Where did it all begin?

[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.

[cakadu]

Okay, if collusion is too strong a word, how about some culpability in the way things have come about? The packers were in no way able to set themselves up this way on their own - wouldn't they have had to have some help in this? Whether it be from incentives to locate here, organizations and individuals believing - rightly or wrongly - that this was a good thing for us to be doing.

Yes, it probably looked really good to have such a big market for our cattle, beef, culls etc. right next door for all the right reasons - they were willing to pay at least somewhat decent prices, we didn't have to work too hard at filling demands because there was sufficient demand for live animals, didn't have to look for new markets because they were a ready market and a whole host of other reasons.

What about the downside that is now smacking us upside the head? There is a big market there, but look what happens when that market doesn't want to play ball. We are faced with a huge risk right now because the border is unlikely to open before November 5th (the day after the election), if it is going to open at all. We don't have any new markets to ship to because we put all of our proverbial eggs into one basket, the basket got dropped and there is yolk running all over now.

We seemingly didn't see a need for any more packing capacity because things were working - in who's favor I'm not so sure any more because of all of this talk of price fixing and gouging by American companies.

Now we are beginning to see that we do need packing capacity on this side of the border, which will do so much more for us than just get rid of cull animals. Most importantly it will allow Canadian producers to hopefully capture more of the value that they have in the products they are producing. It will also hopefully help us to get more markets because we should not go back to having just one major market.

If nothing else, it has gotten us thinking about alternatives and that isn't a bad thing - in fact, it can only help us in the long run.

[ALICIA]

Price fixing begain back in the 1860 with the cattle drives. You must of heard of the big cattle drives in the States. Because of price fixing they uses to drive the cattle to the big rail way lines. Price fixing is want got Billy the Kid on the road to fame and least thats wait got him started in the first place, the big cattle barren, price fixing, so the little guy doesn't get anything for his cattle, so he had to start up cattle drive, from Texas up the panhandal to the railway yards in Montana and St. Louis. Its always been around and I'm sure it always will be. As long as their are cattle going to market.
Even John Wayne made moves about the big cattle drives and as early as 1980 a move Called Young Guns came to the moves. The Santa Fay trail, etc. Get the picture.