Any Business Would Do the Same?

[blackjack]

BFW...I don't care how many feeders or packer guys you put on the boards...but I sure do not have to agree with it...I have one question for you... maybe big packers are not the only problem maybe our big feedlots have just added to it... it won't be long afew will control the feeders...BFW...I dont' know what size of lot you have and really don't care... but as a small independent backgrounding lot the big boys want us out whether you want to admit it or not...

[cakadu]

Rsomer - it may not be right but they are being told they did nothing wrong.

When the price of feed skyrocketed 2 years ago and those of us that had to buy feed had to pay outrageous prices for it, did it matter to the sellers of that feed that some may not be around to purchase it next year? No it didn't. People with feed to sell just kept jacking the price up and buyers had two choices pay it or get rid of your animals. Buyers were ripped off and greed took over. (Not that you could really blame sellers who saw an opportunity to make a great deal more profit on what they had to sell.) How many sellers did you know say that they would set a reasonable price because they wanted the fellow across the road to be able to buy from them next year? Was that normal business practice?

Based on your reasoning, rsomer, when prices for feed go way down, then buyers should say to sellers that they will give them more so that they are around next year to grow it for them. In a perfect world it would work like that, but we are not in a perfect world.

Point being that people are what they are and some will take advantage of a situation. Do we like it - no. Is it reality - yes.

Are the packers taking advantage of the situation? Yes, of that there is little room for doubt. Your examples of Enron and Martha are indicative of how bad business ethics have gotten. With the case of Enron, it was an intent to deceive; with Martha, well, she's Martha and doesn't have to live by the rules for the little people. Are Cargill and Tyson solely responsible for the border remaining closed - I doubt it.

Let me ask you this - if and when animals start to trade at reasonable prices again and you are offered $1600 for your cow/calf pair, but it only cost you $1200 to raise the cow, are you going to say well it only cost me $1200 or would you to take the $1600 ?

Don't get me wrong, I understand your disgust and indignation at the situation. The magnitude of the status quo is beginning to rear it's very ugly head. We are captives of a situation that only 14 months ago, most were able to tolerate and considered normal. Only now do we know better and want to make changes.

[ALICIA]

Cakadu is right any business will do it and do. Farming is a business even if it is a life syle to us.
My next door neighbor is selling me hay because he has 25 acreas, and he will not use the hay for his horses because it has alfefia in it. Last year his hay got rained on once and he charged me 15.00 a bale for a 4x4. His tractor has a hydrolic lift so I get him to stack the hay under my shade because my tractor just has a spring load bucket. So I didn't say any thing. This year his hay got wet 5 times and he baled it damp. When he called I sayed I didn't want it because I know it got wet 5 times. He started to get angree and I said oka I'll give 10.00 because I'll use it before it gets to bad like right away. I put it away from the barn and just the other day I felt inside and it was still wet but it didn't seem to be hot, not sure way but anyway I just did it because I need him to help me pile my hay, he's charging 100.00 this year. So he set the 100.00 fee for helping me pile my hay so next year I will be in a position that I don't need his hay.
I sold two 3yr old and one 4 year old and a 2 year old today, to a man that is going to but a few cows on his farm because cows are cheep. He gave me 2400.00 for 7 females (good breeding stock) I had just been to the sale barn and seen the prices so I want to cut down so I let them go. Then he wanted the reg. papers for them, I said NO you payed beef prices, you got beef cattle. After I look up to see what it would of cost me to reg. them into his name with the hereford ass. and the cost would of been 234.70. Thats the price of one cow. He got good breeding stock but he still wanted more. Thats just the way it is, when I go into his hardway store I pay the price on the drill and I don't get a package of drill to go along with the drill, I have to pay more.
The customer on the street is not supporting the beef farmers, they are just buying more beef from us because we are selling it cheeper then the store is. Just try and sell it like the store prices and see what they say. Most people know its just political and they are going to jump on a deal when they see one.
I don't know of any one that wouldn't like a good thing cheep.

[cakadu]

After reading a couple of articles on the Auditor General's report (Globe and Mail and the Journal) I noticed that there were 3 packers named - Cargill, Tyson and XL, yet XL isn't being named in these posts.

Surely we aren't to assume that it is okay for XL because it is a Canadian company? Granted, the two US packers have made far more and got far more of the crisis money, but XL is still making the profits too. If it is bad business, then it is for all 3.

Playing devil's advocate and taking it one step further, should XL stop buying cattle and selling boxed, boned beef into the US because it is unfairly taking advantage of the producer's situation here in Canada?

[cowman]

The packing business isn't any worse than any other business! They see an opportunity they'll go for it. Do they ever look down the road and consider how they are destroying their suppliers? NO. Business looks no further than the quarterly report. If eventually they lose their suppliers they either find new ones or move on to other more profitable ventures. Big money doesn't really care how it makes its money.
How are IBP/Cargill/XL any different than Esso/Shell/BP?
The fault lies clearly with our federal government for not having any laws in place that protect the consumer or supplier from these guys? Wolves will always be wolves...their nature doesn't ever change...but our government can put in some safeguards to protect us from the wolves instead of actively opening the gates to let them in to feast on us?
Until the laws are changed to allow a fair market to function, what is the purpose of producers owning packing plants? Watch and see! As soon as there is a new kid on the block watch how they are targetted for elimination? Now a producer may be super loyal to his own plant but the big boys will undersell his product and eat a big loss just to break him! They've done it countless times before and they'll do it again?
They had Stan Schellenburger on TV last night in a little blurb about the "proposed" Ranchers Choice plant he is part of. His comment about the frustration with both the federal and provincial government doing almost nothing to aid their plant, was very revealing! Martin makes big announcements everywhere...but doesn't do anything! Then Shirley McClellean mouths off that they can't do anything because it is federal money that is needed! I guess Alberta is so poor they can't chip in a few million to get the ball rolling? I mean oil hit $44/bl. yesterday? Probably the one day increase in royalty payments would have built the darned plant!
And so the politicians continue to dither and nothing happens! You can almost bet though that good old Ralph has some money tucked away to give out to the peasants? Of course we'll have to wait a few months for that announcement...until we're closer to an election? Ralphs going to buy us again!
Some of you guys pushing for a plant in Saskatchewan should realize, in all likelyhood, you're not only going to be competing with Cargill/IBP but probably with the Alberta treasury? It may not be right, but it is good politics?

[rsomer]

Some really excellent comments.

I see XL as a market follower, Cargill and Tyson are the market leaders in Alberta at least. As market leaders they are setting the prices.

Re the example of the high price of hay trading between farmers. That was true supply/demand. No one farmer was in a market position to artificially withhold feed causing the price to rise and no one was to blame. Alternatively in times of plenty no one farmer or feedlot is a position to drive down the price of feeds. Likewise with the examples of selling cows and all the farm commodities, even with fluctuations in prices there would still be a normal functioning market with competition ensuring prices were fair.

The situation with the packers is very, very different with the packers using their monopoly to buy our calves dirt cheap and sell them into the U.S. at record high prices and into our domestic market at very strong prices. There remains a huge demand for our beef, it is not a supply demand situation at all even if government and industry want to put that spin on it. It is a situation where two packing plants in Alberta have effectively gained complete control over the packing plant industry in western Canada and are acting in collusion to create a monopoly whereby they are profiting unfairly at the producers expense. There was an initial period after May 20 when there was a supply demand problem but once the border opened to beef the market was there again but all the packing plant capacity was in the hands of only two unscrupulous companies who took the opportunity to use the BSE crisis to profiteer at producers expense.

It is wrong to suggest that business is allowed to run rampant through the economy of this country and do whatever they want. Business is responsible to its stakeholders and these responsibilities are back up with legislation. No one would suggest the packers should be allowed to pay below minimum wage just because they may control the job market in Brooks. No one would suggest the packer should be allowed to ship contaminated beef and kill and sicken the unsuspecting public. There are rules and safeguards to prevent that. No one would suggest that the packers be allowed to pollute the environment. What about unethical business practices...there are many, many restrictions on business to prevent insider trading, rules on takeovers, sales and acquisitions. Why then would anyone suggest that is normal business practice for two packers to act as a monopoly to artificially fix the price of cattle paid to producers so they can extract huge profits in a time of national crisis.

Government has the ability to deal with the packers, they choose not to. Industry is saying if we allow these two packers to build more capacity that will solve the problem. But that doesn’t change the competitive structure in this country. Cargill and Tyson would still act in concert to fix prices and they will continue to do so until they get competition. That competition is in the United States. We can sit back and wait for the border to open and that will fix the problem, but only for a while until the border closes again for whatever reason. Cowman is right. Government, and have no doubt about it it was government that allowed these two companies to set up shop in this country and create the problem, and government will have to fix the problem so we can have competition in the Canadian marketplace.

What the packers are doing is not normal business practice, that is why they were being investigated by the Parliamentary Committee. We need that committee to reconvene as soon as Parliament resumes.

[cakadu]

Follower or not, rsomer, XL is still reaping the profits too. Does that make them any less a pirate than the other 2?

You're quite correct on the hay aspect, no one farmer could do it, but plenty of them could have and they chose not to because the money was there and they were benefitting from it.

We gave the packers that power and didn't think too much about it until 14 months ago. It isn't the killing capacity that is hurting us the most, it is the lack of markets for the beef to go to. We could ramp up the killing capacity tomorrow and with no where for that beef to go, what does it matter? We seem to be looking at one side of the equation and not the other. Our reliance, and continued hopefulness for a resumption of U.S. trade pre-BSE, on one market is what is hurting us.

[grassfarmer]

Cakadu, that is an interesting last paragraph. You take the opposite line to the ABP who state that killing capacity is the problem, not finding markets for our beef. I think we do need the killing capacity but we also need the new markets. BIG-C is highlighting exactly this course of action - get into new markets and reduce the reliance on the US market. Obviously adding killing capacity to the three pirate corporations isn't going to help - only building independant killing plants is. If government at any level could find a backbone we might hope for legislation to control these transnational corporations antics which may not be illegal under current law but they certainly are unethical, immoral and unfair.

[BFW]

People, itis nice to theorize that we need to develop markets for our products other than the US and if we can all our problems will go away. I agree that we place ourselves in a precarious position by our almost total reliance on the US to take our beef but the simple fact is that product will flow to where it brings the most money and that just happens to be the US. I don't think any rational businessman would take less for his product as long as there is another good customer willing to pay more.

[BFW]

Blackjack, it sounds like you think that that everything can be boiled down to big vs. small, corporate farm vs. family farm, north vs. south etc. Is that true. As for the big guys wanting the "small indepent backgrounder" gone, why would they? You keep cattle in the country (future feeder supply) at a price far cheaper than they want to do it for themselves anyway.

[BFW]

I guess we have two options. We could cut back on numbers,and deal with all of the ramifications that would bring in Canadian Agriculture, or face the reality of being a resource filled country, and try to deal with those resources ourselves, rather than let the American run, multinationals run it for us. It is far too late for the petrochemical industry, and besides, the mutinationals pay the Canadian pawns well enough that there is little need to complain (for now).

This beef industry stuff has not gone too far yet. I think there is potential both domestically and offshore, for Canadian owned companies to take back some of the multinational control. There will always be issues of size and numbers, and even issues of control. Hell the guy with 200 cows will have more confidence, and clout in the Auction Barn compared to the guy with 40 head.
This has gone far beyond size. This is about ethics, and responsibility. There are always options for individuals and companys, and in this case, Cargil and Tyson have taken the noncivil option of taking advantage of a devastating situation.
I don't really care what anybody on this site, or anyone in the industry does when time has settled this mess. But I will never forget the treatment these companies have administered to the suffering masses, and will always search for options in marketing for the rest of my career.

They only did what any other business would have done. Any business that does something like that to me once, does not get another chance. And that folks, is the nicest way this fellow can put it.

[grassfarmer]

BFW, I don't happen to agree that the US is or was the best paying market. Perhaps we were complacent at looking to new markets - the ABP certainly seems to be as they contend that there are no better paying markets in the world or they would already know about them. Well despite their flying around the world wining and dining at our expense other markets do exist. A case in point would be the Korean market for well fattened exotic cows developed by a woman from the Innisfail area. Her story has been read at some of the BIG-C meetings and I think a lot more should be made of this story. She basically spoke to potential customers and asked what they wanted and then provided it - simple good business. The Pacific rim countries are developing so fast there are millions of people who will be able to afford beef shortly and we should be looking to that market.

[rsomer]

Cakadu: Thousands of farmers buying and selling hay make a market. Two packers in collusion, acting as one in a captive market is a monopoly.

We are hanging onto the hope that the border will open because that is the surest way to regain much needed competition.

If this was the U.S. the executives of these two plants would be in jail by now. Normal business practice, I think not.

[cakadu]

Help me to understand how opening the border will increase competition when this packer monopoly that you speak of is the only game in town? If I'm not mistaken, wasn't it the industry organizations that moved the industry into the system that was there pre-BSE? In some respects, blaming the packers seems a bit false when the entire system was geared towards using those 2 packers only. Where were the calls for more packers pre-BSE?

Are there really no other markets out there that are worth pursuing? Is the stumbling block one of having to give the customer what they want and up until now we've not really wanted to do that - just sell live cattle across the border because it's the easiest? It's also the way that the producer has lost the value in their products and left them ripe for the picking.

Seems to me that the net has to be cast a little wider if one is looking to allocate blame for the woes that are upon us right now. That same net should also be cast a lot wider when looking for solutions so that we are never put into this kind of a situation again.

[cowman]

Now excuse me if I am wrong but I thought we were really doing everything we could to expand our overseas markets, before BSE? Weren't we spending a lot of checkoff dollars(and taxpayers dollars) on beef export promotion. Seemed like everytime the ABP spoke up it was about Ted Haneys efforts to expand our markets?
And according to Haney we were making some progress? Were we getting good value for the money we spent?
How is it with all that promotion we still had only a miniscule part of the lucrative Japanese market while the US apparently still had the lions share?
I sometimes suspect "international trade" works more like the Mafia than real business? You might have a superior product, at a cheaper price, but the customer buys from the Mafia guy because he doesn't want to get beat up in a back alley!