Changes are Needed

[ValueChainFX]

Well we have an interesting discussion here that takes us back to a producer-focused system. We talked about re-engineering the beef industry in the later part of the 90's and all agreed that it needed to happen. The challenge is we all keep thinking about what the meat industry calls commodity products. (Standard block ready cuts from feedlot beef going into retail markets) This push comes from the big plants like Cargill and IBP that can only handle assembly line cutting. The niche markets are only niche markets because we have been unable to tap into them in a bigger way!

The reasons for this are simple really. First we lack the Federal plants to custom kill and custom cut our product.

We already have a Canadian branded product. Many Americans want our Canadian product and ask for it. But also we have not done all we can to market our Canadian product here in Canada. Our focus has been exports and we have done well there.... again mostly through the big packers ... Cargill ... Ibp ... better beef etc.

We can change the system now and for less than anyone thinks. But some of the leaders need to pull together and let the government and industry know we are willing and able to do this.

We are going to see many of these changes soon and either the industry will make them or the government forces us to make them. I would rather make them and let the government support them!

Anyway, your thoughts?

[rusty1]

VCFX - I truly hope youre not recomending that the Govt. builds a packing plant. That's the last thing we need. You're right when you say it wouldn't take much to build our own. Infact the current packing industry steal's enough producer money in discounts that the producers could build their own. The other thing I hope the powers that be get to work on is broadening our export market. If the American like our beef I'm sure a couple of used car salesmen could sell our products to some over the pond markets.

[ValueChainFX]

Rusty we will never see government build a packing plant! The producer monies are not in a lake that we can go and scope buckets of it out to do what is needed. It is however in a river. The river we helped the government establish, with fees, and check offs and associations, commissions, councils etc. that need some changes to match their real mandate of the day!

I talk about innovative finances being required, but when the pot is tallied at the end of the day the producer still needs to own the processing unit in such a way that the values created come back to the producer. To date the challenges have been government invests funds in the supply chain beyond the producer and in the words of a top government official "It is hoped the benefits will trickle down to the producer". End quote.

We all know that will not happen. We don't just need a packing plant (although a major component) but a way to market our product into markets that are more stable, and have fewer boarders to cross. This last scare showed us what happens when our boarders close. It also shows us why we cannot give any more of the Canadian Market place away.
The name of this thread is "Changes are needed" well as good stewards of the industry it is our jobs to predict changes and come up with at least possibilities to deal with challenges that could happen. It just happens this is the case here and literally years of discussion, joint efforts and study has gone into this project and the associated programs. The will is finally there throughout the Canadian meat sector (not just beef) now it is time for the producers to stand up and make it happen.
The challenge with many producers is they are an independent lot and will they agree enough to pull this off or will they wait until someone figures out a way to do this and AGAIN leave the producers out! We can be critics or we can help make it happen, but fence sitting is best left out to the ones that like to stir the pot! Can you help make it happen?

[rusty1]

There's at leat 2 reason for why we havn't taken controll of our markets todate.
1. Us Canadians are way too nice and are to quick to put some people on an ivory throne
and kiss their feet.. 2. The other reason is we are too quick to accept "Hostage syndrome"
Out WEst we love to run around doing what we love best and if we're making money then who
cares if we're being ..... Just look at our East - West inequities and for how long we have
sat back and said "ho - hum".
Not till it really hurts are we willing to stand up and say "enough is enough". Maybe we
are going to hurt enoug now to do it. One could only dream - it's uncalcuable of the benefits
that the industry would realize if only - if only we could collectively (dream on) put the
resources together to build orbuy out one of the two US packers. 1.) The discounts turned priemium
alone would probably do it. It really wouldn't take as much as we think.
2, Can you imagine the (wow oh wow) power and benifets if the producers had control
of the retailer and told him how to market the beef instead of "charge what the market bears".
3. Carcass data would become the property of the producer and real genetic progress could begin.
Dare one dream of the day!! And yes I'm ready to get behind the plow. I've seen the iron curtain fall
and the Berlin Wall come down and this is achievable easier than one would think.

[ValueChainFX]

rusty1 ... Yes rusty we are hostages to the present system, but only because we want to be. We really are hurting today, but not as much as we are going to be hurting soon. There are going to be big changes! Any guesses who may pay for those changes?

We have already determined the US plants of today Cargill and IBP are not capable of meeting the future needs of the emerging markets and regulations. Trace back is a main issue and their ability to meet specific customer specifications on specialty cuts will not happen. This is very evident when the Japanese customers want smaller pack sizes with inner boxes weighed than packed in a master. This simple step could not be done. (More to the point they wouldn't do it) Buy what we have or forget it.

Now a producer in a Value Chain system can not even begin to dream of some of the benefits this could produce. Don't get your hopes up, don't expect this is another one of those promises. All I can say, is that it is much easier for you to make choices when you have information in front of you from the rest of the supply chain to make choices on. Plus, if you put extra work or money into your animal for a program you can be paid back for it. Wonder how many producers saw any of the premium dollars from product shipped to Japan where premiums are a part of the business!
Presently our communication system is ready to implement into a proto-type plant and will provide trace back and information feed back for carcass, live inventory, feeds, security etc.

Keep in mind that the Canadian Berlin wall has been gradually built by producers, academics, consultants, researchers, stakeholders and government. Can we come together collectively well maybe not in terms of 20 30 or 40 million, but that is not the kind of money that is required to move forward. In fact we believe that a small proto-type plant under 5ml will provide all the base line infrastructure needed and a foot print for other plants much more effective and efficient than we have now.

Each component in our present plan (which is on the table now and ready to implement) address the needs of the industry as a whole and specifically the producer. This is the first time a plan has been offered with direct producer benefit and the government does not have to HOPE for a trickle down to producers.

So come on board and get involved, I like the guys that say I like the plan but I don't know how I can help. Either you are in the agriculture business or not, if you want to help than offer your help in what you do best. We need to go over these challenges, around them, under them or through them.

Waitng to see who is ready to build the industry?????

[ALICIA]

I like your way of thinking, AND we could make big changes. If every farmer,rancher, wine maker, fruit grower,veg. grower, fisherman etc. The whole world would come to a holt and when we could make any demand we wanted.
BUT money talks and even a little keeps us doing what we love. Raising the best cattle we can for our owe satisfaction.

[ValueChainFX]

ALICIA so right you are, the industry is in our blood and many of us just can't walk away from it. The challenge is our kids can not see a future in it so what do they do!

Money does talk without a doubt! So when we see money spent on things that do not directly assist the producers it kinda makes ya a little more than frustrated. However, when we look at the money spent in compensation packages in the last go around, we can all agree this does not hit the mark! $300ml does NOT HIT THE MARK!!!! We really need to look at solutions that have a long term hand up not what is being called a hand out! (As if)

If the industry is in our blood and if we want to raise product that has a stable future we really need to take control ourselves! You can bet if we don't someone else will as they always have. We all know the problem when government or academics come to the industry to help us control it, the bill always goes to the producer! I guess if you are going to get a bill, maybe you should get something for it?

Keep the ideas going, thank you for your comments ALICIA.

[rsomer]

Interesting comments all around. But discussing changes that are needed in our beef industry needs to done in context of the nature of our "Canadian" industry. Given the degree of dependence we have on the United States market and the effective control of our beef packing industry by the two American firms, Iowa Beef Processors and Cargill I would question to what degree the "Canadian" beef industry can change independently of the United States.

ValuechainFX: Your statement "We have already determined the US plants of today Cargill and IBP are not capable of meeting the future needs of the emerging markets and regulations" may be incorrect. Cargill and IBP have tremendous resources and we should not underestimate what they could accomplish and would be capable of if they saw change to be in their best interest. I think it might be more accurate to suggest that they may not see change as in their best interest. After all, even though the "Canadian" industry is in crisis, the international interests of these major beef packing firms is not.

In many respects Canadian producers find themselves operating in a North American industry rather than a Canadian industry. Our beef grading and food safety standards, production practices such as use of hormones etc. have been harmonized with the U.S. standards for some time and changing that on our own is going to be difficult, especially given the comparatively small size of Canada’s beef production and domestic market.

Producers in the U.S. have made moves to own their own packing plants such as ValuechainFX has pointed out is needed. And as ValuechainFX has pointed out that a producer owned packing plant is not the answer on its own, but we need markets for our product. Although I don’t know how we do that without crossing more borders. The Canadian Cattleman’s Association has been pointing out for a few years now that we need to reduce our dependence on the U.S. market and I agree. But it is not that easy to move into offshore markets and take market share away from existing entrenched market participants. Especially given that our "Canadian" product has been tainted in the eyes of consumers worldwide.

A change that I see is needed and that we could accomplish within Canadian borders is a made in Canada risk management tool for the feedlot industry. Replacing price risk for basis risk by hedging on the US beef market doesn’t provide effective price risk management for the Canadian producer. Canadian feedlots were left unprotected against the May disaster whereas if the same thing had happened in the United States their producers could have, if they had chosen to hedge their risk, been protected against the price declines. We cannot discuss changing the "Canadian" beef industry independently of the United States industry until such time as there is a effective independent Canadian price risk management tool in place for our feedlot and backgrounding industry. I would think that I could argue that until such time as such a tool exists we don’t have an independent Canadian beef industry.

The most important change that I would like to see however and one that would not cost a lot to do is to develop the capability of providing a definitive test for BSE within Canadian borders. I do not believe the United States would have to send a tissue sample out of the country to Britain, as we did, to get a conclusive test result. Given the size and importance of our industry that test should have been done in Canada. I am sure all would agree that the test on the subject cow should have been done much earlier than it was but I would go further to suggest that the tissue samples should be kept under high security until the tests are concluded as a multi billion dollar beef industry could be thrown into crisis by the outcome of the test. I have the impression, and I hope that it is wrong, that somewhere there was a cows head sitting in a unlocked deep freeze for four months until such time as someone got around to conducting the test. Not good enough.

[cakadu]

rsomer - your comments bring us full circle to my starting points. If we were to adopt practices that were in line with what the EU and other countries wanted, we would have more markets to ship to. For years the EU countries have been telling us they don't want meat with synthetic hormones in it - why aren't we giving it to them? There is a growing push for reducing or removing anti-microbials from feedstuffs being consumed by animals destined for the food chain.

If we were to go to having no renderings in our animal feed that would also give us a point of differentiation and potentially open up new markets for us.

One of the primary reasons we don't do it is because of cost. If we were to do any or all of these things then it would mean not only changes in management practices, but the potential for a loss on already non-existant margins.

We keep producing a commodity when we should be looking at providing our customers with what they want.

I agree with you that if the Cargill's and IBP's of this world saw a benefit in doing it, they would be and we wouldn't have to really push to get them to do it.

What would happen if we started doing some of these things and lo and behold the producer actually started getting more for his product? There appears to be a growing trend by Canadians - at the very least - to pay for products that they want and that meet their requirements. What is preventing us from taking that to the next level? What if we were to focus on the domestic market and building it up? Beef consumption has been in a decline for years - what would help to bolster it?

What would need to happen in order for these changes to occur?

[rsomer]

I would challenge the underlying premise of your comments that there is something we, we being the beef producers of Canada, can do about it.

Yes, individual beef producers can identify niche markets and produce a product on a small scale to meet very specific customer needs.

But at an industry wide level an individual producer has little control over the beef industry he or she finds themselves in. If significant changes were to occur in the beef industry I would suggest that these changes would need to occur not at the producer level but at the federal government level.

Correct me if I am wrong, but I cannot think of a single facet of the beef industry that is not effectively controlled by the federal government. Whether we are talking foreign ownership of the packing industry, grading standards, herd health standards, food safety standards, government meat inspection, international trade, use of hormones, drugs, feed additives, even taxation; the federal government effectively controls and regulates the environment the beef industry operates in. And I would suggest a similar situation exists in the United States, certainly other members of the G8 and other major economies of the world.

For example, the present crisis we find ourselves in is not a food safety crisis as much as an international trade crisis. I have not seen where the Canadian consumer has rejected our product because of the one animal testing positive for BSE. The animal was kept from the food chain, the system worked. I think if the American beef industry could purchase our beef they would and the American consumer would consume it willingly. The problem is our product is not being allowed across the 49th parallel because the U.S. government won’t allow it to cross. The problem is not a marketing or product quality issue as much as it is a change in U.S. policy towards Canada, partly because of 9-11, partly because of the present administration. Note that when Canada had a cow test positive for BSE 10 years ago the border never closed.

I would suggest it has been the policy of the Federal Government for many years, certainly as long as I have been producing beef, that it is in the national interest that we as a nation produce beef for a North American market. Yes, market opportunities exist in Europe and elsewhere, but before our industry can access those markets on a meaningful scale, changes in federal government policy which would reach well beyond just the beef industry would need to occur.

The United States government has had a dramatic change in international policy. The present beef crisis may be just one aspect of that change. We as a nation and as an industry will need to consider very carefully if the change in U.S policy is just short term or if we too need to change and align ourselves less with the United States.

Ultimately, those are the kind of changes that may have to happen.