Beef Industry Conference

[farmers_son]

BFW: I noted your comments “The fact is that the average producer does not have either the financial or managerial ability to do this or lacks the drive or dertermination to go to the extra effort.“ Do your consider yourself an average producer? Or do you consider yourself something other than an average producer in some way. If so please explain.

Underlying your remarks is the belief that the border will open and things will get back to normal. What happens when the border closes next time? This time around the big feedlots, who were most vulnerable, received millions in direct government support. Is that your preferred solution to Canada’s vulnerability to live cattle border closures? Or would you rely on CAIS or whatever government safety net is in place to save your operation. Of course that solution ignores the fact that not all big feedlots survived, thinking of Bonnets and AAA. I guess those people lacked the financial and managerial ability.

We have to face it. Depending upon live cattle sales leaves all of us, big and small producer both, vulnerable to border closures. There is no question that it was better to be selling beef rather than live cattle since May 20, 2003. Most producers have no practical way to sell beef as the industry is presently structured.

Your comments that the “average producer” should build a feedlot are well made. And I believe we will see more producers retaining ownership. The cow calf producer has more interest in owning a packing plant than the big feedlots because the big feedlots are margin operators and will make their profit no matter what the price of fats are. The cow calf guy takes what is left and often that is not enough. Even then, most of the big feedlots operators I have spoken with see the problems with the live fat cattle market in this country and are looking for solutions just like the “average” producer.

BFW, can I infer that your operation is already associated with a packing plant venture, e.g. Prices, and you view any more producer packing plants as competition.

[intr3est]

Canfax presentation you would have heard that Canadian producers enjoy a $2.50/cwt advantage to their American counterparts on the sale of 550 weight calves

Is this just a price advantage without taking into account cost of production?

[BFW]

Farmer's Son my comments regarding the "average producer" were not meant to be disrepectful but I stand by them for the simple fact that we have a feeding industry in existence today that has been allowed to develop and prosper by cow calf operators selling them fresh calves in the fall of the year or at any time for that matter. How is it that these people have managed to accomplish this while the large majority of cow calf producers have not? As for me being an average producer the fact is I don't even consider myself a producer. I am one of the margin operators, margin collectors, margin speculators that Cam Ostercamp was referring to at the conference but as far those go, I think that I am above average, well above.

In respect to the border Farmer's Son, I will clarify my previous comments by saying that in no way do I believe that the border reopening will return us to a more normal market situation but you have to admit it will help as we will agin have the ability to arbitrage the Canadian and American live cattle markets. Even with added capacity here it will be to our advantage to have the American processing plants available to sell cattle to. I understand clearly that we cannot return to normal and that as Ostercamp's paper points out we must not continue our almost total reliance on the US market for our excess of live cattle and beef products. The challenge for our industry, if we are to prosper, will be to find new markets that will return as much or more value for the beef that we produce. If we can achieve this and thus decrease our reliance on any one particular market we will all be the better as an industry and avoid the situation of having to have public funds injected which are of little value in the long run.

By the way I toured the Bonnet facility today and by the looks of things much more than BSE is responsible for it's demise. As for AAA Feeders don't believe everything you read here or in the newspaper. BSE has little or nothing to do with that situation and a flawed regulatory process has a lot to do with it and finally you shouldn't infer that my operation has anything to do with a new packing venture because it does not. Were you at the conference this weekend?

[BFW]

intr3est I think there are several factors at work to explain this:

1. We have enjoyed lower costs of production (lower feed grain and forage costs) during this time frame.

2. Strong demand for calves here in Canada.

3. We have better calves on average here when compared to the US.

[farmers_son]

BFW: Thanks for the reply. No I wasn’t at the conference. Got calves on feed and couldn’t get away. If by being well above average, you mean you operate a larger outfit, I would point out that there are no large outfits in Alberta, by global standards they are all small. There are feedlots far larger in the U.S. and operations in Brazil, Argentina and Australia that dwarf anything we would see in this country.

Depending upon shipping live cattle across international borders to establish arbitrage is a fools game and will be a fools game after March 7 as much as it was after May 20. Yes the border opening will help, until the next time and the next disease/next excuse.

I see the challenge for our industry is to vertically integrate closer to the consumer to capture benefits from value adding and branding. The consumer market is the only market there is and we need to find ways to shorten the value chain and capture our fair share of those returns. The successful operations in the next decade will be the ones that demonstrate the ability to form alliances with other producers to work together so as to capture sufficient profits to be competitive. The days of going it alone are probably over for as I pointed out each of us by ourselves lack sufficient scale in global or even North American terms to be competitive.

[BFW]

Farmer's Son being above average means doing ordinary things extraordinary well. By the way what's your hang up with size? There's a term for it I think. Ever study psycho-analysis?

[BFW]

Farmer's Son as for forming alliances with others in the value chain many of us have been doing that for at least the last 15 years. Where have you been?

[rkaiser]

Amazing BFW how perceptions are different, based mostly on fixed thoughts I suppose.

Cam Ostercamp made a point of saying that he was not blaming anyone did he not?

If you call what he did grandstanding, why would Charlie Gracey use the name of Cam Ostercamp when talking of positive change. And why oh why do none of the upper end ABP boys have nothing to offer (off the cuff) without discussing and reviewing their notes so as to not offend Cargil and Tyson.

But the reality is that margin producers bid on cattle and have no concern whatsoever for the seller. This is the system we live in now.

The concept that Ostercamp, myself and the rest of the BIG C gang speaks of would help the big feedlot players like yourself as much or more than the cow calf guy that you buy your calves from. This is not simply a co-op idea, it is about changing the Canadian beef industry.

Once again I will say that the reason this concept will fail will be our inability to convey the message to you or Ben, or any of the rest of the gang of multinational smoooshers.

This is not about little vs big any more than the border closure is about American producers vs Canadian. Canadian producers however need to wake up and deal with this Multinational takeover of our beef industry before we all become service industry workers taking smaller and smaller margins and hoping that our real estate investments give us something to retire on.

[farmers_son]

BFW: I see a number of these so called "above average" outfits that are not doing anything better than anyone else, just the government provided them with irrigation at taxpayer expense. But when it is suggested that the government in some way help the rest of the industry to excel these same "extraordinary" managers cry foul.

[gwf]

This is a very interesting topic, and one that is getting some good discussion. I was not at the Conference, but am told it was very similar to others that have been held in the past. I agree that the ABP are putting all of their eggs in the border opening. Lee Gunderson (ABM) might be right, that it does not open, all hell will break loose. We are very fortunate that we have the feedlot infrastructure that we have. Just ask those that do not have these operations in their own back yard. The border opening will give us time and will provide us with a sense of well-being as Farmer –son has said “until it closes again”.
This uncertainty is what is most disturbing.

The BIG proposal will not affect the “Kaiser Method” or that of two of the principles of the BIG organization. It will not challenge Tyson or Cargill and it will not effect most of the small operations that have just started or are on the drawing board.

It is nearly a year since the Premier Ralph, Ag Minister Shirley and the ABP were apprised of the producer funded packing facility proposal. A polite letter was received from Ralph, a letter from Shirley saying it was up to the ABP, and still waiting for a reply from the ABP.

The present system of marketing our market ready livestock production, does not give us the security and hope we need and deserve. We must explore the other options that lessen our dependence on the US market.