Limits on Packer Owned Cattle

[cakadu]

One of the things that I have heard a lot about over the past year is limits being placed on packer owned cattle. It is understandable that producers especially would want to see limits imposed given that there is this consolidation of packers at the moment.

With good management and some luck, we will hopefully see producer owned packing plants up and running in the short to medium term that will help to at least provide some competition for the fats that are ready to go to market.

One consideration that I hadn't given much thought to until today when I heard it on Agri-Talk, was if limits are placed on the number of cattle that packers can own at any one time, this will have potentially serious implications for producer owned plants. The reason given was that 100% of the cattle would be owned by the producer/packers. The way many of these plants are being proposed is that buying shares gives you access to hook space and the right to have your cattle slaughtered at that particular plant.

Is this a case of being careful what you wish for? I'm curious to hear what some of the rest of you think.

[BFW]

Cakadu: In my opinion packers feed cattle for the following reasons (no particular order of importance):

1. To ensure they have an adequate supply of cattle that will reliably yield a specific product that they have forward sold to a customer.

2. They feel that they have an opportunity to make money feeding the cattle.(lol)

3. Similar to #1 they may foresee a time when they feel there may too few cattle available on the cash market to run the plant efficiently so they own them to fill anticipated gaps in production.

4. By feeding cattle of their own they are able at certain times to exert downward pressure on the price of slaughter cattle offerd in the cash market by slaughtering their own cattle and not bidding as aggressively for others. Obviously this is the the reason that generates the the calls to limit the number of cattle that packers can own.

As for being careful what you wish for, I think that is good advice in this circumstance however I do not think that "producer owned plants" killing their shareholders cattle can be contrued as the same thing. Just because a seller of slaughter cattle owns a share of a packing plant does not mean that "the plant" has control over the marketing of those cattle. These producer owned plants will never have the ability to exert market power over the production sector as currently exists today.

[Willowcreek]

Packers owned cattle in feedlots for years so they could ship them south when the price got too high in the US. Couldn't own as many down here because of openly violating the Packers and Stockyards Act. They have done it backdoor though, using their American owned fats combined with their Canadian owned fats (that don't count in US statistics). Get some regulations put in place or you will forever sell $50 fats and they( Big-multinational-packers)will be selling $150 boxed beef.

[rusty1]

The excuse that packers need to own cattle to ensure supply is and has been a torch that CCA and ABP and CanFax have also purported. What a crock.
In "Free Market" - "Free Enterprise" all it takes is dollars to ensure supply.
Packer ownership of their own cattle has only one purpose and that is to manipulate the market place for their profit and to "bring the beef industry to it's knees".
As for producer owned being in the same issue can not be compared. The maximum number of shackel space any one individual might own will not come close to a significant number to control anything.

[blackjack]

...why are the cattle associations not after the feds or our provincial governments to change regulations against the packer owned cattle ... this would benefit the cow- calf a heck a lot more than these wishy washy programs they have come with up to this point...

[blackjack]

The key will be careful wording of what is considered "Packer Owned." It became extremely obvious that the mutinationals have "more alias's than Jonh Dilinger", as Cam Ostercamp says, after the list of government subsidy payments was made public. Lakeside Farms received about 24 million while Cargil received around 9 million. A whole bunch of unnamed numbered companies received a whole bunch more.
These guys have this thing figured, and are not about to relinquish it easily.
Just as with the fact that they are profiting legaly off the backs of producers in there darkest hour, packer ownership is also legal.
Therfore we have to look past emotion and realise that blame is unfounded, but policy change at the govenment levels is.
If the packers cry foul, what are they going to do. With record profits like those they are making, are they going to sell out, or back down on production-------- I don't think so?
Now is the time to pose these questions about packer ownership, as the pendulum of profit could swing at any time.

[cakadu]

I have no illusions that the packers owning cattle has created challenges to the cattle supply system.

Randy is correct in that the speaker yesterday did mention that the big packers have found ways around it. Randy is also correct in stating that the issue needs to be addressed when forming these packing plants AND if and when changes to current legislation and regulations are made to ensure that the new plants don't get caught up in something they don't want to be in. A little foresight and planning will go a very long way.

I actually have two questions: 1. How were the packers allowed to own cattle in the first place?

2. The packers have to have their cattle someplace i.e. in a feedlot - so couldn't the feedlot owners see that by custom feeding these animals they were actually creating their own competition and potentially created serious ramifications for themselves and the cow/calf producers?

This cattle business is so much more than what first meets the eye. No wonder the general public has no idea of what transpires.

[BFW]

cAKADU, Lakeside owns the largest one time capacity facility in Canada, about 75000 head. In the US, Cargill owns several facilities under the name of Caprock, not sure of the total capacity but are among the largest feedrs in the US. Also if you are custom feeder packers are an attactive customer in that they feed large numbers and pay their feed bills on time.