restructure our industry

[kpb]

I believe it is time for cattlemen and women in this country to question why our industry rep groups and federal government are working so hard and spending so much money to create more foreign markets. The reason that we are in the huge over-supply problem that currently exists is because we export so much beef. The best that can happen out of all their efforts is to create more export markets, hence leaving us even more dependent on foreign governments, foreign consumers, currency exchange rates and a variety of other factors, all of which can change at a moment's notice and leave us in another disaster. That's the best that can happen. If they are unsuccessful, then they are simply prolonging the current agony and spending lots of money. All of this also applies to the U.S. market. Do we really want the border to open so that we can prolong our vulnerability forever?
I have a different idea. Instead of focusing on foreign markets, how about looking at our domestic market and creating a supply side that just services that market. After all, we know that our domestic market is secure, the consumers like us here and we like them too. There's no worry about a change in a foreign government wrecking our markets and exchange fluctuations are minor irritations. If we focus on our own market only, we will have a secure place to sell our meat for a long time to come. Now cakadu has raised the point that this will mean a reduction in our herd. I agree. We can argue about numbers but I would say our herd will have to decline by about half in order to have a proper balance between supply and demand in Canada. There is a proper and right way to do this--consider if our checkoff money, instead of being used to pursue foreign markets, was used in a rational way to encourage older ranchers to leave the industry, something a lot of them would like to do. And the government, instead of giving us hand-outs every six months for the forseeable future, would step in to reduce the herd and help ranchers leave the industry. Once the herd has been reduced by half then it should be capped. Younger ranchers would be able to expand their operations by buying the cap from the older ranchers who want to leave. A lot of you aren't going to like this idea, I'm well aware of that, but think about where we are right now. We have a huge over-supply in our industry, no markets for our beef to speak of and a promise of a bigger over-supply every year. Even if we are able to get new markets to take all this excess, which is highly unlikely, those markets will be unreliable, political and unpredictable. As well, a couple of multi-national packing houses, again owned outside Canada, control our packing industry. If we continue the way we are now, we are
ALL going to suffer for a long, long time. I'm saying we should focus only on our domestic market, reduce our over-supply by reducing the source of the over-supply (the cow herd), take control of our packing industry by owning directly the packing plants, cap the domestic herd to guarantee a decent calf price to the cow-calf producer and be able to have a secure future in ranching. I know of no other answer in any business to a problem of over-supply than an inventory writedown (herd cull) a restructuring to focus on new goals (domestic market) and proper, staged, early retirements or lay-offs. We can talk and talk about niche markets, specialty items, open U.S. border, China taking our meat and every other thing under the sun but the fact is that as long as we export so much of our production we are at huge, huge, risk at any time. We need to talk, like any other business, about how we secure our futures and the foreign export market is not the road to this end.

[rusty1]

not a bad idea it's just that -
1. Our Canadian consumer won't pay what our quality merit based product is worth in foreigh markets.
2. Exporting National products is what makes the world go around. We have something that the rest of the world wants. The best beef grown in the most efficient manner. (I didn't say cheapest or lowest cost way)

[grassfarmer]

The whole idea of "global trade" in farm products needs to be looked at as I feel it is the root of many of our problems. When this global trade is the moving around of large amounts of food from continent to continent lining the pockets of multi-national corporations. Canadian sheep producers can't make a living selling lamb because imports from NZ or Australia are undercutting them. Canadian shepherds are poor but so are the kiwis. We are all being fleeced as primary producers, as are the consumers. One country that seems to value agriculture is France. In France there are strong co-ops, regionally branded products and imports are very restricted. Food is expensive there but the people value the quality and the fact it is locally produced - and their rural communities are still strong. The German government decreed last fall that they would no longer pursue global trade in ag products as policy. They realise the value of the French system, unfortunately many other countries don't.
So I suppose you could say I agree that we should be prepared to cut back and supply our domestic market - on a personnal basis we are doing that by starting to direct market grass fed beef this year - creating a niche market for people wanting a perceived superior product. But on behalf of anyone who wants to stick with what they are doing - selling commodity beef to feedlots/the US or anyone else we still need to fight to get a fair deal - what has happened since the BSE case here has been most unfair.

[InAHurry]

Downsizing by 50 %?
I really can't see how this will work for everyone.
Our land base, equipment etc... was purchased at pre-BSE prices. So downsize that also? To whom? Grazing (marginal land) is for cattle, won't grow a crop (and I don't think we can handle further crop production either). So the next guy does the same thing you've been doing all along ...
If we are to downsize / decrease are imputs going to decrease in price comparably.
You also mentioned those that want to retire could cap off the young person. We just shift a program under another owner's name.
Unless you roll back the entire country's economy I really can't see where this would work. You'd make the enviromentalist (radicals)happy .. they could end up with one helluva big nature conservatory.
This is not meant to come across angrily. In our area you either raise beef or crops there are no alternatives. Semi-arid does not allow many means to disversify.

[kpb]

INAHURRY, thanks for replying to my thread. I think some of your points are good, particularly related to excess land capacity, machinery, etc. but I also think these matters can be worked out through transition from one rancher to another and through an early retirement government program.
But, in my mind, you did not address the real fundamental issue, which is how do we make our business profitable in the long term when we are producing roughly twice as much beef as we need to?
Rusty 1 replied to my thread that the world wants our beef but the bald fact is that the world does not want our beef right now and does not need our beef either. The sooner we accept that fact, and not simply fall back on the old thought that we produce the best beef in the world, the better off we'll be.
Grassfarmer brought up France which protects its farmers with strict importation rules and strong co-ops and, guess what, the French rural economy thrives, rural communites flourish and farmers can plan and make decent livings. This is an excellent example of what I'm proposing (thanks grassfarmer)
If we finally accept that we are producing twice as much beef as we can sell then what do we do? There are only 2 choices--cut back production or increase demand, that's Economics 101. Now we may not like it but unless you want government bailouts from now to forever those are the only 2 solutions.
The first is what I addressed in the original post. The second is what our leaders are trying to do. They have had virtually no success because the world does not want our beef. Other countries have already filled most of our lost export markets and other countries do not care about our cows. We have to get that through our heads--the U.S. and other countries do not care about our industry or our pain, they only care about themselves. If you don't believe me look at the posts on any U.S. ag-related site.
If we continue on our current path, we will continue to produce twice as much beef as we need to and prices will continue to go down until equilibrium is reached and half of us have either gone under or left the industry. I don't care how much we have invested in our operations and neither does the marketplace--if we are producing more of anything than is needed the price will fall until less product is produced.
One way or another this will happen---I just want us to plan for it and lessen the pain for everyone and end up with something better at the end.

[cswilson]

Geez if things are so rosy in France how come you see the farmers rioting in the streets every so often-the BSE crisis is for sure a bump in the road but industry contraction and supply management is far worse in my opinion-read Charlie Gracey's article in the last Cattleman it's pretty thought provoking-if you wanted to contract the industry you could cut out some of the tax writeoff's that 'sundowner's' enjoy. There is a huge percentage of cattle raised in this country by people who don't care about cost-of-production because they just have cows to save on taxes. In my way of thinking getting a huge tax refund isn't much to be proud of.

[cswilson]

We have talked a fair bit about time on these threads. We all might agree that the time it takes for Multinational packers to go down is beyond our liftimes, but how about the time it will take our own government to recognize the need to protect the cattle industry while it downsizes.
Somebody mentioned the proverbial obedient 52 state on another post. Look what happened when Jean e boy, took one small step away from America's will. I don't really think I will live to see the day when Canada steps out again and proclaims much of a new idea.
I like your idea of more smaller farms and less "more is better" attitude.

How much do you think we could pull this thing back by eliminating growth implants?

There is merit to this concept of sustainabilty, but a happy medium would be desirable.

Ever look at the Green Party Platform kpb?

[kpb]

rp kaiser, My wife voted green in the last election but I, being an old time capitalist and rancher, couldn't bring myself to do it. Once again, your advice is well taken. I agree with you that the issue is sustainability of the industry and that is why I made my first post. We need to do things to prevent the erosion of our industry and I think at least some of what I suggested will do that. I recognize that supply management is a dirty concept among ranchers but since I brought it up there's been a fair number of posts and I've yet to see a viable, specific alternative as a way to protect our long-term existence. I know for sure that scrambling after foreign markets is not the answer.
By the way I understand you are running as a delegate. Best of luck and since I'm in your zone I'll surely get out to vote for you if I can figure out from the annual report where I go to cast a vote.

[cswilson]

'young rancher's would be able to expand by buying the cap' is this the same concept as young farmers buying land from older ones we all know how great that is working now don't we. Supply management in beef cattle will bring us all the woes that are befalling the dairy and poultry business. To start with I assume this scheme would be administrated by the feds who happen to have most of their seats in Ontario and Quebec so I can guess where most of this quota would be allocated-another thing if you agree to a quota system you are obligated to fill it-no matter if there is drought etc. Supply management is an idealistic pipedream solution to our crisis and would cripple our industry more than BSE ever has-there are guys surviving off their equity now but it's equity they made under the 'FREE ENTERPRISE' system not under some government controlled fiasco.

[kpb]

Three questions:

1. How many dairy or poultry guys have ever been forced to live "off their equity" like you are saying the beef guys currently are?

2. As I asked before, how many dairy or poultry guys work off the farm to support their enterprise?

3. Do you seriously think that "living off their equity" is a good way to run any business?

In regards to quota allocation, it will be given where the business is currently--i.e. in Alberta, Sask and wherever else there are beef enterprises. I note that you do not trust our own government to do this. Instead, I guess, you trust the foreign packers and governments to treat us fairly--they've got such a terrific track record in this. And in regards to quota transfer--what's the big deal? Land, machinery and farms are transferred every day.

[cswilson]

WellIdo know a guy with 450,000 broilers who got into cows because the chicken business is heading south-I do know a big dairyman who won't buy any more quota because he knows it is on the way out. Living off equity isn't way to run a business but all businesses do it at times to get through tough times. Heck why not get the government to start huge beef collectives and we can all work for union wages-ohh they tried that in RUSSIA!!!!!!

[kpb]

I wondered how long it would take for the old commie card to be played. Typically when someone's arguments are weak they'll resort to name-calling or stereotyping. From your train of thought I gather that you think anyone who is involved in dairy or poultry in Canada is a communist?
I'd like to try to discuss this on the merits of the argument, not resort to name calling. On your suggestion I re-read Charlie Gracey's article. Some of it--relating to the acceptance of supplementary quotas allowed by Canada--I agree with. We should never let this excess beef in, as Charlie states. On an ongoing basis he does not address our almost complete reliance on one foreign market, which is really the crux of the whole argument. As long as we have such an extreme reliance, we are vulnerable. It is also interesting to note that Charlie himself says that if the border does not open by the end of 2005 he has given bad advice. I don't think you're going to see it open by the end of next year.
I would ask you to give me the courtesy of reviewing Stan Harder's article in the last issue of the Alberta Express. Stan has a pretty insightful view of our industry and presents some very interesting points. I would like to see your comments after you read it.
Finally, I built my ranch up from the very beginning, I inherited nothing--no land, no machines, no cows and built it to, at one time, a 440 cow herd. I don't need a lesson in capitalism or free enterprise. If we actually enjoyed free enterprise in our business instead of being controlled by huge corporate or national interests, we wouldn't be having a discussion about how to help our industry. You can't have free enterprise if only one part of the economic chain wants it--in that case we are simply played for suckers.

[cswilson]

Ohhh I just saw how the buying and selling of quota has pretty much eliminated young people from entering supply managed business. If you don't like the Russian analogy so be it-if it looks like a skunk and smells like a skunk it's probably a skunk. Read Charlie Gracey's artivcle it gives a pretty clear view of how supply mahagement would play out.

[jensend]

kpb - i agree with you that the industry is dominated by the foreign-owned packers and they essentially are trying to take a return off our investment; nice if you cna do it. where your argument for supply management seems weak to me is that by reducing the size of the cowherd you are shrinking your economy and that is a hard thing to reverse because infrastructure disappears over time. as well, our supply managed sectors would like to export and grow their industries because they see the benefits to the economies of scale.

[kpb]

I don't have much to discuss with cswilson since he has never addressed any of the specific issues we're facing. I did re-read Gracey, as I said in the previous post, and agree with some of what he said.
jensend, I totally agree with you, infrastructure would be overbuilt if the herd were to shrink. But consider, if we do nothing and the border does not open, our herd will have to shrink anyways over time as ranchers go under and then we'll be doing it in a disorganized way.
Yes, our ranching economy will likely continue to shrink, but when you refer to infrastructure I assume you also mean the packing industry will shrink which I think will be a good thing if producers are able to own the packing industry that is left. I believe this is possible in the scenario I have proposed since the multi's won't want to stay to service the domestic market only. I'm afraid I think it is inevitable that the ranching infrastructure continue to shrink but I would like to see what is left as a viable industry.
jensend, I would like you to expand on what you said about the supply side enterprises in Canada--are they wanting to export because they feel it would enhance their profitability or because they want to be able to have more people in their industry? In my area the richest farmers are the dairy men so it's hard to see why they would want to change the quota system.