More Aid

[farmers_son]

I would point out that until we get more packing capacity in this country there is no direct benefit to Canadian producers if trade between Canada and Japan resumes.

However since it appears the U.S. is going to continue to block imports of live Canadian cattle until such time as the U.S. market to Japan is restored we would receive a benefit through the back door.

Those TISP cheques are not always small. According to public documents filed in Court of Queens Bench regarding the Bonnet Farm bankruptcy, just one TISP cheque was in excess of $318,000. One of the most significant changes to Canada's ag policy in the last few years was the removal of caps on subsidies to mega farms, such as Lakeside Farms and Cargill. The bulk of the $300 million the government has announced today under the TISP program for beef producers will go to a handful of mega-farms.

It is little wonder then that the mega farms can afford to invest $100,000 in a producer packing plant but the majority of producers cannot.

[pandiana]

I got to thinking about this, packer thing. I can't help but wonder how many producers would be willing to re-direct this payment to build packing facilities?

Unless the government would be willing to pick a winner, we would be in the same boat as previously. Which project do we want to support? Also, what happens to those investors who have picked their 'winner' and expect to see construction start soon. Would it be fair to support competition?.

[farmers_son]

Regarding government picking winners and is it fair to others.

A perfect example is the Alberta government's policy towards irrigation in this province. Those few producers lucky enough to have government subsidized irrigation near their land receive the benefit at taxpayer expense. They then produce forages, grains and other produce in direct competition to dryland producers. The government justifies, and I believe rightly so, that the bang received for the buck spent justifies the program.

Given the magnitude of producer losses due to insufficient packer capacity in this country a similar bank for the buck would be realized from policies and programs designed to speed development of producer packing plants.

The Irrigation Districts provide a good working model on how these plants could be owned and managed by producers with government support. The model is there and it is working.

And yes these plants would operate in competition with other plants with more traditional ownership/management but no different than scores of Irrigation Districts in this province operate in competition with dryland producers.

To be clear, I am in no way criticizing Irrigation Districts, just pointing out what worked there could be applied to packing plants.

[grassfarmer]

Pandiana, I certainly would not spend any aid money I receive in a packing plant UNDER THE CURRENT CONDITIONS. It is clear that the monopoly position of the big 2 will made it difficult, if not impossible for new plants to succeed. Until we tackle the monopoly we go nowhere. As farmers_son says any opening of the Japanese market to Canadian beef will not benefit Canadian producers under the current monopoly position. Reality is these transnationals have gained so much additional control over our industry since BSE that it will,in my mind, be very difficult for producers to get a fair return for their product regardless of what import bans are lifted. We need 8-10 companies competing for cattle in Western Canada to secure a future.

[farmers_son]

I am curious why you think a producer packing plant cannot succeed under the current conditions.

Is it because the packer monopoly are paying us too much for our live cattle. Or that there is no market for our beef, I believe there is.

Obviously any packer is a money making venture at the moment. I think a producer packing plant is viable even under the real challenge facing packers, what happens when the border opens to live cattle. Sure the big 2 enjoy some economy of scale but they are not passing it down to producers anyway so that does not impact the viability of a producer packing plant. A producer packing plant does not have to make as much money as Tyson and Cargill, just realize higher returns that the producer is now.

The concern amongst producers is that the packers will artificially inflate the price of live cattle to break the new market entrants. Gee, we bitch that the packers are not paying us enough and then we bitch that they are going to pay us too much. Producers may never intend to market all their cattle through a producer packing plant but such a plant provides an alternative. That alternative effectively provides competition. That competition is needed.

Producers need to look further down the road than the live cattle price. The future is in value adding and moving closer to the consumer. Time to forget the live price, it is not real, whether it is too low or too high. Either way it is a trap. The boxed beef market is much more stable, less subject to trade actions and more profitable. It is the place to be.

[topper]

Just wondering how this aid will affect market prices? Will the packers lower their prices and steal it like they have before?

[grassfarmer]

Farmers_son, I think producer owned plants can be sucessful in the long run but they have to survive the current monopoly players to get established. Look back to what they did to the feedlots "marketing initiative" plan when they started hauling cattle in from Ontario to break the feedlots attempt to raise prices. These guys have almost bottomless pockets at the moment thanks to producers and the Canadian taxpayer and would be able to take a financial loss for many months to break a new plant - that is my fear. I think government should intervene on this issue it wouldn't even cost them any money - just a little resolve.

I agree with your earlier comment on the mega-farms that collect the bulk of TISP payments. When CAIS was being negotiated the NFU was the only Western Canadian commodity group to raise this exact concern and lobbied for a lower the cap on payouts. You must be a socialist too farmers_son ;o)

[farmers_son]

Grassfarmer: Now, now... no need to get nasty. LOL. I consider myself a free enterprise kind of guy, and I would very much rather get my returns from the marketplace than more government handouts. But I do realize that government plays a role in agriculture today and would play a role in producers as a group improving their lot by having an alternative to the packer monopoly. I am a supporter of the family farm, and do not see mega farms as having any place in the future. The family farm is a very solid foundation upon which to build agriculture.

How many feedlots are there? Really only a 100. Now how many cow calf producers are there. They number in the thousands…together a much more powerful group with a gross equity value that would dwarf Cargill and Tyson combined. The packers are business people. They have responsibilities to their shareholders. They will not throw their resources away unless they see a chink in the competitor’s armor. If you are perceived as vulnerable they will attack, otherwise you will be left alone. I agree that if the packers thought they could break a new plant within a few months they would do so.

But if we were to assume the producer packing plant was financed properly, with producer equity and no bank debt and that the producers were going to support their plant, their very own plant and not the monopolies plant come hell or high water, why I would say it would take a very long time to break such a plant. If you consider the cost to the packers to even try to break that plant, it would be in the billions as they would have to increase the price of every live animal bought not only in Canada but in the U.S. as American cattle would start to come North. And they would have to do this for a period of years. And the catch 22 would be that by increasing live cattle prices to break the new entrant, the Big 2 monopoly would be transferring wealth to their competitors’ shareholders.

A producer packing plant would be a tough egg to crack. That is what you call win-win. We win either way.

[Horse]

Well this will make it hard on the oil workers and bankers and lawyers and so on how will they hide all this new money ? More tractors and trucks?
Odd how when you want to avoid tax $ someone just keeps pushing more your way.

[farmers_son]

http://www.cbc.ca/story/canada/national/2005/03/30/ranchersaid-050330.html

Mixed reviews for Ottawa farm aid
Last Updated Wed, 30 Mar 2005 07:47:01 EST
CBC News

EDMONTON - Ottawa's billion dollar aid package has drawn mixed reviews from western cattle ranchers who were hoping for much more money.

Cattle ranchers will get $300 million of the $1 billion aid package announced Tuesday by Federal Agriculture Minister Andy Mitchell. The money will start flowing in April.

"Some of the cheques have certainly filled some voids, but are nowhere close to compensating for 50 per cent losses in areas," Doug Horte, a rancher in Camrose, Alta., told CBC News.

Horte said he has qualified for relief totalling slightly more than $1,000 so far. But instead of compensation, Horte would like to see the federal government deal with the root cause of the problem.

Canada should be building new packing plants, said Horte, adding that it's crucial that the country stops depending on the U.S. beef market rather than waiting for it to open again.

Fellow Alberta rancher Lyle Lueders said he's claimed about $1,400 in compensation and insisted it was just not enough to help him through this crisis.

"That pays gas and utilities on the farm for one month," said Lueders. "Their intentions were good but I think their plans were flawed."

[smcgrath76]

While cash is always welcome in agriculture I do get annoyed at what I see as throwing good money after bad.
Interesting to see comments from ranchers/farmers talking about their losses, and although they often do not get the opportunity from the press, how many of them have really looked at their:
business structure/enterprises
overhead costs
marketing efforts
etc.

Don't get me wrong. I do agree that things are tough and I certainly know that many producers are trying to cut costs/corners/lifestyle to make this go, but from a strictly business perspective we eventually as an ag community have to make some serious choices.
I suspect that the Gov't does not want to enter this political arena and be straightforward with what they want to see 20 years out.
Also, I think we need to realize that money for agriculture is tied to votes from:
food processing industry (huge industry vote wise)
ag supply industry (large industry vote wise)
agriculture producers (very, very small vote wise)

[farmers_son]

In 2004, the TISP program had two components. A flat rate $80 per head except for cows that have calved and intact bulls older than one year based upon their 2003 ending inventories. In 2004, $680 million was allocated for this component. And a second $250 million general payment based upon on a producer’s five-year average (1998-2002) of eligible net sales.

The problem with basing payments upon eligible net sales is that Alberta beef producers could not claim cattle sales as eligible sales before 2000 while other provinces did. It appears to me that this announcement of $300 million is going to paid out using the general payment method. On the positive side this will get some money to all sectors of the cattle industry in Alberta, however Alberta’s producers will only receive half of what producers with similar sized operations in other provinces would receive since Alberta cattle producers will have 3 years of eligible net sales averaged over 5 years. Payment to Quebec will use different calculations.

[farmers_son]

Got this just now...$19 per head based on replacements and feeders on hand as of December 2003 (no cows that have calved or intact bulls older than one year). The second component will pay out on net eligible sales.

No word yet on how or if Alberta is going to participate.

[les]

farmers-son do you know what the break down for the grain guys will be?

[farmers_son]

This information courtesy of the Farm Income Program help line.

The general portion will be 4.4% of your average eligible net sales (NISA)for the period 1998-2002. No distinction between cattle or grain or any other commodity. There may be a further final payment if there are funds left.

The $19 per head payment on replacements and feeders will be 80% up front, the rest later if funds remain.

The payments are to arrive middle of May. The payments will be based on information the government already has so no applications necessary unless you did not participate in the TISP program last year.

I believe provincial contributions will be in addition but was not able to get anyone to say for sure one way or the other.

Phone 1-866-367-8506 for more information.