Wrote a letter today....

[Sawbones]

We can't seem to learn from the past. COOL is a non tariff trade barrier the same way as BSE. Brad Wildeman, the president of CCA stated in a report to Cattlemen in December "On average, the combined impact of lower revenue and increased cost(of COOL)is about $90 per head. Of course, the Canadian packers seeing this opportunity have factored it into their domestic bids, so we can apply roughly a $90 loss to all cattle whether they are exported or not."
And the CCA's response is a court challenge against the US when we know even if we win things won't change.
Why not get mad at our local packers instead of allowing then to **** us as they did from 2003 to 2005 or better yet, support the producer initiatives like NVF, the Balzac Plant or Keystone.
Randy, you're right when you say the cowherd is being dessimated.$.50/cwt seems high for a cow today but it certainly wasn't only 6 years ago. It must be the Canadian way to shrug our shoulders and say there's nothing that we can do except follow the crowd or exit the industry.

[kato]

Hey Randy. Good to hear from you.

I agree that we have a shortage coming. We only have to look at all the slaughtered bred cows to see that many thousands of feeders are not going to be here next fall.

Will this give us better prices? It would be nice, but I'll believe it when I see it.

Here's a fearless prediction for the future. Canadian cattle numbers drop. American based packers start whining that they don't have enough numbers to run the plants. Do they pay more for the cattle? No. They go to the government pleading poverty and threatening to shut down if they don't get some good old fashioned corporate welfare. Do they open their books to prove they need money? No. Does the government pay? Yes, probably. Do we get any farther ahead because of it? No.

These big corporations have been taking their easily gotten profits and investing them in South America and Australia. They've got things set up so they can easily shift operations overseas and replace the fallen North American beef industry with cheaper imported beef that will make them even more profits.

And the only way they will say the government can stop them is to pay up with Canadian taxpayer money. I would hope that if this day ever comes, our government will find the backbone to just let them go. They need to be putting energy into putting the Canadian cattle/beef industry back into the hands of Canadians, where it belongs.

And they need to be reminded who put them into office, and who can take them right back out again.

[Sawbones]

Kato, your predictions are right on the mark. Another quote from Mr Wildeman. "One thing is certain-the entire industry needs to speak with a single voice..." Again absolutely true but Mr Wildeman, you and the CCA and largely endorsed by the ABP have to change your songbooks. You are not speaking for the good of the industry. Simply knowing the age, actual birth place of a calf and putting on a symbol that looks like a rooster comb that's part of an advertising campaign that some say cost producers close to 1/2 million is not going to save the industry. We need to address the slaughter situation and we need to do it now. The actual retail price of Canadian product in the US has not changed as there is no differentiation at the food service. COOL could be used to our advantage if only we could share in the profits of getting our own branded products sold,

[Sawbones]

Kato, your predictions are right on the mark. Another quote from Mr Wildeman. "One thing is certain-the entire industry needs to speak with a single voice..." Again absolutely true but Mr Wildeman, you and the CCA and largely endorsed by the ABP have to change your songbooks. You are not speaking for the good of the industry. Simply knowing the age, actual birth place of a calf and putting on a symbol that looks like a rooster comb that's part of an advertising campaign that some say cost producers close to 1/2 million is not going to save the industry. We need to address the slaughter situation and we need to do it now. The actual retail price of Canadian product in the US has not changed as there is no differentiation at the food service. COOL could be used to our advantage if only we could share in the profits of getting our own branded products sold,

[smcgrath76]

I think this is pretty close to the challenge.
Let's assume COOL is costing $90 per head in terms of basis. Let's look at Canadian plants. A large portion of cattle killed in Canada are also eaten here (no COOL cost). Another large portion are also sent to the restaurant/food service in the USA (again no COOL cost). There may be some segregation and labelling costs on a portion of production but certainly not all. I struggle to believe the actual cost to the plant is $90. I do believe it is $90 to the producer.
I think the scenario of packers scaling back operations and stepping out of the marketplace is very real based on projected cow numbers. If you look at the north american cattle numbers I beleive we are near a tipping point in Canada (http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1464)
I believe that plants will scale back as cattle numbers fall, but that there somes a point where they scale back completely when the economies of scale no longer exist. Based on one large plant with a single shift capacity of 3500, working 6 days a week, 50 weeks a year, that is a requirement for just over 1,000,000 head. Add a 5000 head plant and you add another 1.5 million. add another 1500 head plant and that is 500,000 more. That is 3 million head out of a potentially contracted 3.2 million head cowherd. Add feeder exports and voila. I am not sure where the tipping point is, but in the current scenario it may be coming sooner than later.

[Sawbones]

I didn't follow the math Sean but I do think the packing industry is ready for a major shake up but we're not. JBS made quite a splash and currently can kill about 10% of the total world production. They however have a very high debt and there is a possibility that with the current economic situation and the devaluation of their stocks, they may implode. The Nilsson story is similar with a stong patriarch and three sons. A history of leverage and expansion. There has to be a massive debt load. With the decrease in numbers of Canadian cattle, there is probably only room for one major plant. Cargill has an annual budget in excess of $50 billion. Who do you think will survive? When the crash occurs, who will be ready to pick up the pieces? Alberta may finish 69% of the cattle in Canada but they only have (or had) 39% of the cowherd. There may be other plants developed in other regions. As Kato predicted, there will be a lobby to the gov to save the majors..Maybe we should be ready to save ourselves and at $90/head in COOL savings, a 500 head/day plant would generate $9 million/year.

[smcgrath76]

so about the math problem.
3500 head * 6 days a week kill = 21000 a week. 50 weeks of killing = 1,050,000 head. Add lakeside and XL Calgary and you can kill every calf in the country after the cowherd contraction. We also have Moose jaw doing several hundred a day and some large regional plants in the East (ON, PEI). There are just not enough cattle to go around without pulling US cattle in for slaughter.
I don't know what the financial debt/equity situation is for Nilsson, but I suspect they are large enough and connected enough and employ enough people in Alberta that they are more protected than us poor regular folks who must rely on standard programs such as CAIS and ALMS. But maybe I am just a pessimistic skeptic.

[kato]

Exactly how often do official numbers come out on the size of the Canadian cow herd? I'd sure like to see what it is now.

[smcgrath76]

just over 4.86 million as of july 1st according to a USDA report from August 08 (95% of 2007 levels). We should get some 2008 numbers in February. As well the report states 655,000 heifers kept as replacements (98% of 2007).
Based on Canfax reporting 371,000 cows slaughtered from the first week of July on, and additional non reported kill, I would say that number has to be down around 4.5 million at the moment, if not lower.