Plan B

[rsomer]

pandiana: you said "Tell me what is it that Australian beef has that we don't"

I see the core reason why Australia is the world’s largest exporter of beef is not their product, it is that they understand that international trade is about trade, not about selling.

Australia is a tiny country, population is 60% of Canada yet they are significant players in agricultural global trade. I believe Australia is able to do this because they are excellent negotiators. Australia will approach a country like the U.S. and negotiate access for its beef in exchange for accepting American imports and allowing limited American investment in Australia. Australia goes to Canada, Japan, Europe and does the same. In 1999, Australia exported goods worth $59.5 billion and imported $59.7, mostly machinery computers and office equipment, crude oil and petroleum products. Australia’s export partners are developing countries 45.6%, Japan 19.7%, ASEAN 13.3%, EU 11.7%, US 9.7% (2001 est.). Its import partners are developing countries 31.7%, EU 21.6%, US 18.9%, ASEAN 14.8%, Japan 13.0% (2001 est.). Australia trades with the world.

Contrast that with Canada. Canada trading relationship is NAFTA. Our imports partners are US 72.7%, UK 3.4%, other EU 3.2%, Japan 3.0% (2000). Our export partners are US 84.6%, Japan 2.2%, UK 1.6%, other EU 2.2% (2000).

When we signed NAFTA, North American became the focus of our trade. It took only a few years after NAFTA was signed before Canadian beef imports into the U.S. began to have an effect on a politically influential sector of the American economy. As a result RCalf started its countervail actions against Canadain beef which even though we won, we lost. As a result of the RCalf trade action the Canadian industry saw potential threats to its trade into the U.S. and tried to kickstart offshore exports of beef. But we were going into the global community cap in hand. We had already given the U.S. preferential access to the Canadian market, the majority of our imports were from that one country. We go to Japan or Europe and say won’t you please take some of our beef, they say what products are you going to accept of ours. I am sure that if 13% of Canadian imports came from Japan instead of 2.2% we would have more success gaining more than the 2% of the Japanese beef market that we had before the BSE outbreak.

Many say we should find different trading partners for our beef, but it is not that easy. NAFTA gives us preferential access to the richest market in the world in exchange for accepting imports from the U.S. But because the size of our domestic market is small, our ability to also accept imports from the rest of the world is limited. If we are not importing from these countries we would like to sell beef to, then our success in finding further non NAFTA markets for our beef is going to be very limited. We have nothing to negotiate with.

NAFTA is our market for Canadian beef. We have to defend it.

[ValueChainFX]

rsomer comments can never be to harsh if they are what you believe! A vision is good if it has the flexibility to be open to changes for the good, one man does not build an industry vision! The seeds of hope are in any vision with a foundation built on need and building blocks become solutions to meet that need.

With that said I point out that the greatest needs are at the producer level, I see others in the supply chain that have taken advantage of this BSE challenge, and have been taking advantage of producers long before. We cannot compete with the big guys on what I call commodity beef products! (These would be products that are produced on a line and sold into a market place as one of the basic 15 or so cuts from a side) We can however compete on any product that does not blend well into an assembly line type system or product. We can also work on marketing efforts that are not traditional, not in the mainstream and have the ability to balance out supply chain costs!

There are several reasons that the brooks plant sold to the americans, non of us know them all, but it is clear that these big plants operate in a system beyond one plant! If anyone thinks for one second Cargill operates as an independent unit from the US plants they are mistaken! These plants work together and constantly move product across the boarder in a way that makes them income. I have suggested smaller plants would be solutions to several of our challenges. These plants would be closer to the product (live cattle) smaller plants retain their employees longer, so we have better trained people. Big plants we were told centralize the facilities and reduce costs!!!! Right how much did it reduce your cost as a producer? You had longer hauls, your cattle more stressed, weight loss and on and on! It did reduce the cost to the packer though didn't it.

When we talk about quality, keep in mind what I see quality as being;

1.) Quality has to be defined as conformance to requirements, not as goodness.

2.) The system for causing quality is prevention, not appraisal.

3.) The performance standard must be zero defects, not "that's close enough."

4.) The measurement of quality is the price of non-conformance, not indexes.

Austrailia is a trader; they see market opportunities and work with them. They have people working on solutions that can be implemented into their assurance system. Does this make their product better than ours? No, this makes their product sell.

If we look at the USA as our only market we are in big trouble. Yes the US has to be part of any marketing plan, but we all need to recognize that the US market is full of many years of challenges and many more years of challenges to come.

The Plan B that I propose is not an over night solution (Keep in mind we have worked on this plan for a long time now and it is not meant as an over night solution) It is long term, and looks after many of the challenges we face today. It doesn't look after live cattle sales (although, live cattle can blend into it as well) Agriculture in general is seen as blending throughout this plan. Cutting input costs goes beyond the feed you put into your cattle. We all know that organizations that were once developed to serve farms have gone the way of big business and serve themselves not the farms!

We are in the initial discussion stages of a Canadian Value Chain. If nothing else they have been interesting, where it goes from here is yet to be seen, but the door is always open to ideas.

Will the vision be formed from these talks ... well I'm sure we will all see. All I know is I don't think their is anyone left out there that think things don't have to change!

[carebear300]

Now if we lived in Afghanistan we would just load up our guns and start shooting. And in the long run might be the only way to catch peoples' attention. Just a fleeting thought for what is worth. Not a viable option but it sometimes makes you think. Desperate people will try desperate things!!!!!

[rsomer]

ValueChainFX: you spoke about quality. I saw opportunities to differentiate agri-commodities by focusing on quality a few years ago. Along those lines I successfully completed courses to become a RAB certified ISO 9000 lead auditor. I think I understand the quality concept pretty well.

As for Australia, I have been watching what they were doing for some time with the view that why can’t Canadians do that. I see Australia supplying hormone free beef to Europe and think, hey, we could have that market. I see the market share that the U.S. has with Japan and think why doesn’t Canada have a greater share of the Japanese beef market. Why did we, at least before BSE, send our fat steers down to the U.S. to be slaughtered and rerouted to Japan when we could just have that market for ourselves. More effort devoted to marketing would seem to be all it takes to overcome our competitors in these global markets.

I am now suggesting that these marketing efforts will be fruitless unless we as a country are able and willing to accept imports from those countries we wish to export beef to. 28.5% of Japan’s exports go to the United States. I am suggesting Japan is sensitive to that statistic and will not look to cannabalize offsetting imports of U.S products like beef in order to buy Canadian.

Of the G8 countries, Canada is the only one that trades almost exclusively with one country. Even Italy which is a member of the EU has 50% of its trade beyond Europe with its European trade split between Germany 14.5%, France 12.2%, UK 6.7%, Spain 6.1%. You said "If we look at the USA [NAFTA] as our only market we are in big trouble" Well I guess we are in big trouble.

Canada can easily duplicate what Australia and the U.S. are doing with beef products and marketing. Canada cannot easily duplicate the trading relationships these competitors have in the global marketplace. What I am suggesting is if you wish to export beef products to Japan, China, South Korea you will be more successful if you are based in the United States, rather than Canada. If you wish to export beef to Europe, you will be more successful if you are based in Australia, rather than Canada. However if you want to export beef products to the United States, you will be most successful if you are based in Canada. It is simplistic to think of global agricultural trade as a bazaar where anyone can pitch a tent. Trade is between countries. Canada is at a disadvantage when it comes to selling beef off shore but it has a huge advantage when it comes to selling beef into the United States. And it has nothing to do with product or marketing and everything to do with trading relationships. That is why we can’t sit back and say if the U.S. doesn’t want or need our beef we can go global and peddle our wares in other markets. We need to defend our NAFTA markets for Canadian beef.

Quality can be defined as the ability of a set of inherent characteristics of a product system or process to fulfill requirements of customers and other interested parties. I am suggesting that before Canada will be able to offer a "quality" beef product to Japan or Europe we need to be able to meet the other interested parties need for offsetting imports, otherwise our product will not find acceptance.

[rsomer]

For anyone interested, there is a good overview of the Australian beef industry at:
http://www.orange.usyd.edu.au/staff_members/rcox/Beef_Industry.pdf

[pandiana]

rsomer..what is a RAB certified ISO 9000 lead auditor.

[rsomer]

If a company wishes to be registered to ISO 9000 standard, their quality system must be audited. Auditors will go through the company's quality system manual and the actual practices of the company to make sure that the company says what it does and does what it says.

Auditors will have passed a Quality System training course, have at last four full time years in a technical, professional or management positon of accountability involving the exercise of judgement and at least two years relevant work experience in the implementation and/or operation of quality systems.

RAB stands for Registrar Accrediation Board. A lead auditor is qualifed to supervise the audit process and is responsible to manage as well as perform the quality system audit and submitting the audit report.

[rusty1]

A correction may be in order. If I remember right the Lakeside operations have never been wholy owned by Canadians. I believe in the early days Germans had a large protion of the equity and later there was some strong Japaneze ownership.

[rsomer]

It was my understanding that Lakeside was started by Tor Wigemyr and a partner whose name I can’t recall. Lakeside would have been much smaller when it started in 1966, the name Lakeside Farm Industries didn’t come until 1969. The ownership of Lakeside after that may be the subject of rumor but Lakeside did vertically integrate into the packing business in 1974 and 20 years later sold its packing operations to IBP in 1994. I have enclosed a link to the Lakeside Story
http://www.lakesidepackers.com/history.htm

A correction might be in order when I referred to the USDA inspector as Howard Lyman. My memory could be wrong. I believe the problems with inspections at the Canada U.S. border did cease once Lakeside sold to American owned IBP. It’s only ten years ago since this happened, seems like longer. So much has happened in the beef industry since then.

[rsomer]

To confirm just how bad my memory is I believe Tor Wigemyr's partner was Garnet Altwasser.

[cowman]

Rsomer: If you are a qualified auditor do you do any work at it? Or would you if you became qualified?
This definitely is an up and coming thing and I would think a growing opportunity for a career. I imagine the pay would be pretty decent? Might make more sense than running a bunch of 10 cent cows?
In regards to IBP. They have a long history of being a pretty sleazy outfit! Many times accused and found guilty of predatory business practices, violations of workers health and safety, and unsanitary conditions. Lakeside wasn't much better! And leopards don't usually change their spots!
Meat packing is a pretty dirty business! If most people could see what goes on they would be shocked!

[pandiana]

I read the article you referred to above, and yes it was quite enlightening. However, it still does not explain your statement ". Canada cannot easily duplicate the trading relationships these competitors have in the global marketplace. What I am suggesting is if you wish to export beef products to Japan, China, South Korea you will be more successful if you are based in the United States, rather than Canada." What is so special about Australian trade relations with the world that we cannot pursue similar avenues?

[rsomer]

Life’s journey takes us down many paths. If the farming thing doesn’t work out I need a Plan B that involves off farm work. As I tend to doze off if driving long distances driving a truck is not an option for me. Auditing, land agent work, management consulting are some things I have got lined up if it comes to that. As well, if my son or daughters decided to farm it might help if I can step aside and do something else if it means they can farm. I nearly ended up taking courses in the U.S. to be a Certified Organic Inspector but the courses got canceled and it never happened. So one never knows.

Running a bunch of 10 cent cows lets me be home with my family. So far farming has kept us fed and clothed.

My wife once had a job inspecting boxes of beef livers being loaded out of Lakeside destined for Peru. She got to tour the plant and see everything but the slaughter floor. Some of the remarkable things she saw were the "head table" where people were removing the insides of the heads and barrels of pickled anal sphincters. Everything from blood to guts was gathered and prepared for sale. She mentioned workers on platforms that moved sideways and up and down cutting the carcasses in half as they moved down the line. Lots and lots of government inspectors everywhere and everything was very clean.

I would expect the business side of the packing industry is very cut throat, to use a bad pun.

[rsomer]

pandiana: You are correct. The article, although interesting would not explain my observations on international trade. My observations suggest international trade revolves around give and take rather than being simply a matter of marketing. I look at Japan and see Japan supplies 3% of Canada’s imports at the same time as 2.2% of Canada’s exports go to Japan where Canada has about 2-3% share of total Japanese beef imports and I see a connection. Likewise the United States is Japan’s number one export partner and when the U.S. threatens retaliatory action against Japan if Japan doesn’t accept more U.S. beef, suddenly the U.S. has 50% of Japans beef imports. I look at Australia and see 19.7% of Australia’s exports are destined for Japan while 13% of its imports come from Japan, and Australia has the other 50% of beef imports. I see a correlation.

Canada is tied into NAFTA. NAFTA is our trading relationship. Canada cannot just change this relationship to have 13-20% or more of our trade with Japan instead of 2-3% even though doing so would probably open opportunities for more beef exports to that country. Because we are in a NAFTA trading relationship with the U.S., that pretty much fills our import market. 2.2% of Canada’s exports go to the EU and 3.2% of Canada’s imports come from the EU. We do not have the room in our economy to go out and import additional goods from Europe to match the 21% EU exports that Australia accepts although doing so would probably give us leverage when it came to exporting our beef to the EU.

What is special with Australia’s trading relationship is they have more trade with more countries while Canada which trades mostly with one country. Our trading relationship with the U.S. should have given us an advantage when it came to exporting beef into that country, but we are constantly getting the message that the U.S. doesn’t really want our beef and Canada should go hunting for markets globally. The only way I see for this to be successful is if Canada breaks away from NAFTA and starts trading with the world again, for instance like Australia does. Because trade is not just about exports, it is about imports too. Until Canada breaks away from NAFTA, Canada must defend our NAFTA right to export our beef and live cattle into the U.S. Producers need to be aware that Canada’s ability to export beef into the world markets is hampered by our NAFTA relationship with the United States. My opinion.

FYI my numbers on trade come from the Central Intelligence Agency web site at http://www.cia.gov/cia/publications/factbook/index.html

[ValueChainFX]

It's fine to take into account any of the traditional values and avenues of marketing. It's fine to say governments control global marketing and we must have the US as our strongest partner. My suggestions here are for each of you to take the (your) thoughts and ideas to a new level. Go beyond the traditional and find the possibilities! New and successful marketing comes from thought process and we all have the seeds for this process in our background and knowledge base. I never suggested I have all the answers, in fact I suggest "You" have most of the answers. When I say "YOU" that means a combination of many people putting their thoughts together in an aligned process.

We Can market our product anywhere we want to! If the conditions are right and we are able to meet those conditions, if not we look elsewhere. We can never neglect partners such as the US, but if we can't get into the US we don't just close our eyes lay down and wet on ourselves.

I do talk to as many people as I can, I try to use my experience in the industry and come up with a path to follow. I take an action component and do hands on work to reach the goals I set. These goals are based on the needs (as I see them) of the industry as a whole, understanding that a long-term plan needs the support of the industry. Duplication of success is not a bad thing, duplication of the short falls in the industry is. If we think for a second any plan "B" will take on the big guys and yield success we are fooling ourselves. The present plan I am working on, builds infrastructure back into some of the rural communities, is designed to put skilled labor back into the industry, put extra dollars into the jeans of the primary producer, and supply products and services that are in demand around the world to partner consumers. I for one don't see this as a bad thing!! I have many guru's that have made light of some parts of the plan but on the same note have had those same guru's that have taken the time to study the plan come back and ask to become partners with input and involvement. Any long-term solution will take time to put in place, and there will be challenges. But another day in paradise molds a flexible set of choices into something that can benefit us all.

I just believe that rather than spend time looking for all the bad points of a plan we should recognize the plans challenges and make it better, work on the good points and help implement them. Use your energy to make things better rather than saying it won't work and justifying your position of why it won't work!