Where did it all begin?

[grassfarmer]

rsomer, When the Competition Bureau were mentioned a few months ago it was stated that the "smoking gun" they needed to find was a written agreement between the packers which would prove they were price fixing. Do you know if this is the case legally?
If this is true I doubt anything will be found as the packers are being charged with criminal price fixing activity not stupidity.

[BFW]

Rsomer, I would like to put forward the argument that practically all producers have access to the marketing system for all of their cattle with few exceptions by selling their cattle through the auction system or direct to feedlots who do have the ability to get cattle slaughtered. It is only those producers who have chosen to retain ownership through to slaughter when they normally would not have that are crying that they can't get a kill spot. Nothing like seeing "your own bull getting gored" to increase yor awareness level. Beside why shoulfd the so called "big feedlots" be punished for having developed closer relationships with a packing plant? Sounds like good business to me.

[bombay_43]

I have real problems agreeing with you BFW, when you state that there is a much larger supply of slaughter steers and heifers, than there is demand, and you believe that this is somehow to blame for our prices.

If this is true, then why is the price the consumers are paying for beef almost the same as it was prior to BSE? It would stand to reason, that an over supply, would cause an abundance of outrageously low prices, not just for the producer, but also for our consumers! I have not seen any .50/lb ground beef going over the counter. My 1500 pound cows that sold for 5.50 (five and a half) cents per pound, should easily be converted to a tidy profit for the packers, even at fifty cent a pound ground beef! That leaves 44.5 cents for packing!!

When prices in stores, drop low enough to reflect what the producers are actually getting, then I can buy into the supply and demand theory. Until then, the packers are just as guilty of unfair trade practices as Martha Stewart.

No other country in the world would allow what our Canadian government has allowed in the name of “Just good business!”

Incidentally, I marketed these cows, through the auction mart that I usually use. I am not choosing to piss the packers off in any way shape or form! If my cheap ground beef was passed on to the consumers, it would be a thank you for supporting the beef industry! The only ones getting a “Thank you” here is the packers! (and I didn’t even get kissed!)

[cakadu]

This is great discussion and I am learning a great deal. My intent for asking the questions is to allow for an understanding of where we've been in order to change where we are going. Unless you understand where you have been, you won't know where you're going.

We are doomed to repeat the past if we don't learn from history. What changes need to be made in order to take away the ability to price fix? Is it really price fixing?

The gist of what I'm hearing is that the packers couldn't have gotten into the position that they are in unless there was collusion along the way in order to allow it to happen. Now, that collusion could have been unwitting, but it was still there just the same. Where were the ABP and other organizations like the CCA that should have been protecting the best interests of the producers? Over the years have these organizations done what they think is right and in the absence of any indications to the contrary moved ahead along this path, to what we now realize has been to our complete detriment? Is it like BFW has referred to and there hasn't been enough of a will to stand up to whomever has needed standing up to?

The competition for cattle will arise when there are more markets for the cattle to go to. Our entire cattle production here makes up about 10% of what they need in the U.S., so how did we let ourselves become so reliant on just one market? And please don't tell me that the packers made it that way because the opportunity has been there over the years to find new markets, start new packers etc., etc., but for whatever reasons, we chose not to go too far beyond the border.

Where was all this uproar about price fixing prior to the border being closed or even 6 months ago? Has this price-fixing become an issue because the border is not yet open, we are facing our biggest calf crop ever hitting the markets this fall and we have a glut of cull cattle? It seems to me that over the years we were content to keep the status quo going because at least some money trickled it's way into our pockets.

Martha had insider information and that is what make her activities illegal. I don't think anyone told the packers May 19, 2003 that the border was going to slam shut May 20th and remain closed.

We have choices in front of us now, which ones are we going to make?

[BFW]

Bombay_43, as frustrated as we are by the current situation we must realize that the supply of live slaughter cattle and the demand for those same cattle by the packers, and the supply of beef and demand for beef by the consuming public are to different things. Live slaughter cattle and processed beef are to totally different commodities and the the problem for us as producers is that the relationship between them has grown greater because of lack of demand for live cattle at the packer level. I'm no economist and am as frustrated by the current situation as anyone, but those are the facts.

[cakadu]

Let's put the shoe on the other foot for a moment. A couple of years ago when record prices were being paid for fats, feeders etc., and the packers had to pay in order to get fats to slaughter, did feedlots and/or producers say that the price was too high and offer to drop the price or did they take what the market would bear? Were the packers considered held captive by a marketplace that demanded high prices?

How is it different now that the market will bear a far lower price being paid? I haven't heard the price for fats for a week or two - what is it at now?

Is there more of a problem with the fact that there is no where for the cull cattle to go? How much of a portion of the trade in live cattle was cull animals?

The price at the retail level isn't dropping because it doesn't have to -- as BFW has pointed out the demand for beef is still there. Remember the pork guys and the 17 cent pigs? We didn't see the price of pork come down one iota and the reason given by the retailers is that consumers would not want the price to go down and then "skyrocket" back up when things got back to normal. In the current situation, consumers have felt that by keeping up the demand they were helping the producer - it is only now that they are beginning to find out that it isn't the case.

I haven't heard anything to the effect that the price of beef to retailers and foodservice has increased - have any of you? (Incidentally, in a true functioning value-chain, these are things that would be known to all parties involved.)

Don't get me wrong - I don't like at all what is happening out there and the rough ride that the producers are being taken on. I don't think that the solution is to get the border open, as that alone won't fix or change some of what caused all these problems in the first place. Sometimes taking a look at the problem in it's entirety and not necessarily apportioning blame to any one or anything, but recognizing where the mistakes were made can go a long way in helping to rectify those mistakes. We can then use the information to hopefully never make the mistakes again.

Movements such as those proposed by BIG C may not have all the answers, but they are at least looking at finding solutions.

[stettlerab]

Cakadu As has been mentioned above. An example of a real market in Alberta is the hay market where there is a large number of sellers and buyers.

This situation with the packers is not the same. There are two large packers owned by foreign companies that have a lot of political influence in the country that has shut our live cattle out. You can be sure that these packers are not only not anxious to see the border open, but are using their large influence in the US to make sure the border stays closed.

This is only speculation, but if a number of small community owned packing plants opened up and offered competition, these American plants would use the huge resources that they have behind them to close the local plants down. The larger packers play a role in this. I cannot see them refusing to ship to an American packer if the price was 2 cents higher.
While you can say that these are natural market forces at work, a free market really does thrive the best when healthy controls are in place.

It would be nice to find a letter from
IPB to Cargill that stated they should get together and set the price. That letter likely does not exist.

The scenario here is more like an uncontrolled monopoly, than a free marketplace. While I never considered myself a liberal, I would have to say that government intervention and control will need to be established, or we could well find ourselves in this situation again. I wonder how long it will take the feedlot owner and cow calf operator to forget what happened once the border opens and some degree of competition remains.

I am sure that there are quite a number of people out there that would like to see the wheat board disappear and we could sell to cargill. The cattle situation at present is just the same as we would be facing without a wheat board.

[grassfarmer]

Cakadu, According to Alberta Ag reports Alberta fat cattle prices were @67 cents /lb last week - Nebraska prices were @ $1.08/lb CDN. On a 1300lb animal that translates to $1404 for the US animal compared to $871 for it's canuck cousin - that is a whopping $533 EXTRA for the packers to play with! No wonder Lakeside is said to have made more money than ten US Tyson plants this year. This is a scandal of epic proportions - yet ABP tell us we are still selling cattle at "acceptable prices".

[rsomer]

Cakadu: Perhaps we need to define "collusion" See: http://wps.prenhall.com/ca_ph_ebert_busess_3/0,6518,224378-,00.html

collusion
An illegal agreement among companies in an industry to "fix’’ prices for their products.

BFW: Re lack of demand at the packer level. Demand is a product of quantity and price. The packers are artificially fixing the price they pay producers therefore the demand at the packer level is contrived. The price of live cattle should be determined by a derived demand that is based on the consumer demand for beef products but that is not the case. Instead the price for live cattle is being fixed.

Commodity prices rise and fall in a functioning market, that is a normal market reality. We are dealing with a non functioning market with a monopoly cartel and a captive market for live cattle. One has only to look at the huge packer profits to realize that this is not a "normal" market situation. Comparisons with normal market fluctuations are not appropriate.

The facts clearly indicate the packers are fixing the price they pay producers for live cattle.

[rsomer]

Cakadu: Sorry I missed your comment on transparency in the value chain. The price retailers pay the packers for beef cuts is known throughout the industry. See the Boxed Beef Report. http://www.canfax.ca/
Click on Boxed Beef Report.