The future

[grassfarmer]

Looking to the future of our industry I want to get peoples opinions on what will happen when the US border does open. For sake of argument let's say it will open in 2004 whether it be May or December - what happens then?
As I see it the US feedlots will outbid Canadian feedlots given their better financial position. What happens to feedlot alley? will there be a catostrophic drop in values of feed barley, barley silage etc that will produce values so low that feeding in Canada will be competitive again? If our feedlots are empty what will the packers here do? Would hugely decreased feed costs prompt an expansion of the cow/calf sector here with the aim of marketing more live feeders into the US in the future? That would make us scarily vunerable to future trade/political whims of our neighbours.

[cowman]

Grassfarmer: I suspect you hit the nail right on the head! I think that is exactly what will happen. Sad but true. Goodbye local packers.

[kato]

Given our depleted bank accounts and overdrawn operating loans we will be forced to go for the maximum returns for a while at least.

Once we get the hydro bill and fuel bill paid, we should all sit down and reflect on the last year, and make an effort not to put ourselves in such a vulnerable position again.

Maybe we should all have a sign up on the kitchen wall saying "Remember May 20th". Then we should make a real effort to support the new plants that are in the works right now. If it's a co-op, sign up. Try and look past the immediate cheque, and see the big picture.

It's up to us now, not to forget this last year. (As if we could!)

[WoolyBear]

Maybe we should all send a message to the USofA that there is a new Canadian Farmer ready for business....... We're trading beef, lamb and wheat to anyone and everyone that wants to sell us tractors, combines, cars, trucks, fresh fruit in January, fertilizer, soybean meal, cattle minerals, etc........... send the message out that New Holland, Case IH, and John Deere aren't welcomed up here unless they take Canadian agricultural products at PAR.

Just a thought........ can't hurt to see more EU manufactured goods around, maybe we can even start sending over some canola and flax too. OR maybe we can get back some of our manufacturing base that the US stole from us when farm
machinery makers went south? If we start looking out side the box, then maybe we can make something out of this whole mess that will make the US wake up and smell the coffee.

[15444]

Kato, your idea of putting a sign up on the kitchen wall saying 'Remember May 20th' is brilliant. When this whole situation turns around I think I will have someone make me one. It will be a constant reminding to my father and myself that we have to make every farm decision on our toes and expect the unexpected in such an irregular marketplace.

On another note, I think that the idea of supply management will still linger in many minds even after the border is open. Read an article the other day where a family dairy farmer in Alberta said that supply management in every ag sector and a fierce defence of it on the international level will be the only way agriculture in this country will become evening remotely profitable, along with removing alot of risk of oversupplying ourselves in times of export uncertainty. He went on to say that the dairy industry is hurting because of BSE, but that the industry always knew that dairy meat isn't their bread and butter.

[blackjack]

The cow-calf man will need to take back control of ABP. If our voice in the government is not heard, how can we expect to have a change in policy? If we leave the people in the ABP that are leading us now, we`ll deserve what we get!

[rusty1]

shouldn't follow a mennonite into war

[rsomer]

grassfarmer: I don't think the border will open to feeders for a while yet, only animals destined for slaughter. The feedlots will not have to compete with the U.S. to buy our calves until after this fall's calf run. Based on the support shown the feedlot sector to date I think it is reasonable to assume feedlot alley will not only survive but grow. I see the profitability in the beef business shifting towards the feedlots and away from the cow calf sector. There will be fewer live calves and for that matter fewer cows shipped across borders in the future, too politically sensitive. More packing plants in Canada, possibly producer owned. Canadian beef industry will continue to grow, mostly due to continued low profits in other sectors such as grain. Beef profits will be kept low by the need to keep domestic prices low in order to be competitive globally. Herd sizes will continue to grow.

[cowman]

rsomer: While your scenario might very well be correct I wonder where we will find people willing to continue to expand the cow herd? In my area the larger cow outfits pretty well took a beating during the 2002 drought and then mad cow. The 600 to 1200 cow outfits are pretty well all gone or vastly reduced. The ones that have survived had large grain interests as well.
I believe for cattlemen to go into an expansion phase they need some longterm guaratee of stability and some definite assurance of profits? Most of the current players are just struggling to hold on to what they have and quite frankly they can't take anymore "wrecks".
Couple these problems with the producer age problem and I suspect we might see a reduction of the overall cattle herd? Just go to the cattle auctions and see all the senior citizens? Where do we get all these young cattlemen with lots of money in their jeans?

[rsomer]

Expansion in the cattle industry, if it happens, won’t be as a result of profitability of the cattle industry but rather a lack of profitable alternatives. Our grain industry is still uncompetitive when compared with the U.S. grain industry which receives huge injections of subsidy money annually with no sign of that stopping. The U.S. is continuing to target our grain industry with trade sanctions even at this moment. Even though the Canadian beef industry will be less profitable in the next ten years than it was in the last ten years and our beef industry will loose some our competitive advantage when compare to the U.S. it will still be more competitive than our grain industry. The shift from grain to cattle will continue, maybe at a slower pace.
Although the risk of feeding cattle in Canada would suggest the feeding industry should move south our government support of the feedlots suggests to me that our governments are not willing to loose our feedlot sector. Increases in CAIS caps from $975,000 to $3,000,000 or even $5,000,000 are designed not to protect Joe and Jane farmer but rather the mega operators like the feedlots. With that level of government protection feedlots will continue to grow in this country. CAIS is the feedlot’s guarantee of longterm stability and their guarantee of profits will be the captive supply of Canadian calves.
The age problem will continue to result in a reduction in the number of farms, not the size of the industry. Someone will continue to own the primary cattle industry although if the Canadian cow calf operator is expected to withstand the BSE crisis on his/her own with no government support like the feedlot sector received then the name on the mailbox will change on quite a few operations. In another thread the opportunities in Brazil were highlighted. I would think rather than move to Brazil, Americans looking to expand would prefer to come to Canada. If the Canadian cow calf operator is expected to make it through the BSE crisis on his own that might be what happens.

[grassfarmer]

rsomer, "I don't think the border will open to feeders for a while yet, only animals destined for slaughter."
That's an interesting analysis but one that surprises me a bit. As this is all just a protectionist racket anyway wouldn't it make more sense for the US to open their border to feeders first and fats later? The feeders will be younger - ie further removed from the 30 months age group. More important feeders would allow US feedlots the chance to make good money whereas bringing in fats would only result in a drop if fat cattle prices - something their feedlots wouldn't want.

[kato]

I think a lot of our future is tied to the value of the Canadian dollar too.

If it goes much higher, even without the politics of the present time, we would have to reassess our futures.

I see a lot of retirements as soon as there is enough value to make it worthwhile. There are a lot of people in the business who are not all that committed to cattle to want to stay on much longer either. The ones with other sources of income, and the city investors won't want to live in our uncertain world.

It's up to us to decide our own future. I think value added, with closer ties to our consumers is one way to help stabilize things. Right ValueChain? ;-)

Since we are much more vulnerable to the border closure than other provinces, there is a lot of talk in Manitoba right now about what to do with the future. Almost all of our fats and cows have traditionally gone south.

On the government website www.gov.mb.ca they are inviting suggestions on how to direct things in the future to avoid this mess happening again. Labelled Manitoba Beef is one idea that is gaining popularity.

Sometimes we just need a good kick in the bum to get us started on new ideas.

[rsomer]

grassfarmer: I based the assumption that the U.S. would grant access to live cattle destined for immediate slaughter on Canada’s response to the Washington Holstein where most of the world banned American beef but Canada continued to allow boneless beef under 30 months and live cattle destined for immediate slaughter. Although I would agree that the science would indicate that there is no justification for the U.S. to continue to block access for our feeders, science has taken second place to politics throughout this crisis and no doubt will continue to do so. For instance there was no reason for Canada to block access for U.S. feeders after December 23 but Canada did, politics. I agree with your view of what would happen to the Canadian feedlots if the border were to open to Canadian feeders in the near future. I do not see our governments pouring $1billion into the feedlots to save them and then let them die like that. The Canadian feedlots won’t have to compete with the U.S. feedlots until they have had an opportunity to recover. That recovery will be achieved by having access to Canadian feeders at artificially low prices while selling fats into the North American market, in effect a transfer of wealth from the cow calf producer to the Canadian feedlot.

[grassfarmer]

rsomer, so are you saying that either the Canadian government or some of the beef organisations are/ will be campaigning for only access for fat cattle to protect the Canadian feedlot sector?

[cowman]

rsomer: I expect you are probably right about the grain/cattle thing. You seem to have a good grasp of the big picture while I probably see things in a more local type picture.
I too wondered about raising the cap limit on CAIS from $975,000. I was at the CAIS roadshow when the speaker informed us that the cap had been raised. The guy sitting ahead of me said to his buddy "I guess Cargill wasn't happy just getting $975,000!"
You paint a gloomy picture for western agriculture but I suspect probably the reality.