How common is this?

[cowman]

Met a farmer last week on a gas lease. The lease is basically in the middle of a large pasture(probably 320 acres). Anyway we had a good visit, roasted the government etc.! He had a really good setup with flowing springs that he had set up into a very good system using gravity feed. Had a really good corral set up made up of oil field pipe.
Him and his son were running 180 black and red baldies and calving right now. Looked like a pretty decent bunch of cows.
Anyway, heres the story: He was in his early sixties, the son mid thirties. The son had been working winters in the oil patch while the old man fed out the cows. The son was getting sick of supporting the cows and having to work so far from home as he had a young family. They had come to the conclusion that if the border doesn't open this summer they might as well quit the cows. I asked him what he would do with his land? He said a neighbor had expressed interest in renting some of it that could be farmed and he supposed they might either custom graze or run some yearlings in the summer. Then he added that in reality when the cows went there really wasn't a lot of reason to stay. He was born and raised there and had never lived anywhere else.
I found this whole conversation rather sad as I can see it happening everywhere? People just seem to be getting sick of this wreck and losing hope that things are going to turn around?
This cow business sure hasn't been a whole lot of fun the last few years.

[rkaiser]

Too bad the board of directore for ABP would not travel around the country and visit with folks like that. At least in Alberta we have the blinkin oilfield to fall back on.

[rkaiser]

My neighbours run 180 cows, have a small trucking business as well. Last week they applied to subdivide a 5 acre parcel out of one of their quarters, they have decided that if the border doesn't open by fall, they are going to sell the cows, sell the land and say to hell with killing themselves trying to make a living. No-body is afraid of the work involved in the cattle business, but I think that people are just getting worn out with the mental stress of trying to jockey paying bills, having nothing left over for any luxury like a three day vacation somewhere etc.
Randy, we are darn lucky to have the oil patch in this province, in many cases oil patch money is what is keeping some communities alive these days.

[grassfarmer]

Why does everybody get so hung up on the border opening? Do they really think feeder cattle will jump from their current levels to astronomical new heights - and stay there long term?
There are just too many factors working against Canadian producers even if the border were to open. Sure, it will bring more competition and more bidders but enough that people will all be able to make a good living from cows again overnight? I personally think that our problems run deeper than that.

[grassfarmer]

grassfarmer, I think that closed borders certainly is one main cause for the crisis in the beef industry.
I am sure if the border opens to live cattle and we keep the boxed beef moving we will see an improvement.
Increased slaughter capacity should help the cow trade some, and any increase in prices is better than status quo.

[cowman]

grassfarmer: I suspect if the border opened tommorrow we would see some pretty solid prices!....Maybe enough to bail and still keep the shirt on our backs?
But I do agree the problems with the cattle industry run a whole lot deeper than that. The profits pre-BSE were poor! BSE just made them totally laughable?
If you were an out and out capitalist, not interested in a lifestyle, would you invest in the cattle industry? ...not likely? The money was never really there and the old cost/price squeeze was happening long before we had BSE? Cam Ostercamp spells it out fairly well in his article?
But whatever, that's just the way it is! No one can really change what is happening in North American agriculture? Everyone just needs to learn you either live with it or quit?

[kpb]

When I read the original posts this morning I had exactly the same thought as grassfarmer. I had to go outside for a while and I see now that he has put those thoughts down in perfect form. The real problem is, I hate to say, that we, in Canada, are high cost producers of a commodity that many countries can produce for less money.

kpb

[grassfarmer]

Cowman, I agree when you say "Everyone just needs to learn you either live with it or quit? " that ultimately is the bottom line on an individual farm basis.
I think we should still be actively involved as producers in trying to secure a better return for our product through influencing politicians or farm groups as well as being actively involved in resecuring our control of the slaughter industry.
Either way this crisis will not see beef producers go out of business en masse and the prairies be empty of cattle. The alternative is grain production and it is a less attractive option than beef production. There will be casualties, there are in the best of times - but the majority will survive with a leaner fitter industry as a result. If things get really bad the price of land may even fall which allows us to produce beef cheaper again.
Agriculture is an industry of change and if you aren't prepared to adapt you might as well get out.
It was often said in the UK that the BSE crisis was as bad as the 30's - but I never heard that from anyone that lived through the 30's. That was a different kind of hardship when farms sat empty unless an estate found a willing person to pay the land taxes on a farm - if they were willing to do that they got the farm rent free. In Canada the 30's saw people just up and leave their farms with the clothes on their backs - we're a long way from being that desperate and for that we should be grateful.

[grassfarmer]

and grassfarmer in the 'Dirty Thirties' we had drought, and NO HELP from the east !!! So those that survived were truly a hardy lot !

[grassfarmer]

Before anyone thinks that I am older than dirt...I WAS NOT around in the Dirty Thirties !!

[pandiana]

Within a 5 mile radius of my home quarter, there are 5 farms who have sold their cows, two farm sales this spring and rumors of at least three more that are seriously talking of getting out. This leaves about 3 farms left with cows. Unfortunately for me some of those that sold are my bull customers.

I agree that this is not just a BSE problem. The border opening would relieve some of the pressure for the moment but we still have to deal with the systemic problem of not being able to leverage enough return on our investment to remain profitable 'every year' not just in the boom years. As things are going, agriculture in North America is not sustainable in its present form. If the industry becomes vertically integrated as has been proposed by many, it may become profitable as the industry will them be able to charge the consumer the full cost of production.

What BSE has shown us is that cattle producers are extremely vulnerable to vagaries of trade and nature. The risks associated with raising cattle have always been great but never as high as they are now and will be in the future. Our parents never worried about bio-terrorism, environmental constraints, encroaching urbanization, globalization and world trade barriers.

Any number of diseases such as foot and mouth, Johne's, TB and others as yet not identified, could wipe out production from a farm, a community or a district in the blink of an eye.

We still have weather to contend with which by all accounts I have heard is expected to become ever dryer over time.

With regard to our situation not being as bad as the 30's, I think it is hard to compare. In the 30's farms were more isolated and very dependant on the land. No crop, no livelihood. Todays farmers on the other hand are, by every estimate I can find, substantially subsidizing the farm enterprise with off-farm income. NB That was a very good point about Alberta oil patch contributing to farm income. I wonder how non-oil provinces fare?

[grassfarmer]

I agree with your thread Pandiana apart from the part where you say "The risks associated with raising cattle have always been great but never as high as they are now and will be in the future."
Historically the risks were far greater and the implications more severe. Look at the severe winter 1886-1887 when lots of guys lost 60% of their cattle. They didn't have the comfortable option of trucking in feed from other parts of the country. Or the years when there were market collapses when cattle were on boats headed to Europe and were rendered almost worthless overnight.Producers faced more instant ruin in those days yet the survivors arguably had better opportunities to expand and consolidate.
As society and settlement has advanced we have reached a new comfort level where even today if we decided to pack in cows our land in Central Alberta would be worth $1000-$2000 an acre which is still a large security blanket.
The day the beef market totally collapses and land prices really fall we would be in a different position.
In agriculture we often get caught up in talk of low profitability but longterm the banks still view agriculture as a far safer bet than many other businesses because of our generally appreciating land values.
I would argue that although we are a very low return business we are a relatively secure business.

[kpb]

Our industry has become more concentrated in the past two years, not less, as we have failed to respond in a meaningful way to the border closing. Pandiana's comments are correct but I think I should point out that vertically integrating our industry will not, ultimately, benefit the primary producers.

Vertical integration generally comes in any industry from the top down as the wholesalers and retailers seek to control their supply and fix their costs. In our industry that would mean that the packers would fix their supplies through alliances and deals with the feedlots, thence to the backgrounders, thence to the cow-calf producers.

This has already been started and will be accelerated in the future. The beneficiaries of this will be the packers, only, and the history of most industries where vertical integration has taken place shows that the primary producers end up either disappearing in favor of "managed operations" or becoming basically indentured servants of the big companies who would set consistent management practices including (in our business) prices, feeding schedules, breeding programs, etc.

Vertical integration in an industry always takes place to benefit the powerful members of that industry, not the weak and divided. We are the weak and divided in our industry and we will continue to be taken advantage of by the strong and powerful. Vertical integration ultimately makes the powerful more powerful.


kpb

[farmers_son]

When we talk about risks, we should do in context with rewards. Risk is acceptable if the rewards are sufficient. I believe the risks were greater in past years but the contribution per head has declined dramatically since then, especially if viewed in terms of a constant dollar. It will be a decision individual producers need to make if the rewards from cattle production are enough to offset the threats that Pandiana outlined, which certainly have always been there even if we producers tend to ignore them most of the time. Any operation financed with borrowed money is very susceptible to even slight changes in cash flow. You are only as secure as your ability to make your next payment.

Land should be considered a separate investment from cattle. In terms of the overall Canadian cattle industry, the land prices in Central Alberta along the Queen Elizabeth II corridor are an anomaly while cattle prices would tend to be somewhat consistent over a much larger area. Land prices have declined in the past and certainly could do so again and have done so in Saskatchewan and elsewhere in the country. Land prices are sensitive to rising interest rates which is an external threat to the industry.

I doubt very much if the person buying said land for $1000 to $2000 per acre considers it a security blanket. Assuming they borrowed for the investment, I would not be surprised if they may have trouble sleeping at night.

[cakadu]

kpb - there is a difference between vertical integration and value-adding in which the producer benefits. Some of the differences you have already mentioned and sometimes in verticial integration the producer doesn't even own the animals he is raising. You buy the feed made at the company's mill, send it to the company owned processor and it is then shipped on to the wholesale and retail outlets owned by the company.

In value-adding the basic premise is that at least 3 players in the "chain" are totally separate entities and are at arms length from one another. The producer grows said goods according to criteria and specifications set out by an end user, whether it be the retailer or food service or a customer.

An real-life example of value adding involves chicken producers and Swiss Chalet (owned by Cara Foods). Swiss Chalet had customer complaints about the differing sizes of the quarter chicken white (I prefer white meat so that's what I will use). When patrons looked at someone else's plate, the chicken portions were sometimes significantly different. What they did was to get producers to get birds to a certain size and weight to get into the program. If birds met the criteria then they qualified for a premium. Interestingly enough, less than 30% of the birds made it into the program, so sometimes achieving results is not easy.

In the end, producers were getting paid more for their products, customers were happy because meals were approximately the same size, which translated into money for the company.

I agree with pandiana's statements and think that the silver lining to the BSE crisis is that producers were finally able to see how they have not been getting the value for what they produced.

Emrald, in my area I'm reasonably certain that land is going for $2000 an acre and up, especially since they seem determined to set up Gleniffer Lake as the next retirement mecca. Only problem with getting high prices for land is that you have to then turn around and pay big prices for land unless you are willing to relocate far away from the corridor. To pay those prices for land does not make sense from a production standpoint and I wonder how many can afford to pay big money for land to not have it do anything. Leasing is an option, but I'm not sure how feasible that is for everyone.