiveness Sector

Economics and Competitiveness Division

International Relations Unit

Competitiveness Unit

Agri-Food Systems Branch

Livestock Health For Market Access Section

Now there will be an Alberta Livestock and Meat Agency too.

Next will be the Alberta Producer Puppet Control and Exit Agency.

Rkaiser: I will cash my cheque too, I can’t afford not to. But after this cheque we become puppets with Cargill George the puppeteer. If we do not dance for George we do not get any more money and we are welcome, as George puts it, to exit the industry. After all George knows best and George gets to say who stays and who goes.

Grassfarmer: with all respect, from what you have described it does seem at least to me that the Province’s new strategy to tie future industry assistance to requirements that we dance to Georges tune is very much like Europe.

I am frankly surprised there is not more interest in the Province giving the big packers $36 million for automation equipment. That money could have gone to creating new real competition in the industry instead of a gift to Tyson and Cargill. Given the incredible profits both these companies made at our expense in 2003-2005 I question the need for direct government support of our two multinational packers. I question whether giving Cargill and Tyson millions of tax payer dollars is going to diversify or change the industry in any way whatsoever. The Province seems to be hardly able to stop themselves from funneling money to the packers.

The Province could have put resources into making age verification work through the marketplace, I do not think they wanted it to work. They wanted to make age verification mandatory, the Province wanted to make it free for the packers and they want to tie producers to subsidies so we can be controlled, kept under their thumbs, made to dance to their tune and told when we need to exit the industry. If some think that is OK, fine, but it is not OK with me.

[grassfarmer]

I agree with you on the packer subsidy/monopoly F_S, that is one part of this package that I am not comfortable with. This problem was not dealt with before and it's not being dealt with directly now. I remember Lakeside Arnie seemed quite happy to back the packers against the producer interest when he was the leader of the ABP. So to ridicule "Cargill George" is a bit like the pot calling the kettle black.
That said there do seem to be some opportunites created in this package that may benefit new or existing small packers to get some product shifted off this continent and into higher value markets.
I don't understand your fear of Government in relation to this issue "they want to tie producers to subsidies so we can be controlled, kept under their thumbs, made to dance to their tune and told when we need to exit the industry." Why would they want to control us or keep us under their thumbs? With reference to your earlier Cais comment what harm can they do us if we tell them how many bales of hay we feed or cows that die on our ranches?
It seems an irrational Western paranoia that many in Alberta have.

[grassfarmer]

Sorry, missed a line out there, meant to read "So to wish for Lakeside Arnie as Ag minister and then ridicule "Cargill George" is a bit like the pot calling the kettle black.

I'm looking again at the $30 vs $20 angle and don't quite follow your reasoning f_s.
Good for you if you get $30 a head on your fats. I like to think I have always got a premium for age verifying the feeder cattle I sell too but estimate it would be closer to $10 per head.
Regardless - how many fats are receiving age verification premiums? 15% of total production?
So for every million head of slaughter cattle 150,000 are currently earning $30 a head = $4.5 million return for age verification to the industry per million cattle. New proposal - all 1 million will receive $20 (your figure)= $20 million return for age verification to the industry per million cattle.
In fact it is way more than that because unlike your $30 figure I assume the $20 figure will be paid on all cattle not just the slaughter cattle. The figure in direct aid mentioned is $150 million now and the same again in January - with the 5.56 million cattle population listed on the press release that equates to close to $27 per animal on each of two payments. And on an industry basis that is a big loss compared to getting $30 on 15% of the slaughter cattle population??

[farmers_son]

As I understand it the money Cargill George is going to pay us is to offset high feed costs. Not age verification. But I had it figured we would get about $20 a head although I am guessing as I do not know how the split will be between hogs and cattle.

From here on in though we will have to play a new game called Georgie Says. It goes like this...when Georgie says we have to do mandatory premise identification, vaccination, animal welfare practices, and process of rearing and breeding information we have to do it or we are out. No more subsidy money for the bad boys that do not play Georgies game.

Where I think you missed the point with your numbers is when we were getting paid by the marketplace, in my case $30 a head, that money will come year after year. But what we see here is Groeneveld will pay us money this January to play Georgie Says but after that he just hits us with a stick, i.e fines and punishments if we do not play with him. Georgie is not much fun to play with in the sandbox.

And do not forget that up to this week it was costing the packers money for age verification but now it will be free. That is a huge gift producers are making to the packers. I do not know what that number would be but it amounts to millions. The packers are going to get a lot of the money that was announced, one way or another.

[grassfarmer]

Farmers_son, If you look at the global history of agricultural subsidies I think it would be fair to say New Zealand is the only country ever to have reverted to a non-subsidized industry once they had one. It's highly likely that if we embark on a more subsidized industry here that the system will remain. Get used to it - it's just another revenue stream to be accessed. I will take Government money just the same as packer age verification money.

I will tell you a conversation a friend of mine had with a European agri trade negotiator recently.
The trade negotiator said he was bemused by Canada's ag policy. He said in Europe they generally accepted subsidy was needed to achieve welfare and countryside goals whilst retaining people on the land and a degree of food production.
The US in contrast preached the "free market economy" but in reality heavily subsidised its producers because the system didn't work.
By contrast Canada adopted a kind of cartoon version of the US system - preaching free market but letting it's producers go to the wall because it doesn't work.
Maybe George has learnt this lesson?

What was your alternative (The Lakeside Arnie plan) anyway? Wait and hope the US bullies the Koreans and Japanese enough that they buy their untested beef, wait and hope the US bullies the Europeans until they take hormone treated beef and then hope and pray that this would create an opening to allow some Cdn beef into the US by the back door? Newsflash!!- The world's changed - the subsidised ethanol industry and $ exchange rates mean Canada can no longer be the low cost supplier to the US that it once was. On top of that we have the MCOOL legislation of a protectionist US Government fast running into financial meltdown. I don't really know how George's plan will work out long term - nobody does, but all I can say is thank god we didn't get Lakeside Arnie for our Ag minister.

[blackjack]

in the end only time will tell...if the cowcalf doesn't receive a bigger part of the pie...more will exit the industry or subsidize what cows they have with other farm income...if there is some other groups other than abp that can make some headway that would be great...the abp has had ample time to bring in new solutions but were unwilling or lacked vision...hopefully govt will add some new faces to these new committees so some changes can be made...

[farmers_son]

I should say Minister Groeneveld, his position does deserve respect. I know it is a lot of work being a Provincial Minister. I hope I can still disagree with the policies of his government.

For certain different governments in different parts of the world take a different approach to the marketplace versus government intervention. Right or wrong, this Alberta government would have been expected to let the marketplace work. This kind of government intervention might have been expected from the NDs although on second thought this government has been very supportive of Alberta’s two big packers right from the start. And this announcement is all about, I mean ALL about, helping the packers. Age verification information was something that producers should be paid for, not something the province mandates is provided to the packers for free.

Really, producers being paid for age verification has been a lost cause since Horner announced the Conservatives would make it mandatory if not enough live cattle were age verified. That was a clear signal to the packers to not make age verification work because if age verification worked through the marketplace it would cost the packers money. This way they save millions, a direct government mandated transfer of wealth from producers to the packers. The Province never wanted age verification to work.

As far as subsidies versus the marketplace discussion goes, I do not believe we will see the government money continue in the long term. This is one time money that will be replaced with fines and regulations.

I think the creation of the new agencies is more a smoke screen. Any benefits will accrue to the packers. The price of our live cattle will continue to be determined in the U.S. minus a basis and it is foolish to expect that to change as long as our Alberta industry is dominated by two U.S. packers who seem to have the total support of the Alberta government and its treasury.

How many times have we seen where the Province could have stepped in and done something real for producers and every time they instead supported the packers. This is just another one of those times. The Province clearly wants producers to be dependent upon subsidies and ruled by more regulation, punished by fines.

[loric]

Speaking from a cattle producer perspective here....not ABP - has anyone read through the entire strategy paper? There is one point that I know will affect many producers in the province that go south to buy their Ivomec. I quote "Reduce the availability of over-the-counter non-perscription animal health products that put ALberta livestock products at risk in interational markets." I know my family is making a few trips south to stock up before Groeneveld shuts this down.

[grassfarmer]

I was pleased to receive my cheque this morning. It equated to $28.88 per head on the calves/feeders/fats I usually sell in a year. Thanks George!

I read it in detail Lori - and I saw one little opportunity in there. When they list the cattle/hog/sheep/bison/deer inventory in the footnotes I see they include mule deer, whitetail deer and reindeer. So I guess if I go out and rope some muleys and slap a CCIA tag on them I can get subsidy on them too?

Seriously there is a good opportunity for someone with time on their hands and computer literacy to set up as a form/tag filer for all the producers who will be unable or unwilling to do the new tasks required. This has turned into a lucrative business for some of my friends in Europe. There are always opportunities if you look for them.

[BFW]

I think we should all applaud the leadership of Minister Groeneveld for bringing this to the table. It take courage to support change of this magnitude. Who knows if this will prove to be the right direction but at least we have a reasonable plan proposed for the long term future of the industry. Maybe we will be reduced to being a domestic supplier only, but to stand by and watch this happen when there are potential alternatives is criminal. The saying "it is better to be wrong for something you did than didn't do" , certainly applies here and time will determine the outcome.
The donuts should be going down rather slowly at the coffee room in the ABP circles.

[per]

Lead or get out of the way. Minister Groeneveld doesn't seem to want to get out of the way. The ABP has had plenty of time to have their say but didn't seem that interested at least with the B5 group. You would think that those who spend time trying to influence the government on beef issues wouldn't use such raw emotional rhetoric. There are many parts to this initiative I am quite pleased about and others that I can see the necessity. As far as the age verification goes I am happy to give up my small premium to help create a thriving and viable industry. If all of this doesnt work then we can at least say we didn't roll over and go down without a fight. Our present path wasn't working exactly stellar. It is fairly obvious that we need to be more than a low cost commodity supplier if we can even achieve that goal anyway. We can all agree that we're capable of producing the quality beef that Europe needs. Lets start showing the world that we can do more than follow our next door neighbor.

[farmers_son]

I agree that we are capable of producing beef for Europe and the world. But the challenge for especially the cow calf producer was how to get paid for doing that. One way, and yes it was a new emerging market that was still in its fledgling stages, was to be paid for age verification. Producers now had a new product, information. That information was valuable and could bring in much needed extra money. And that information could have included other potentially valuable information products such as guarantees of hormone free and a host of other characteristics that would have value to an end consumer. Basically though it was information and we wanted to be paid for it and some were, especially us cow calf guys who fed out our calves but that would have expanded as the new market developed.

The province has said no, you cannot, you will not be paid for information. The packers are going to get that money, not producers. The government has said we will provide that information to the packers for free or we will not get any subsidy money this next January and if we do not give the packers that information for free going forward we will be fined and punished.

That information, age verification and other information that was just as potentially valuable, stood to be a genuine new revenue source for cow calf producers. Minister Groeneveld has taken that from us and gave it to the packers. You will be a bigger optimist than me if you think they are going to pass any of the resulting profits back to us.

The Province never wanted us to have that money for age verification and made darn sure the packers got it all. The information was worth tens of millions of dollars.

[rkaiser]

Come on farmers_son --- enough already. Should this new plan take 10 or 15% of our beef offshore, our price increase due to supply and demand will far offset the 25 or 30 bucks you were getting from the packers who were getting a lot more than that for your age verified cattle.

I said I was not going to get into it, but you are getting pretty pathetic with you whining farmers_son.

Have a great day everyone --- the future looks bright, and you don't need a pair of rose colored glasses to see it.

Could have tossed your 30 buck premium into our program --- still could --- or Bern Kotelko's and seen even more benefit by now batman....

[smcgrath76]

I don't see the US as the only market, or even the preferred one. I just don't see how making averyone do something is going to help open those markets. Producers can pursue a lot of these intiatives now (age verifying, retained ownership, premises registration, VBP). GG's announcement basically forces change on those who don't want to change. Not sure how selling age verified calves in a presort is any different than what happens now. As well, what do we do with cattle coming in from other provinces, or with producers who farm across provincial lines, or with people who really don't give a rat's A@#$ about value added production. I think if the government wants to support market development, then that's what they should do, not force the general marketplace to meet standards that don't provide the general marketplace with an enhanced return.
We are not a special operation by any means. We are often financially strapped, we are not neccesarily leading edge, and we have not done anything that "joe average" producer can't easily do. The fact the "joe" doesn't want to do this stuff is probably a sign. George had a comment about those not willing to do all the things required in the program need to figure out how to exit the industry. This really frosts me. Now they may have to do it, for a mere pittance. If you were in a least cost model selling commodity cattle (not beef) then not doing these things probalby made you more money. I am not saying that is right for the industry, but I am also not going to say it is wrong. These operations provide room around the edges for guys like me to operate.
I have asked a few questions to various economist contacts that I have and I will keep you posted as I recieve their commentary back.
We still have 3 local buyers. Cargill, Tyson, XL. If they wanted to really move things along they would have worked with other provinces to harmonize provincial meat inspection.

[smcgrath76]

Forgot to mention, just before you brand me as a heretic. I equally resent paying ABP, brand inspection and gas prices, just as I will resent paying for the continuing operation of the new $56 million oversight branch being set up.
You can bet ongoing funding won't be coming from the AB gov, but us.