Industry Consultation on Livestock Marketing and Brand Inspection Laws

[cowman]

I doubt if there is room for another big player in the fat market in Canada? I suspect if Swifts comes in XL will have to go?
That could be a good thing however as they might consider moving XL Calgary into a cow slaughter plant?
Incidently Sunterra has a small plant in Innisfail Alberta and they are rapidly building on to it. The blurb in the local paper was they intend to kill cattle and further process them. I think it said around 300/day.
The plant in Salmon Arm is apparently killing cattle right now? In the end there were four major shareholders that got it going, as well as a few producer participants. Now I wonder who will make the profit?
I guess the point I'm trying to make is there are some cow plants coming on stream. Over capacity is not necessarily a good thing...especially if you are the packer! Quite frankly, there are going to be a lot of people lose their shirts on these plants? Which is okay...after all it is their shirt!
There was a reason why our packing industry, either died or went to the multi Nationals....the American packers are more efficient and have deeper pockets.
Now that isn't to say that niche market type packers can't make a go of it. But never get the idea in your head that you are going to run IBP/Cargill out of business, because it just ain't going to happen!

[farmers_son]

Based on Canada’s 2002 exports of live cattle to the U.S. of 1.7 million head and assuming a 200 day per year slaughter that works out to 8500 head per day more slaughter capacity needed in Canada just to process our 2002 production, not factoring in the subsequent increase in the size of the Canadian herd. There is presently 17,000 head per day slaughter capacity in this country. The 8500 head per day increase needed to eliminate live cattle exports represents 50% of our present slaughter capacity.

Yes we are not going to run the big 2 out of business. But our industry needs more packing capacity if we are going to reduce our dependency on shipping live cattle to the U.S. and that has to happen.

[JD4ME]

When you get your business plan in place I'd like to have a chance to look at it please. If I wasn't running a 4500 acre mixed farm with 200 cows pretty much by myself except for harvest help. I'd be talking to and emulating as much as possible Harris ranches in California. Or Creekstone beef. So if your business plan is looking along the lines of what they do I may be interested. I very much want to be involved "beyond" the farm gate and have started in other areas, the beef side has been a bit of a problem apart from breeding for the markets tastes and selling on the grid I have yet to get to the "next " level.
Thanks

[greybeard]

The basis of this thread is that small Canadian packers won’t be able to compete with the large multi-nationals. I think other sectors of the Canadian farm economy support don’t completely justify that theory.
In the grain handling business, the Canadian based outfits still have a major market share, despite some suicidal tendencies. Many smaller farmer-owned terminals are operating with good support here in Sask. Look at Weyburn as an example of shareholder loyalty. SWP had legendary support until they put in some VERY bad management who had a near phobia about competing with multi-nationals and started pissing money .
Small independent farm supply dealers control 30% of the market. Why is that? They don’t have any economies of scale in a commodity-based business. They also compete against Cargill and Con-Agra yet their market share is growing.
My point is, I think we underestimate farmers intelligence as a whole. They will chose that they want to deal with and make informed choices in doing so

[kpb]

wd, since you started this thread and, with your last reply, it seems that we've moved past telling each other to shut up, I'd like to say that I think anyone who invests in these new plants has my respect. But the fact is that I almost sank $100,000 into one that is not anywhere yet and I have done my due diligence and am not just standing on the sidelines criticizing.
As I have said before I hope these new plants will succeed and make a meaningful impact on our industry--not just niche markets which do not really interest me. My concern is that they will not be able to compete--time will tell but I think it would be a real shame to sink our hopes and money into something that fails---will make it that much harder in the future.
As I have said in another post, right now is the best opportunity that I have seen, ever, to make money in our industry. I suggested three weeks or so ago that producers with extra feed (just about everyone) buy 5 to 550 weight heifers, rough background them and sell them in the spring or grass them and sell them in the fall. At that time they were going for .85 to .87. They are now around a buck a pound but still, in my opinion, a way to make a real good buck. Think about it--if the border DOES NOT open they should go at 1,000 pounds next fall for .85 and you should net about $150 to $200 per head. That's your worst case scenario--but if the border opens you'll net at least double that. Put that over even just 500 head (say 1250 pounds of silage) and it's a nice pay day. And a producer can easily handle 800 to 1,000 of these feeders.
I don't think we'll ever have a better chance to make a lot of money and you can finance the whole shot through a feeder association. wd, I'd sure rather have my friends and neighbours investing in critters than in packing plants that may or may not happen.

[rusty1]

thanks for all the feed back -
cowman - firstly I would like to try one more time to help you realize that it isn't about "packer capacity", that IS NOT our motivation for our initiative. It's about getting paid for our product what it is worth, it's about becoming 'price makers', and if you don't want to take up your part and responsibility in the beef industry and it's future then like I said to kpb - SHUT UP. (I'm not a cheeky guy atoll) however the rest of the industry that has done the research and knows how and where to apply management change to do that, and has learned that there is opportunity to succeed, then rather than expound on a shortage of resources and research maybe you should ask some questions about 'how can we do it' cause I'm dang sure you would like to see it happen! Like I said before you spend more on a weekend with your wife (and so you should) than we’re asking for to push this along. Plus you can join us is sending a message to our govt. that “we are thankful for the fish, but can we borrow your fishing rod” to catch our own meal”.
And there are plenty of examples of producers taking charge of their destiny and being successful, as greybeard points out above. To correct what you read into my earlier comment - Swift can't come here, it's against the ropes and struggling and many in the industry south think they won't survive. 3 other giants have their sights on them and one is contemplating using us in Canada as a pawn in their chess game if we let them.
secondly - cowman - the American packers up here were more efficient 15 to 20 years ago. However today those plants are old, tired, and way out of date; that poses significant opportunity for us here and now.
About running out these two packers - your right, however as I said they are running at peak capacity, so for them to pay more for live cattle to beat us out won't happen either cause they are full.
And as (i think it was farmes_son) earlier in another thread said, there are 2 questions
1. Is there a future for your son in a beef industry that ships so much raw (live) product out of country?
2. is there a future hanging your hat on a US multi-national that is in a high steaks poker game with bigger thing on it’s mind that you?
And lastly Yes niche markets are begging for your calves (if they are any good) and you can get paid big premiums if you read the examples above. YOU CAN IF YOU HAVE ENOUGH WANT TO.

JD4ME - You're bang on as to who we are emulating, we'll try to follow the winners and learn from them, and they actually want to help us succeed and will help us do so, without control. Thanks we'll keep you posted.
wd - I'm sorry for the cheekiness -I'm sure you'll understand that we really get frustrated with all the negativism and na-sayers. My point is that it has to happen, if there will be a future, so lets band together put our heads together toward success and put together a 'strategic plan' that's a winner. And we happen to feel totally confident.
We examined a $100,000 opportunity and asked for an independent, third party appraisal of assets, to which to our knowledge has never been done, they are not trying to buy the used equipment out of the Cargill plant cause budget is blown.
Yes we might fail – but we’ll be on record as having gone down with a fight, and a little investment, (no more than a good TV) worst case scenario would be that if we get it built and can’t go it alone we could lease to some one else that can, but that’s the last resort.

[grassfarmer]

kpb, Not in any way disputing your business predictions about buying heifer calves in the last few weeks but if the prospects are so good why was the early Fall calf run so poor? Nothing has materially changed with regard to a border opening or new slaughter capacity coming on line.
It reminds me of the slump last February which everyone likes to point out was a foolish time to sell and a great time to buy - but it was only this because there were virtually no buyers hence the depressed prices.
Do the majority of buyers use herd mentality in their thinking and then be wise after the event while a few go against the grain and beat the system?

[cowman]

rusty: Well I guess I'd better shut up then because I have no desire to become a packer or a retailer.
But answering your other question about how my son might survive in the beef business...that is a good question.
How do you raise beef, at a profit, on very expensive land? Well actually you don't!
But still you have the land and you've got to do something with it, right? So I guess I might look at cattle as fairly cheap maintenance equipment...to maintain the land while the value of that land continues to rise! Also lets face it...there are some fairly decent tax breaks? And besides I like living here and having the freedom to do just about whatever I want. I do not make the majority of my income from farming or cattle, nor does my son. That is a personal choice that I made as a young man and I've never regretted it and I believe I have the best of both worlds.
My son has decided to keep the cattle, in fact he intends to expand, since he recently bought some more land. For myself personally, I have no more desire to own any cattle but I still enjoy seeing them out in the pastures! I really don't do very much with the cows anymore.

[rusty1]

Sorry cowman - I guess i guess I have one more questtion.
How much more do you your calves would bring if we had another packer at the table to buy your calves?
I'm going to answer for you (put words in your mouth) hope you can forgive me!

Lets assume your calves were to fetch another $.005 per pound.
I'm being real generous :-(
So assuming your calves slaughter at 1350 lbs.
And assuming you sell 100 head. My adding machine says that you will bring home an additional $675, simply because some of us were stuborn enough and get another packer on the market.

The question then is how much of your oil revenue would you have to invest to earn $675 per year interest?

I'm sure your savings account is making you 5% at the bank.

Then according to my calcualtor you can afford a $13,500 investment in the packing plant.

Your welcome.

[farmers_son]

I note the references to "Shut Up". Really we need to be talking. Talking to each other and to government. It is time the various players, the people with the proposed packing plants get together with government to map out a strategy on how to move forward. We have a number of conflicting views on how best to move forward with some co-op plants just starting as well as large producers investing their own money in proposed private owned plants with small to medium operators looking to government so they can participate in the value added opportunities that are out there.

I would suggest that rather than each of us approach government individually with our individual proposals that we consider the strength there is in numbers, get together with government and each other, find common ground, find a common strategy and make something happen. I read nothing in these threads that suggests the various new proposed packing plants consider each other to be the competition. Why not form an alliance and get honest to goodness results. Sooner rather than later would be good. Definitely there is going to be more packing capacity built in Alberta and Canada, the question is how can producers participate in the value added industry.

I also note the references to investment, feeders being a better investment than packing plants and cowman wondering how you raise beef on expensive land. The fact of the matter is there is lots of money in the food business, we just have not been getting our share. Commodity food producers need to capture opportunities to add value to their production. The days when the individual can be successfull by doing more, raise more feeders, more cows, get bigger are coming to an end. There will no longer be enough contribution in basic commodity production to support agriculture in the coming years, certainly within the next generation.

We are at a turning point. We can choose to participate in the value added market or we can choose to remain unchanged. I believe the future for those producers who do not change will be much the same as for those producers who continued to farm with horses when the successful farmers invested in tractors. I believe producers and government are struggling with how best to see the needed changes happen but there is general agreement on the need for the change to happen. Our future depends on it, we cannot go back to doing things as we did.

I do not think the problem is whether or not producers should be investing in producer packing plants. I think the problem is this is not something we can do as individuals. If each of us could invest in a packing plant that was economical with just our own production, similar to buying a tractor after WWII, most of us would do it. The problem is we can’t do this by ourselves. Now we are going to have to learn to participate in something bigger than ourselves and work together with other producers to create a profitable future for our individual operations. Therein lies the challenge.

But I believe there are examples out there of farmers successfully working together to improve their lot. It is about creating a future for our kids and we need to do it.

[gwf]

RUSTY: I’ve heard your analogy from other members of your group. What happens if the $.005 is a negative number? Would your calculator then suggest that you shouldn’t invest anything? The 5% from the bank is fairly safe and probably won’t have debt and loan guarantees attached to it. I am not raining on your parade and I do wish your group the greatest success, but there has to be better reasons for investing than your example.

FARMER_SON: There is no doubt that if we are going to find a solution to the problems facing the livestock industry, we have to work together. Most producers thought they had the means and the leadership to do just that …. in the ABP. We all know where that has led us. You can’t get any closer to the government than the ABP.

[cakadu]

I just have one question - which bank would pay you 5% on your invested money? Seems to me you'd have to have an awful lot to invest to get that rate, when many accounts are sitting at 2% or lower.

I have to agree with farmers son on working together, which I've maintained from the outset of talks about more packing capacity. Get one going that works, tweek it where you need to and set it up in other areas. From what I can gather, everyone is chasing those same elusive (or almost non-existant) dollars, which dilutes the pool you have to draw from.

Show everyone that people in agriculture can work together for the common good. That in and of itself would be a monumental step forward.

[rusty1]

farmers son - one of the bottom planks in our proposal is to encourage people to come together so we don't complete with one another etc. We motivated a meeting of such last May in Red Deer.
We have talked to every group that we have been able to find out about, which includes quite a list from BC to MB.
However, and as one might expect we all want to be independent and puch our own project.
I think that once we all learn how really difficult this will be to accomplish on our own will we be willing to explore a collective working relationship with one another.
If we don't get through that phase quickly it will be our demise, as the foreign interest in our opportunity is growing and seriously being examined by major players.

gwf - the cash market price to you is already at a -$$, a colective effort can make it plus. And my point was that even if a producers stands by on the side lines and gets the benefit of a third buyer on the market that producers gererate he will probably still get at least a $0.005 benefit.

If you scrool up about 17 posts from here I think you'll some significant reasons for participating, if those aren't enough then........

I'd love to have a list of your reasons.

Infact I asked some of our industry leaders if anyone in the last 18 months had done a "SWOT" anayalisis and developed a Strategic Plan. The response was "hadn't heard of such being done". No wonder we wander from piller to post.

[grassfarmer]

"When the classic cowboy is hit over the head by nature, by misfortune or by an overwhelming force from an unequal source, he will wipe his brow, tighten his buckle and tough it out on his own. He will not organise his fellow cowboys to withstand or outsmart the next blow together.
Entrepreneurs choosing Alberta as the place to do business are very much attracted to this politically and socially deep-rooted individualism. It is called the Alberta Advantage - the perfect climate for capital to extract the wealth produced by nature and labour"
A quote by Jan Slomp, regional organiser of the National Farmers Union (Alberta), winter 2003.
How true - as we say "in union is strength."

[BigMuddyrancher]

Strange, a couple of weeks ago I suggested that BIG C join forces with the Manitoba group bring that Washington plant to Dauphin and was lambasted for even thinking that. I have said that with all these diferent ideas it was to bad that some couldn't join forces and work to build a larger more viable sized plants but it seemed that everybody had their own ideas and weren't going to give up any control in order to succeed. i hope egos can be put aside and some of these groups can work together and have the greatest success.
ABP and SSGA have been critized for not supporting one group or another, it is not up to those orgs. to pick winners and losers it is their mandate to lobby for the right political climate for them to succeed.