Two sides of the story...

[kato]

Here are two arguments being put forward in Manitoba. One from the NFU, and one from the Keystone Agriculture Producers.

"NFU Calls for Review of Packer Ownership of Cattle


The National Farmers Union is calling on Ottawa to follow the U.S. lead and look at the issue of competition within the Canadian beef packing industry.
The NFU report "The Farm Crisis and the Cattle Sector: Toward a New Analysis and a New Solution" looks at factors contributing to the current low cattle prices.
Manitoba coordinator Fred Tait says packer control of cattle has allowed them to affect spot price and he is encouraged by the Obama administration's consideration of ending the ability of packers to use captive supply to regulate markets.

We're recommending that the federal government bring the packers, the retailers before a committee of the House of Commons and let's see how this system is working and look at ways of improving it.
If we’re going to have a free market system then that free market systems has to be a free market system not freedom for farmers to have to compete against one another and an assurance that packers don't.

Tait notes Nilsson Brothers has an application before the competition Bureau to buy out the Tyson operations in Canada which, if approved, will concentrate control of slaughter capacity in the hands of two companies.
He suggests, if the U.S. administration is going to limit packer ownership of cattle then Canada is going to have to follow suit."

Then there's the other side..........

"KAP Rejects Calls for Limits on Packer Ownership of Cattle

Keystone Agricultural Producers is rejecting calls for government legislation to restrict the ability of beef processing plants to own cattle.
A National Farmers Union report identifies packer control of the cattle supply as the main reason for low prices and calls on government to restrict packers' ability to own cattle.
KAP president Ian Wishart agrees the lack of competition has been a factor but he doesn't believe legislative restrictions on the ownership of cattle is the route to take.

There have been U.S. states that were concerned about that and, in fact, a few U.S. states that passed legislation to restrict packers’ ability to own cattle in feedlots.
It hasn’t been terribly effective and any legislation such as they propose would probably have a fairly major impact on how big multinationals looked at our market place as some place they wanted to operate in.

Wishart acknowledges, in terms of returns for the cow calf-producer, it's been bad every year since BSE hit.
He believes legislative changes to deal with BSE have had a greater impact on profitability than packer control of cattle supply and he suggests the added costs of addressing BSE have been borne by the cow-calf producer."

As far as I'm concerned, KAP is way out to lunch on this one.

[grassfarmer]

Quite agree Kato, That's very similar to the argument we get in AB from the ABP.

"It's not worth trying to restrict packer ownership because they tried it in the US and it wasn't always successful"

They are nothing but apologists for the packers that are bankrupting primary producers. I find it hilarious that they continue to speak from their position of ignorance, citing in this case BSE associated costs as the problem. None of these status quo supporting commodity groups have ever done the research or asked the tough questions that the NFU needed to to produce their beef sector analysis. Without understanding the problems or the questions how can you offer solutions? - You can't hence we have a leadership devoid of ideas or solutions.

On a positive note some NFU Canada members are currently representing producer interests at a tripartite conference in Billings meeting with like minded producer organizations and individuals from the US and Mexico to share ideas and experiences and hopefully formulate solutions to the problems of packer power and captive supply. They are doing it on their own dime too - not spending levy dollars.

[kato]

Good for them. That's the kind of thing that needs to happen more and more.

For those from other provinces, Keystone Agriculture Producers is a general commodity organization that is supposed to represent all sectors of Manitoba agriculture. It is noteworthy that the MCPA has withdrawn it's membership in KAP. I think now I know why. Although KAP has professed to speak for cattle producers, I think they don't really have a handle on what it is we are about.

That comment about how prohibiting packer ownership will deter big business from wanting to move to Canada is a really good example of how out of touch they are with our reality. When in the past few years has any cattle producer anywhere in this country said "What we need here is some more big international corporations to set up shop."???

[Sawbones]

Careful Kato..Big multinationals are still only interested in their profitability and do not have to share with producers.
GF while I agree that just because it didn't work in the US is no reason not to try it in Canada, I'm concerned about legislation that will limit packer ownership of cattle. Our group has been trying to invest in a packing plant to guarantee access. That makes us packers who own cattle and if it were legislated, we could not continue. There always will be commodity cattle and the major packers are efficient. Their bid is needed but it needs to be competitive and pocketing the $250 differential between Canadian and US cattle cannot continue. What we lack is the opportunity to develop branded products that can be sold to specific niche markets for a premium even if that's our own local Canadian marketplace. There is also a large amount of money that is lost because of excessive regulations in regards to SRM removal as a result of BSE

[grassfarmer]

Sawbones, I don't know what I'm talking about here but I would think there should be some way to structure a producer owned packer plant model so that it was not affected by a packer ownership ban.
If for example you structured the business so that it was a co-operative group of producers that reared the cattle the co-operative could then sell the cattle to the plant. Co-operative members could also owns shares in the plant.
That is very different from one of the large packers who are only packers and wholesalers of beef and their only reason to own/control live cattle prior to slaughter is to price fix(other than a short term holding capacity for slaughter capacity in case of poor road conditions etc). I think a 7 day ownership should be allowed to cover the above circumstance.
What do you think?

[smcgrath76]

I think there are a lot of issue here, most of which involve federal gov't and some that involve provincial governments. I watched an extremely interesting debate on processor concentration in the US and even the argument that competition still exists in the US packing industry focused on the need for at least competing entities (not 2).
Is Canada big enough to support more than 2 large packers? Is the US supposed to be our 3rd packer in this competitive model? Would we be better to have moderately sized regional plants (some are already built)?
I think the feds need to kick CFIA in the butt on some of this, streamline some regulations to improve competitiveness and work on the competition at the packer level. I know of at least one federally inspected packing plant that incurred an addition $12 million in construction costs thanks to CFIA changing its mind several times.
I think the provincial governments need to put up or shut up and either back the industry or quit playing favourites altogether. I can think of several examples where for the glory of province or simply because "we can't work together" that a feasible interprovincial solution to a problem was lost and two completely idiotic approaches were adopted.
I also think the provinces need to get their acts together and streamline interprovincial trade within the country. We can't even work brand inspection interprovincially, let alone trade meat for god's sake.
I don't think more legislation or programs at the primary producer level are anywhere close to the answer, unless the programs are designed simply for education/skill development, risk management or ground level R&D like CFBAS or CAIS (revised)/production insurance or the Western Beef Development Centre. I think in a functional marketplace the market will demand and pay for all of the things that are being legislated into being for no benefit and added cost to the primary producer.
I also think that as a whole we need a movement at the primary level to get off the proverbial agribusiness input teat. Collectively producers represent a lot of purchasing power and we are really good at keeping a lot of people other than ourselves driving around in new 4x4 trucks. This is easier said than done, as every time we have an extra $ we seem to sink it back into a new tractor or an upgrade to a handling system, or other inputs.
My frustration lies in the fact that we are continually paid small amounts of money to shut up, with no fundamental changes to the landscape that is agriculture in Canada.

[smcgrath76]

sorry second line should read "at least 3 competing entities"

[Sawbones]

Sean...I like the number of times you referred to "I think" That in itself is refreshing. We have been asked too many times to accept the status quo. GF..there probably is a way that a producer plant can be implemented. My concern is that legislation by itself can be stifling. Unfortunately on this blog, I feel that we are preaching to the converted. Maybe it will take efforts that you describe to get the attention of the MLA"S or MP'S
Keep up the dialogue

[kato]

One thing we need to keep an eye on is what happens if the Americans actually succeed in limiting packer ownership of cattle. The Obama administration seems open to the idea, which is a lot more than the Bush administration ever claimed.

If they do succeed, and we don't have similar legislation, then we as a country become the pool of captive cattle that will be used to manipulate the markets. We will take the blame, and we will be the ones to have to fight to keep borders open. And we all know what that's like.

Whatever happens south of us must be matched here.

[grassfarmer]

Kato you are right on the money once again! In recent talks with Government and other organizations this is something the NFU have been really pushing. With Obama's election promises we are approaching the best time in history to tackle these problems. We need to make it politically unacceptable for any of our politicians(Federal or Provincial)NOT to follow suit when these laws are implemented in the US.
We are achieving some common consensus among other producer groups in Alberta on this issue but there are still those who don't agree. It seems to be set in stone that the ABP will continue advocate for the right of packers to manipulate live cattle prices through captive supply and packer ownership. I just shake my head at that outfit.

[per]

I don't think I can add anything new that hasn't been said. I was just wondering where all the Natural Ruling Beef Producers have gone. What happened to our resident ABP apologist? Maybe if we were to see the other side of the storey one more time some of us could figure out why packer ownership of feeder cattle is a good thing.

Kato for PM!

[farmers_son]

Per: I presume by resident ABP apologist you meant me. I certainly do not consider myself to be an ABP apologist although I have on more than one occasion tried to keep things real and not lost in the imaginary solutions of whatever the fringe group of the day might be trying to convince producers should be public policy.

Re packer ownership….Grassfarmer and I have exchanged posts on this quite a few times and really it has all been already said. Big picture is if anyone out there really believes that banning packer ownership of cattle is the only problem Canadian producers have with a lack of competitive pricing of live cattle in this country and that if somehow our government (the same government that let the packers off the hook and said the packers did not have to show their books to a parliamentary committee looking into unfair pricing of live cattle during the worst days of the BSE crisis) would ever pass a law banning packer ownership of live cattle then by all means fall into bed with other wishful thinkers like the NFU.

However the reality is a lot different:

1. Our present government (yes the same government most cattle producers voted for last time and will vote for again and again and again and again ad nauseum) will never ever in a million years enact legislation banning packer ownership of live cattle. It just ain’t ever goin to happen.

2. All of us can think of at least 10 ways a packer could get around any kind of packer ban on ownership of live cattle. A law like that is just a joke and really just puts a band aid on a much larger problem. We simply do not need more band aids. We need real solutions to the real problem of a lack of competitive bids on our live cattle. COOL comes to mind...

3. It will be a dark day in hell before I go to the government and ask for legislation restricting who I can or cannot sell my calves to. In our small auction sometimes there just is not a lot of bidders. Some days there are only two who are putting their hands up and one of them is a packer buyer. I am sure there are people out there who wish that packer bidding on my backgrounded or weaned calves was not in the stands but those people are looking after their own interest, not mine.

4. Maybe the NFU thinks government is the farmers friend and if we only ask government will fix all our problems with a law for this and a law for that. Myself, I am becoming increasingly concerned that government, especially this government, is out to put an average sized producer like me out of business. We are being legislated and regulated to death already. The government is not our friend and we need to be wary of ever increasing government involvement in our industry.

5. Bottom line we are not going to fix the problems with the cattle industry in this country as long as the present government is in power. With all my heart I wish that were not true but that is how it looks to me. Suggesting we should go to this government and ask for more legislation to save us is simply posturing by the NFU and akin to asking the fox to save the hens.

Just my opinion and I don’t apologize for anyone or to anyone for having an opinion. My opinions are my own for what they are worth.

[BFW]

I think the NFU study hits on some very good points that we seriously need to look long and hard. Were it fails is it offers no real solutions to the problems the business faces. Farmers Son, I agree with you packer bans on ownership is not the solution to our problems. We must determine why, as you point out, that on some days there are only a couple of hands bidding for your calves and one is a packer buyer. Answer that and we will be on the way to that solution that we seek.

[kato]

Ok, so if the packers aren't allowed to own the cattle, doesn't it follow that someone else will own the feedlots currently owned by said packers? I can't see them just disappearing into nowhere. Wouldn't it follow that without the market manipulation, those same feedlots would have a better chance at profitability?

I know they'd find ways around it, with shell companies and cover ups, but in the long run that would all that extra maneuvering be worth it? Would they want to bother? Especially if the U.S. wasn't playing the game either?

As far as losing buyers for the cattle, isn't the very fact that no one can make money feeding cattle part of the reason for a shortage of buyers? Maybe the reason there are only a couple of bidders at the sale is because all the others have gone broke.

It's kind of a chicken and egg thing, isn't it?

And yes, I agree, it's time for a new government!

[grassfarmer]

Come now BFW - no solutions offered by the NFU? If you have read the document you know that isn't true. You may not agree with them but solutions are offered. Although both you and farmers_son are quick to dismiss the NFU document you still seem unable to grasp the simple concept of why there are is limited competition in the system. It is all clearly spelled out by the NFU - corporate concentration at processing and retailing levels eliminates competition. This lack of competition is then passed back down the chain - with the captive supply arrangements the big packers have where they feed cattle in their own lots, or get them custom fed for them in other lots the independent feedlots are squeezed out. How can they compete when there are no alternate places to get their cattle slaughtered? The packers have them over a barrel and they know it. Now instead of twenty buyers for calves you have two - no big mystery.

Packer ownership, captive supply and alternate packing capacity are all crucial items that need to be tackled if the situation for producers is to improve.

It's good to see your opinions don't change farmers_son, opting for the status quo because it's easier than trying to do something different. Saying it's a waste of time talking to Government because they are Tories and nothing will change. You say it is a waste of time going to Government yet at the same time you are hoping or dreaming that a few CCA/ABP lobbyists will change the US Government's stance on "Free trade" agreements.

We must do something - the status quo is not an option and I for one am tired of the complacency surrounding this issue and many others in Alberta.
I am reminded of the Abbie Hoffman quote;
"Democracy is not something that you believe in, or something that you hang your hat on. It's something that you do, you participate. Without participation, democracy crumbles and fails. If you participate, you win, and the future is yours."

Time to get off our asses, out of the coffee shops and participate - the future could be ours.