Industry Consultation on Livestock Marketing and Brand Inspection Laws

[cowman]

Again, cowman your wisdom shines through ! I am sure that the city of Lethbridge realizes the opportunity for spin offs to their economy if the plant goes ahead.

[farmers_son]

As there is government money available for anyone starting a new packing plant, I would imagine the entrepreneur in Lethbridge is milking the taxpayer too.

Having given the matter some thought I do not believe more packer capacity is the answer at all. More packer capacity is needed, that is for sure, but it is not the answer. What the producers needed throughout this crisis and in the years to come is an alternative market for their cattle. That alternative market is not the live cattle market with just another packer to phone. Cargill and Tyson will continue to be the price leaders in the Alberta live cattle market no matter how many new packing plants are constructed and no matter who is the company behind them, small player or Swifts or some other major player.

What producers need is an alternative to the live cattle market and that alternative is the wholesale beef market, boxed and value added. That is how we add competition to our industry by creating the option of selling into a different market, not by simply having more places to sell into a live market. That is the purpose of producers building their own packing plant, to create the opportunity to sell their product based on the more stable and market driven wholesale price of beef, allowing them to capture the real value of their product while adding value at the same time.

Grassfarmer’s visit to the Legislature highlighted for us a grim reality in the beef business. Even government is powerless to do anything to fix the live cattle market. Limit the major packers ownership of live cattle to 10%? Can’t do it. Why can’t the government do it, because the packers have such control that all they have to do is reduce the kill for a couple of weeks and lower the price of fats and the feedlots are on their knees and the government will have to come out with another ad hoc program. We have to realize the live price of cattle in this country and I suggest the U.S. as well will continue to be manipulated and fixed by Tyson and Cargill and the price leaders in the live cattle market. The answer is to create an alternative market for cattle, the wholesale boxed beef market, not to try to try and somehow fix the live cattle market. It is beyond repair.

Can we do it? We have to do it. We really do not have a choice. Even if the border were to open we all have seen that it can close again. Is it going to be easy? No, but necessity is the mother of invention and producers are a resourceful lot. Wishing and hoping that the live cattle market is going to give us a fair return and reflect the actual value of our beef product if we only have more places to offer us a live fat price is unrealistic. We need a market outlet that lets us participate in the boxed beef, value added market, and that place is a producer owned packing plant.

We need an alternative market for our production so we can finally get a fair return.

[gwf]

Farmers_Son: Your assessment of what has to be done is very much in line with the proposal that has been promoted by the Beef Initiative Group. I firmly believe that this approach is the only one that will have any meaningful change to the stability of the Livestock Industry, but I will be very surprised if it ever becomes a reality in Alberta. Saskatchewan and Manitoba producers are more likely to accept the concept. If we continue to rely on governments to provide solutions, I think we will be waiting a long time. The Alberta government through their “Industry”, the ABP, sees the solution as the planned increase through expansion of slaughter capacity by the US based (foreign owned plants). If producers see this as the salvation, then we just have to wait, and our problems will be solved. On the other hand, if we do nothing, we will just have more of what we have had on the past, subject to the border staying open at prices set in the US, and no hope of capitalizing on the opportunities that may exist in other markets.

I heard recently that there are over a thousand slaughter proposals on the table across the nation. If they are all dependent on governments to some degree the government has a very difficult task in deciding which ones are viable and which ones to support. It may be fair to say that 99% of them are not feasible and will not survive. So the next time we say that the government is not doing enough, think seriously, what you think they can or should do? Should governments provide financial support to all proposals?

[gwf]

my understanding is that there are in excess of 250 proposals for plants in Alberta alone.

[cakadu]

GWF, the absolute last thing we need is the government trying to pick yet another "winner".

I couldn't agree more with the assessment that we need alternative markets and I do believe that BIG C, rp, and rusty among others have mentioned on numerous occasions that this is what they are trying to accomplish.

We cannot and should not be continuing to rely on a market that takes 80% of our product, no matter what that might be. The way we have done things in the past has not really worked for us, so the time is right to change.

For a very long time now some folks have been referring to farming as a business and that being the case, the business has to do what it can to stay viable; in other words, change.

Are we ready to do as WD suggests and move out of the box?

[kpb]

wd, believe me I didn't create my operation by wallowing but, rather, by being realistic. And I've yet to hear just what your great idea is to take back control of our industry. If you're just proposing yet another of the 250 or so plants on the drawing boards for Alberta, than you're just a dreamer along with all these other guys who can't raise money for their dreams.
The only way to gain control of the industry is through government intervention--they're the only ones big enough to take on the multi's and make a meaningful change. That's what they've finally realized in the U.S. and that's what we need to see here too.
I still haven't heard why anyone thinks why any local plants that eventually do get going will be able to compete with the mutli's except for niche markets. Is that what we're aiming for--little niche markets in our own country and leave the big stuff to the big boys? WD, unless you've got some realistic business proposals instead of wool-gathering about "ending empires" and "fighting with my last breath" I suggest YOU shut up.

[grassfarmer]

Do I smell another corporate conspiricy? According to wd40 ConAgra sold out to Smithfield who are fighting with Swifts to gain the upper hand in the US. Which one of these was ivbinconned hinting were going to build a plant in Southern Alberta? I note that Doug Horner's credentials include a 3 year period working for ConAgra in Nebraska ... do you think he hates Transnational Corporations control over the beef market?
As far as the slaughter plant debate goes, there is lots of talk about an issue that is really two issues. The slaughter and processing of young cattle and the slaughter and processing of OTM cattle. Once a country has the stigma of BSE these cattle will have to be killed in seperate plants for a period of 10 years I would think. Personally I think the battle to build plants for young cattle is largely over - a few smaller plants will enter the scene catering to specific markets - higher quality, hormone free etc. I will continue to fight for political action on packer control of cattle but the border will open to these cattle before the new plants are up and running. OTM cattle are a different issue and I think that should be our priority, these cattle will not go to the US live or in box form for several years so we do have time to get plants built that will capture the returns for cows and keep them in Canada. I think there is room for both large and small plants in this field - I would like to see BIG-C get their plant built but this levy issue is a stumbling block unless we can convince ABP and Government that this is what the producers want - the Alberta Beef magazine reader survey showed that 97.33% of respondents backed a levy funded, producer owned plant. The future is in our hands on this one, we need to get producers to awake from their slumbers, their butts in gear and make enough noise that we get this plant built. Will it happen or will they all sit around and bitch about being hard up for another year?

[grassfarmer]

excellent comments grassfarmer. I do think that some producers that would like to become involved as shareholders just don't have the cash to do so, however, my neighbour who is continually crying about the lack of money, and wants to start subdividing off parts of the farm to generate cash but are leaving in two weeks for an Arizona vacation. SO. I guess as usual it is priorities isn't it ??

[ivbinconned]

I would never fault any man or neighbor for taking a holiday!!

And I would never fault any "David" for his willingness to take on "Goliath"

I will always applaud any mans efforts no matter how large the challenge.

...................................

“All experience hath shown that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which the are accustomed”
Thomas Jefferson

[rusty1]

What do you want out of the beef industry? If you would make it you’re the following could be possible. Look out of the box, think out of the box and get out of the box!

The following testimonies are from producers that put their pants on the same way as you do. Have you got the ambition to phone them and ask them how they did it. I'll provide you with their phone number if you like - better yet check out the web site i mentioned above, their numbers are there, and many more tesimonials. Better yet get in you van and take a drive and go see for yourself.

Downey Ranch, Inc.
Downey Ranch, Inc., (DRI) is a family operation specializing in producing high quality beef and assisting our seedstock customers in doing the same. Since becoming a founding stockholder of U.S. Premium Beef (USPB) in 1997, it has been our only marketing outlet for finished cattle. Our most recent set of calves owned with seedstock partner Kniebel Cattle Co., White City, KS, processed on March 12, 2002, weighed 1,301 lbs., graded 97.39% Choice and above, 52.70% Certified Angus Beef (CAB), and 19.68% Prime. They brought a $59.55 per head premium at a time when the Choice/Select spread was only $3.86.

Gardiner Angus Ranch
In the last three years (1999-2001) GAR customers have received an average of $77.61 more per head, in grid premiums and patronage dividends, by selling their cattle through USPB than they would have from selling them on the cash market. That is a total of $931376 received by our bull buyers using USPB shares owned by GAR.

Larson Angus Ranch
At Larson Angus Ranch (LAR) we are focused on providing the best in maternal and carcass traits available in the industry with an eye on producing high carcass quality cattle that are sound, fertile and functional. From our commercial herd in 2001 we shipped 130 head (85 steers and 45 heifers) to U.S. Premium Beef. The steers brought back premiums of $130.45 per head. They were 86 percent Choice or better, with 58 percent qualifying for Certified Angus Beef (CAB). The heifers brought back premiums of $108.67 per head. They were 91 percent Choice or better, with 58 percent qualifying for CAB. All cattle yielded better then the plant average.

Northwest Cattlemen’s Alliance has about completed our business plan. IF YOU HAVE ENOUGH WANT TO - the opportunity is here and we CAN take back our industry.

If we can find top quality calves we have all our beef sold.

[wd40]

kpb - there are several at least 2 cow kill plants in Alberta aiming at 250 head per day. The cost of entery is not hight, however taking pot shots from the side lines is pretty smug. There is currently around $300 margin per cow for these small plants with a closed border. That would payoff the plant in very short order and they remain off the radar of the big players who don't slaughter cows.

[rusty1]

Maybe I should re-iterate our project plan in Southern Alberta. We have nearly completed our business plan for a 2000 head per day plant for UTM's. It is focused, to bring a large buy in from alot of people with a low entery level fee. Our goal is to make this plant "OURS" meaning someone in Dauphin Manitoba or Prince George BC will feel as attached to it as anyone else. A regionally lable product will be recognized by Mrs. Consumer as "Oh thats the plant that our friends on the farm in Eyebrow Sk have shares in and sell their cattle to, I'll buy those roasts thanks."

And again if we can access the right cattle to match our marketing spec.s we have the meat all sold. A focused, committed, merrit based (value-based) supply chain can basically develope it's own environment and become a bit of an island to itself. (I'm being a little nieve here I know - just trying to paint the picture)

These big packers in Alberta are running at 110% capacity so they can't run us in the market. Plus their plants are out dated and very inefficient.

The plants in the North US are in trouble and very old, plus we have about a $50 to $70 dollar freight advantage over them.

We will become very public after the new year.

But I have a question, I know there are alot of old cows out there stareing you in the face evey day. We we get enough buy in fro cow calf producers we may well start the plant off with cow, till we get this wave of animals back in line. (I will add that we found a market for 50,000 head per year across the pond that Canada has neve particiaped in to any degree, and they don't like the Auzie beef). That being said, and Cowman I'm sure you can shed some light on my question. When a rancher looks at his Income Statment at the end of the year, is not approxiamtely 85% of the income from your calves and 15% from the culls.
So what's your priority?

[grassfarmer]

Rusty, not beating on your slaughter plant plans here but the US examples of cattle you show above making great returns - isn't that proof that selling on a quality grid system rewards good cattle rather than producer owned packing plants make producers more money per se?
As you say the existing big plants are running at 110% just now - but with your new plant up and running and the border open to live cattle will the big 2 still be happy for you to be killing 2000 head a day if they are short of cattle themselves?

[farmers_son]

Just a comment regarding the packers being short of cattle. There is a widespread notion that once the border opens the Canadian packers will be short of cattle. Or that somehow building more packer capacity will somehow short the market of cattle. Not so.

Once the border opens the big 2 Canadian packers will no longer have a captive market for those live calves and will have to bid up to keep them here. But they still have the cost of freighting those live calves south in their favour and they will competitive with the U.S. plants just like they were before. The big 2 will not be short of cattle, they will just have to pay the U.S. price minus the cost of freight.

Likewise once more packer capacity is built the Canadian market will not be short of calves. There is no limit to the number of calves that can be brought north across the border. The only limit on calves available in this market is the amount of silage we can grow and we have not come close to seeing that limit.

Our prices will be improved if the border opens because the Canadian packers will have to compete with their U.S. counterparts for the live fat calf, not because the market is short of cattle. The North American market will have lots of cattle to go around.

If you truly want to improve the returns for your production you need to find another way to market that production other than through the live cattle commodity market. The market for live cattle will never be short other than the extreme example we saw in the U.S. that occurred after our Canadian cattle were not allowed into the U.S. market. That was a very unusual situation, once in a lifetime.

[rusty1]

That's the point - both the packer marketing high quality cattle and the packer communicating their markeing needs to the producers and the producers responding with genetics and selections - allows both to win. That's called a "Win Win" situation.

We really need to think out of our boxes and exaamine situations that are working for others and learn what can be done, again "WE CAN IF WE HAVE ENOUGH WANT TO".