Corporate question

[grassfarmer]

Ranchers Own had a booth at this weeks Provincial Agricultural Service Board Convention in Red Deer. It looks like an affordable project. $500 down and pay for the remaining $4500 out of cattle sales or over a certain period of time. I don't know how that compares to some of the other proposals for plants.

[SASH]

rkaiser wrote:
You can call what the packers have done since the border opened to boxed beef in Sept. 2003, legal all you want, but I call it piracy. How in Gods name was price established over that period of time. It had nothing to to with a functioning marketplace or even capitalism for that matter. It can not be compared to any of the situations you mention, which are all based on some semblence of market supply/ demand.

So tell me how this has nothing to do with supply and demand. Closing the border essentially created a glut on the market. The packers above all know that there is very limited packing capacity in Canada. Again, I have to wonder what sort of debt you feel that the packers owe you as a producer. They have a business to run, just like you do and why should they care whether you survive in the long term or not. Its not like they are the Salvation Army and are supposed to be a charity. Again, I will ask you if the packers were losing money would you ante up to help them out and if not why not because you are expecting them to do it for you. This goes back to my whole argument about producers getting control of their production. The way the industry is right now could be compared to a mining company doing all the work of digging and giving the material over to someone else to refine it and make money off of it and to do it as individual producers is like sending a crew out with picks and shovels instead of investing in bigger equipment to make it more efficient.
Randy, I have never in any way criticized the way you run your business but I question if every producer could go out and knock on doors and sell beef to the city people. If they did, I think that you would find that over time there would always be somebody who would lowball your customers and you would find yourself in a fight to maintain your market share. So, now you would have producers fighting producers again.
When I look at a traditional farmer vs the agribusinessman, the biggest difference I see is their focus. Traditional farmers are primarily production oriented. Business arguably has five disciplines. Marketing, Operations Management, Finance, Accounting and Human Resource Management. By far Marketing makes the biggest impact on the bottom line. Most farmers are very good at Operations Management (the day to day of keeping farms working). Finance is the one I can see that is really going to hurt the farmers after this whole crisis is over. The financial institutions have certain things that they look for that start to raise red flags. As soon as you raise these red flags, you are on their watch list. Being on the watch list has a very bad effect on your ability to borrow money. There are a few strategies to stay off their radar but some of them aren't very ethical so I won't bother mentioning them. For alot of traditional farmers, accounting is something they do once a year. HR is only relevant if you are bigger than a family farm. I guess the key point is that if as a businessman, the two things you need to watch closely are Marketing and your finances and your biggest focus is production, how do you think you'll make out in the long run?

[farmers_son]

SASH: Supply and demand only work in functioning markets. Markets do not function when there is a monopoly. There has not been a functioning market for live cattle since May 20, 2003 in this country and often I question whether there was a functioning market before that date. Any arguments you would offer about supply and demand are not applicable to our situation.

The discussion is about ethics. So you put in something you found on the web about disciplines of business. “HR is only relevant if you are bigger than a family farm”. Absolute rubbish. HR is critical on every family farm. ”By far Marketing makes the biggest impact on the bottom line”. Maybe, maybe not depends upon the nature of the business. But what does that have to do with the discussion topic which is whether or not the packers have done nothing wrong either legally or ethically since BSE.

Some of your posts give me the impression you are posting messages to these threads under two user names and sometimes you reply to your own posts but forget to switch user names.

You said ”Got a little off track with that last post”. Why restrict that comment to just the one post?

[SASH]

How can you possibly say that this has nothing to do with supply and demand? If there is more supply than there is slaughter capacity, how would you ever expect the price to stay where it is? This whole thing happened because when the border was closed, all of our traditional slaughter capacity and markets down south were gone. It would be no different then if every farmer in the world all decided to grow barley and nothing else. What do you think would happen to the price of barley. Do you think it would stay the same? Nobody forced the industry to sell their cattle for that price. If you think we could have done better, maybe we could have stopped the supply but there will always be someone out there who will sell either because he has to or because he doesn't care what the price is.
As far as my response on the business thing, that was a response to Mr Kaiser and his comment about my education and background. Pay attention, will you. I wrote it right at the top of the post.

[greybeard]

I think the packers are paying what they think they need to in order to make supply and demand work for them. If they had continued to pay the prices they paid in the summer of 03 they certainly would not have any supply today. Even the $28 basis is, I think , to ensure supply when they have to compete for product. They can't go from 50 cents to 86 cents overnight. They are paying as little as they think they can, and continue to operate here. I also think Cargill will have more loyalty than IBP when people have a choice. A somewhat more ethical image? What do you feedlot guys think? I bet the cross border trade in fats will be at all time highs from the south as IBP brings in US cattle to keep the line full.

[farmers_son]

When people talk supply and demand they typically are thinking of many sellers and many buyers. A functioning market.

No one should ever confuse that for the situation cattle producers find themselves in since May 20 after producers were cut of from competing buyers for their cattle. And although prices for live cattle have improved, supply and demand forces for live cattle still are not functioning properly. The live cattle prices are beginning to reflect the potential opening of the border and the end of the packer monopoly due to speculation but Cargill and Tyson still are profiting unfairly from their monopoly position within the captive Canadian live cattle supply.

Is it ethical? No, it is not even legal and the situation Canadian producers find themselves in would never be tolerated in the U.S. To a large extent Canadian producers and governments find themselves powerless to do anything about it however as the packers continue to threaten to reduce kill volumes and destroy the very industry they depend upon for their supplies.

Monopolies are not normal in a free market system. The actions of the big packers since May 20 should never be considered to be OK by any producer.

[rkaiser]

It makes me chuckle SAH when you talk of reversed roles. Would I offer to bail out Cargil or Tyson if they lost money? We have seen what happened in America when profit margins even dropped a little bit. CLOSED the plant.
We are talking a spread of hundreds of dollars in Canada. Cargil and Tyson would close their plants within minutes of loosing even close to that amount of money on a carcass.

What are your thoughts on the limitation bill that you have posted on this site SASH. Are you just looking for more ways to prove your point about your knowledge of business.

By the way, I don't go to any household in Calgary or any business for that manner, I have a very ethical partnership with a packer and a marketing team. Not only does this marketing team sell to restaurants, but they are linked to 3 meat shops with more on the way. This system started pre BSE. Hard to beleive there could be good business in the anachaic price world we lived in these last 2 years, is there?

[rkaiser]

rkaiser, you obviously have taken advantage of an opportunity to add value to your on farm product, and I am sure you will agree that having developed this marketing option has been a financial advantage to you since BSE vs just selling your live cattle to a market .
Do you think that many of the'on farm beef sales or truck load sale' initiatives that have come on stream since BSE will continue long term ?

[rkaiser]

Emerald,
I would say that those who got their feet wet, and have had some succes will continue. Especially if they are as disgruntled as I am with the current conventional market.

If we can get a bunch of these producer owned packing facilities up and running, most truckload boys will probably turn to them

Just my thoughts.

[SASH]

rkaiser:
Perhaps if the producers had jumped in and helped the Canadian packers back when they were having trouble or bought them out and started running them as indepents when they were all closing in the eighties, we wouldn't be in this jam now. From what I understand, the packers in the states have been losing money for well over a year. I, personally believe that the plant shut downs are being used as leverage to pry the border open but God forbid, you should think any thing the packers do might help you out. I still contend that what the packers were doing in Canada was just business. For example, the SAAN chain is in bankruptcy protection right now. Why don't you head on down there and tell them that you want to buy their products at full price instead of taking advantage of them in this time of need for them? At least then you'll know that you aren't taking advantage of them like those nasty old packers took advantage of you. Then you can boycott Wal-Mart and Home Depot because they run a better business than SAAN. I'd be interested to know who in your youth told you that life is totally fair and everyone you deal with will always have your best interest at heart. You might want to think about giving them a call and telling them that you have found that this is not necessarily true. Is it fair that producers are down and out and prices are low. No. But it is an issue of supply and demand. Before you start telling me about the market being unfair because there's not enough buyers, explain to me why Nortel was trading at $120 in 2001 and is now trading around 5 bucks. Or if you don't like that example or want to make some remark about their ethics, lets talk about Bombardier which is worth about 10% of what it was in 2002. It has been listed in the ethical funds since ethical funds were invented. The people who were invested in these lost scads of money just like the cattle industry but you don't hear them crying in their beer because they knew there was a risk going in. Every career that you have is going to have its ups and downs. You chose to be a cattleman and I'm assuming you knew that there would be risks in that when you got into it. You guys seem to take this thing with the packers so personal. No one producer is big enough to even register on their radar screen. Its just business.

[grassfarmer]

So what was the point of posting the later thread about the packers in the US being found guilty of price fixing? Did you forget you were trying to convince us that the packers have done no wrong? For that matter why were you proposing a marketing board for beef - if everything is working great at present?
This is why I've never posted on Ranchers.net - a lot of the participants argue and trade petty insults for the sake of it rather than having a genuine concern and belief in what they write.
My opinion.

[rkaiser]

The good old packers are shutting down to help open the border for me SASH?

Who said I want the border open.

I'd rather see every pound of beef go south in a box even if it is the Multinationals that do it.

I won't even bother to respond to the rest of your lecture............

[rkaiser]

rkaiser, I agree with you. The folks in this area that have been marketing inspected beef either from home or truck load sales are limited to the number of animals they can get slaughtered ( 2 per week at the nearest abbatoir).I know that they have really been pushing for ranchers own to get off the ground and have every intention of keeping on marketing their beef.
The next month is going to be a very interesting one in the beef business !!

[cowman]

So what is the story on Ranchers Own? Have they started construction? Bought some land? Have they got all their financing in place?

[cowman]

They have the land in the Acheson Industrial park near Spruce Grove and they have a significant amount of funding in place. My understanding is that a lot of the local producers are getting on board so they have a market for their cull cows.
Cost per share is $5000.
$500.00 upon signing, and the remainder over a period of time or paid for with cattle shipped to the plant.

I think it is one of the few that really will get on stream within a year or so.