Changes are Needed

[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.

[cakadu]

I agree that there is government control along the entire ag sector, not just the beef sector. That is where the regulation is going to have to come from in order to disallow rendered animals in food. The government is going to have to set the policy and then police it.

I realize that there is a lot at stake with the industry the way it is, but it seems to me that with the recent closure of the border that we rely on the most it necessitates looking at doing things differently both in terms of how we grow the animals and where we seek to market the final products.

It will mean thinking outside the box and finding the leadership to see it through. If it's regulated then everyone will have to do it or face severe penalties for not doing it.

Once the border opens up it isn't going to be business as usual - it is going to take some time to re-establish ourselves. It seems to me that now is the time to be looking at new ways of doing things because the old way doesn't seem to be working too well for us.

When the first BSE cases happened 10 years ago I don't think we knew as much about it as we do now; or the converse - we know even less about it then we knew then which is probably why the borders never shut.

There is no easy solution here and it is going to take time, money and leadership to turn things around and instill the necessary changes. We need to focus on the future as much as we do the present.

[ValueChainFX]

The conversation has become more interesting with every comment, but it still comes back to "We need to do something"!

When I pointed out that we have determined that Cargill and IBP cannot meet the future needs, the comment was directly pointed at the system they have in place today! To understand what changes they would need to make you would have to have in-depth knowledge of their goals and how their operations work!

One of their main goals is production ... no one should argue that point! To get it, they need people on their lines! They take a person off the street and "TRAIN" them. Somewhat of a tongue in cheek comment. They go through orientation, and they go onto the floor where they learn basically one job. IF they make it three months they get the big boost from being a newbie to a full time employee. (They start with a baby blue hat and move to a white hat!)The turn over rate is big big big!!! So they hire more people. (Get a warm body on the line, is a typical comment)

So in reality they do not have all around trained staff! This is true in many US plants as well, and this is a recognized fact in the industry worldwide.

We do depend on the US market place and the comments about less dependence means just that, recognition of global markets and entrenching Canadian product into them is our future. Depending on one market just does not make sense at all. That doesn't mean we cut our US friends off after all there are a lot of US customers that enjoy our product. But the fact is the boarders are not controlled by our customers as much as by the US government. We do need to provide them with product they want and with the safe guards in that product.

If a beef producer even wanted to go into a VALUE ADDED (or niche) market, "How would they do it"? You can have your animals killed at a provincial plant and you can sell inside your provincial boarders "That’s it"! Even inside your provincial boarders you are limited to who you sell to as much of the market place will only buy Federally Inspected Product. So that means you would have to kill in a Federal plant. Where are the Federal plants? Who has control of those plants? Will they even do a custom kill for you? Even if you get them custom killed for you, can you get the product cut to meet your specifications and have them follow a protocol acceptable to your market?

You are very right when you suggest we should never underestimate the Cargills and IBPs out there. But I do believe ever one of the producers know they need to start building something now or there is no future. Those in leadership positions may always want to make that big sale, deal with that big buyer, or the high profile customer. Reality says that without a producer you have no industry, without a grounder you have a gap in the system, without the feedlots you have a harder time getting numbers and consistency, without the packer you have no place to turn your raw product into a saleable product, without a marketer you have no relationship building for the future, without the wholesalers you have little niche markets with a cap on them, without the retails you don't reach the consumers and without consumers ... What’s the point! So we have the opportunity to look at the whole system, to fill in some of the gaps, to meet some of the global needs. All the issues we are discussing are mute unless we all agree that it is our industry (not the USs industry, not the EUs industry, not the global industry) it is ours .... Canadian ... we make it work (or not) the government regulates it but we make it work.

My suggestion is that we work together to make it happen, and work as a coordinated group. Be proud of our Canadian Industry, we have proved we are strong and can survive, now time to prove we can be leaders in what the world is demanding. If Cargill and IBP want to make the changes that is up to them, but you can bet on this, if they make those changes they will be good for Cargill and IBP and debatable if they are good for you as a producer or any other participant in the supply chain for that matter. Please don't get me wrong, I don't think Cargill and IBP are bad for the industry, I just believe the industry has plenty of room to make things better.

My thoughts would be the cattle industry would be lining up to find out just how to make these changes, what the industry plan is and how they could help! The worst that could happen is we get together and share ideas and some people may still want to get their pay checks and benefits from Cargill and IBP!

[rsomer]

ValuechainFX and Cakadu, thank you both for your comments. ValuechainFX’s remark "All the issues we are discussing are mute unless we all agree that it is our industry (not the USs industry, not the EUs industry, not the global industry) it is ours .... Canadian ... we make it work (or not) the government regulates it but we make it work." reaches the core of the issue of change in the beef industry. Do we, we being the Canadian beef producers, control our industry?

The answer to that question leads directly to ValuechainFX’s second comment that I thought hit the mark "We need to do something"!

As participants and observers of our industry we need to be cautioned against getting swept up in current events. This is a long term industry. Yes we have a crisis but it will pass and even though I expect it will take years not months or weeks before we reach a new level of "normal" (as Cakadu comments, it will take some time to re-establish ourselves) that time will come.

At some point whoever is in charge of our industry will make a strategic decision, do we continue to harmonize our industry with the United States and focus on that one market or do we target the Canadian beef industry towards offshore customers. Although the comment "Depending on one market just does not make sense at all" may sound right when viewed in the context of the last month, if that one market is North America and it comes with a large and prosperous customer base that already accepts our product then the industry needs to think long and carefully about the North American market before we throw our hands up in the air and say "We give up!"

I believe changes will happen, perhaps as Cakadu suggests one of the changes will be a ban on rendered animals in food. There will be others. I believe we will continue to harmonize our industry with the United States (and for that matter Mexico) and the majority of changes will be made simultaneously throughout NAFTA. Cakadu commented "When the first BSE cases happened 10 years ago I don't think we knew as much about it as we do now" And for certain we as an industry will learn even more from the present crisis and the entire North American beef industry will benefit as a result, albeit at our expense.

It is attractive to producers to believe they can take control of their industry and improve on their lot by joining together (don’t get your cheque from Cargill and IBP, sell it yourself). With respect, that line of thinking has about as much credibility as the Focus on Sabbatical land set aside scheme. In theory it is a wonderful idea but, bottom line, producers don’t control their industry.

[ValueChainFX]

rsomer you are correct in your words of wisdom, thank you for sharing. Without working towards the future we live with what we have!

As stated above the effort needs to be collaboration and the vision as it sits now would see a marketing group working with some collaboration that benefits us all. Examples of this may be in terms of national inventory levels, quality assurance standards, and verifiable trace back etc.

I would never suggest for a second that we neglect the US in any marketing strategy or any of the big packers for that matter! However, I would suggest that we build foundations with other partners, in other markets and with specific requirements to ensure our industry has the weight of our marketing strategy spread out more broadly. Even inside our boarders markets exist that could be more secure if we approached them in a unified manner.

This in no way suggests price fixing, or a national board but it does suggest a national strategy.

Moving into the next steps will set the stage for a long-term strategy. Most of us are ready to move forward, I don't think anyone will blindly go forward but move ahead with a strategy that makes sense for the whole industry.

[poorboy]

All of the above posts are correct in that we need to do better jobs of controlling the quality of our products. Canada being a small market, we export most of the goods we produce and the natural resources we eploit. Our market is just too damn small!!!!!

We have to have better quality control because we need all these export markets to survive.

Almost everything in the world has serial numbers on it. This allows most people a system to trace the commodity throughout the system, be it a tv, computer, car, etc. If a batch of faulty brakes is discovered by Ford, they know where the brakes were used and which vehicles to recall. This instill confidence in me as a car buyer and user. Would you buy a vehicle from a company that had very poor quality control?

Probably not, even if it was made in Canada. So why as beef producers do we think that we are any different? The mad cow case has certainly made us aware of how export oriented we are, and because we rely on exports so much for our livelihood, we should definately be doing MORE to provide a serial number for each animal and a traceably chain for the animals that could be traced back in under 24 hours.

In the future, we may encounter a situation where the USA finds a case of mad cow, and the stores and restraunts, could just switch to Canadian beef and tell their consumers that they know to the farm where each animal spent its life.

If we could have had a system where we could have positively known where the mad cow had been within 24 hours and had all of the herds dead within 2 days, the mad cow issue would have blown away instantly.

Good business's would consider it just part of good marketing. But some cattle farmers are so backwoods and slow that I doubt it will ever happen.

In most industries, the poor producers just disappear from lack of sales and profit. Only in Agriculture are the poor producers allowed to integrate and destroy the markets for everyone!!!!!

[rusty1]

Fortunately we have the tools to track every animal throughout it's life time. Like you say the only thing still lacking is the will. However after the unthinkable wake up callof "520", if a producers refuses to participate in a new national ID program that records the calf birth place date and travells then he should be refused a place to market his calves.
As I said we have the tools now ready to be put into action which will track the animals like a passport from pick-up point to delivery point, and all points in between.
Every brand inspector, auction mart, feeder, terminal or community pasture needs to be equiped to read the tags and interface the critical data with the CCIA.
This needs to be private enterprise giving the livestock owner the option to vertically integrate any production records he deems helpful to obtaining a better market value.
This would also go a long way to genetic improvment, value capture for good cattle and discounts for the ones that have been over paid.
As I said we have the tools to provide an vertically integrated service and will be making anouncements in this reguard soon. So keep watch.

[ValueChainFX]

Poorboy and rusty are right in all counts, the trace back is here and we best get used to it. Trace back is great up to the packinghouse door, but once the ccs hits the fab floor we seem to fall down, this is about to change.

However, getting to poorboys comment the quality assurance is the next key to trace back, issues such as security and feed trace back fall into the same issue now, and these also have to be part of the system.

Several trace back systems provide great live id and info associated with that id. Getting a standard that is in alignment with those global markets and the government regulations that go with those markets means trace more, faster and in the right price range for all of us.

I look forward to your announcement rusty and hope we can all work to those goals. Our system is there as well, and making the industry better is what it is all about!

I would love to hear more about your system rusty feel free to drop me a note avcc@telus.net

[charliep]

ValueChainFX

You asked me a question (forget which thread about marketing in the new world (likely in the beef one). My silence indicated I didn't have an answer.

Another challenge/opportunity for creative thinking today. Met with a potential value added grain processor about buying grain. Spent all our time talking about being competitive in a commodity market. The project has all the good things about it (rural development, more competition, new product line, etc). In order to be successfull, however, this company will have to encourage farmers to grow/do something different (a behavior change). Financial rewards, sharing of risk, relationships, etc are the ways to make this happen. The new business mind space is to pay lip service to some of these things but the smoke clears, buy cheap in a commodity market.

From the farmer side, they are not likely to be enthusiastic contractors (what this company needs to ensure supplies) until their is a trusting relationship established and they feel good about crop profit potential relative to other alternatives. I am not sure that there will be enough crop production to ensure supplies for this plant on a consistent ongoing basis.

Realizing I wasn't born yesterday in asking this question, is there anyway to change agricultural industry's thinking to creating value versus selling/buying commodities, a recognition that the word profit in all sectors is not a dirty evil thing and the importance of working together to satisfy a consumer need (an end product for a customer is what the game is all about)? Create value first and then let the market shares the proceeds along the value chain.