Canola Basis !

[rkaiser]

Good title farmer_son. Good way to introduce this proposal approved by four industry groups here in Alberta. Media will have their hand on it next week.

NOV 30th, 2007 JOINT AGREEMENT BETWEEN BEEF INITIATIVE GROUP, ALBERTA CATTLE FEEDERS ASSOC, WESTERN STOCK GROWERS ASSOCIATION, and the PROV. FEEDERS ASSOCIATIONS of ALBERTA:
[1] From where we now stand, it is imperative that we find someone as straight forward and result focused as for example a "Lee Iococca" CEO and a board of highly knowledgeable and aggressive industry personnel to work with him. This board would take the leadership role on trade policy. This board could technically operate under the auspices of existing industry organizations , however, with the understanding that existing industry organizations will defer to this board on matters of trade . All future govt assistance to industry needs to be contingent on a new clearly thought out business plan focused on increasing trade in markets beyond the NAFTA territory. Our survival hinges on trade, including trade with non-NAFTA markets, and we require in the long term a more diversified marketplace.
[2] We propose the reconstitution of CBEF and BIC (marketing agencies) with an enhanced mandate and an effective governance structure. CBEF has been hamstrung by both industry leadership and packer domination for too long. Current Canadian major packers obviously favor north – south trade. This may be part of the reason for our dismal headway in foreign market re entry. The new board handling trade and policy must have access to a workable CBEF like organization, virtually oriented and focused on the same objective. Such an organization does not exist as we speak.
[3] Further to the implementation of the above recommendations, A PRODUCER OWNED BEEF BROKERAGE CORPORATION will be formed. This corporation would stand beside existing Brokerage Companies and would never discourage the formation of others. Shareholders of this corporation will be the producers who wish to retain ownership of their cattle and beef products through to the point of wholesale or retail, unlike most currently existing corporations that only broker beef. Shares would be offered on a voluntary basis to all producers whether they vertically integrate or simply wish to support this new corporation. Share value of the initial offerings must be sufficiently attractive to producers in order to create entities of the magnitude required to restore profitability to the Canadian beef industry.
The mandate this corp will work under is as follows:
JOB 1 will be re-establishing trade for Canadian beef in non NAFTA territory while simultaneously building partnership investment between foreign markets and the Canadian cattle industry thus bridging the cultural gap existing between both. This model will uniquely identify Alberta and Canadian beef and explore ALL foreign markets. Th is corporation will partner with various govt agencies to promote this "uniquely branded" product, much as the Australian beef industry has done so effectively.
While partnering with organizations like CBEF and existing Provincial and Federal foreign trade offices, this corporation will be free to create market opportunities on a free enterprise basis. The industry needs to address certain existing trade constraints which have largely prevented a distinctly Canadian approach to market re-entry. Neither will this approach be restricted to foreign markets as there exists many opportunities for the vertical integration of producers into the North American market.
This corporation will allow both primary and intensive livestock sectors to partner. The past market model which this industry was built around has become dysfunctional and has never been conducive to the promotion of both primary and intensive sectors of the industry integrating into the value added chain. By partnering, the feedlot sector will reduce capitol investment on cattle purchases and maintain placement numbers, while simultaneously encouraging primary producers to actively integrate into the value added chain, thus preserving Canadian infrastructure as well as the Canadian beef herd population. We must be allowed to cease selling cattle on the hoof at a discount and become marketers of beef.
This business model will address the need to pass market signals up and down the production chain. All marketing and efficiency tools such as grade information back to producers post slaughter, age verification, and current information on health attributes such as leanness, CLA, and Omega 3 must be available. By becoming marketers of beef, producers will quickly adapt to the market's desires. The missing link in current attempts to persuade producers to age verify, for example, has been the lack of a clear economic incentive.
Last but possibly of the most importance, the brokerage corporation and the new CEO and board will be responsible to inform producers as to the obstacles faced by the sales teams. Information and statistics must flow to producers freely to insure these corporations remain flexible, dynamic, and cohesive. Knowledge is power, but only if the knowledge is shared. At times, this means anticipating our competitors next move and positioning ourselves accordingly. Not following in their footsteps.


This business plan uniquely addresses the needs of all aspects of the Canadian industry. This model will help keep feeder cattle in Canada, help keep Canadian slaughter capacity operating, and add value to a depressed live cattle market by increasing non NAFTA beef trade , without discouraging other brokerage companies from existing or starting up. Producer's taking ownership of their industry by vertically integrating into the value added chain is a great alternative to greatly shrinking the Canadian cattle industry.

[farmers_son]

With all due respect, what rkaiser has posted is a manifesto, not a business plan.

Manifesto definition: A manifesto is a public declaration of principles and intentions. Manifestos are often political in nature.

A business plan is quite different and typically would include financial projections and an explanation of how the stated objectives would be financially achieved.

I agree with smcgrath76. I do think the large commercially sized herd may be just as able to produce to niche value chains as the smaller herd. For example a lot of organic grain production is done by very large farmers. I see the need for provincial inspected abattoirs to be able to ship interprovincially before processing to fill a niche market would be viable.

The competitive advantage Alberta feedlots enjoyed after the removal of the Crow Rate Benefit has completely disappeared with the U.S. government’s recent policy on ethanol and bio fuels. The Alberta feeding industry may not move to Saskatchewan, more likely the feeding industry will move to the United States. At least one of our two major packers would move with it.

Assuming the feeding industry does move to the U.S., Canada’s beef export business would completely disappear. We would become exporters of live cattle not beef. Canada may not be able to provide enough finished cattle to supply our own domestic market. This could happen within the next five years.

Faced with the highly visible movement of large volumes of live cattle to the U.S., American cattle producers will successfully lobby their federal government for countervail and anti dumping legislation to further bolster their industry and protect them from Canadian imports. This will happen within 3 years.

I see some of the large feedlots disappearing and smaller 5000 head or less feedlots taking their place unless government programs continue to prop up the 100 or so big players presently operating in Alberta. Canada’s cattle herd will decline from its 2006 level of 15 million head to 10-11 million head, about the size it was before the Canada U.S. Trade Agreement (later NAFTA) was signed in 1989 and the removal of the Western Grain Transportation Act (Crow Rate Benefit) in 1995.

Within a period of 20 years (2009) the U.S. government will have successfully negated any advantage Canadian primary industries would have gained under the free trade agreement while maintaining unrestricted access to Canadian oil supplies.

See:
http://www.statcan.ca/english/freepub/23-012-XIE/23-012-XIE2006002.pdf

[rkaiser]

manifesto - business plan - press release - call it what you like farmer_son.

What do you think of it?

[farmers_son]

See:
http://www.agr.gc.ca/redmeat/01beefex.pdf
http://www.cattle.ca/factsheets/trq_faq.pdf

I think this plan is based upon Canadian beef exports. Prior to 1991 Canadian beef exports were around 100,000 tonnes or less. A number of very significant events happened around 1990; CUSTA, continuous decline in Canadian dollar from 1991 to 2002, removal of the WGTA, and government policies within the United States such as the Export Enhancement Program starting in 1985 which caused a shift in cattle feeding from the United States to Canada and a resulting 500% increase in Canadian beef exports. I think the picture has completely reversed itself and it is very reasonable to suggest that Canadian beef exports will revert to their 1981-1989 levels. Given that non NAFTA imports will continue at or above the TRQ of 76,409 tonnes I would expect that Canada will barely be self sufficient in beef, much less a significant exporter. I think it is very optimistic to suggest that Canada can become a major exporter of beef to the non NAFTA market at the same time as we import non NAFTA beef especially when viewed in light of the paradigm shift in critical success factors for the Alberta finishing industry.

If CAIS was working the loss of our cow herd would be more gradual but given the present situation change will be rapid as cow producers have no reference margin left. I think some of the feedlots do. We are facing some very serious difficulties.

There are problems within Canada’s cattle industry with non functioning markets due to packer control and lack of competition but solutions will need to focus on live cattle not beef exports. Part of that solution will be continuing to improve access for live cattle to the U.S. as a means of introducing at least some competition to the marketplace. I see any solutions that focus on beef will need to directed at Canada’s domestic beef trade which will dwarf any beef exports we may achieve in the next 10 years.

I am glad the previous reference in your press release to a charismatic leader was removed.

Bottom line, the United States has dramatically changed its farm grain policy which since WWII was an export based policy, e.g. Export Enhancement Program to a domestic use policy based upon energy production. This is going to change the dynamics of cattle feeding and cow calf production within North American in ways not before seen by any person living today.

[rkaiser]

Interesting comments farmer_son and as usual backed by your own charismatic style.

I guess you are insulated enough to think your predictions of a shrinking industry and simple live cattle trade as just fine. Me too. But as a representative of producers are you as proud of your predictions?

Do you think that those suffering a worse fate than you are happy to let their leadership talk of needed adjustment while they are seen as expendable?

Do you feel that because of the history you have presented, the future cannot be changed?

How about all of the effort taken to value ad in this province, should we allow those tax dollars to disappear, and accept your predictions of live cattle exports?

You suggested that this manifesto could be seen as political in nature. Maybe it is. Maybe your predictions are also the predictions of the current leadership of ABP. Maybe ABP needs a little positive attitude shift.
What do you think farmer_son?

[grassfarmer]

Manifesto or Plan, that is the most encouraging thing I've seen in Alberta beef politics for a long time, perhaps it could be the start of the sea changes we need to survive.
As for the gloomy(or realistic) predictions from farmers_son - first,thank you for posting that concise look at where you think the industry may go, all discussion is good discussion in my mind.
It seems to be constrained by conventional thinking though and as such is dooming us because we can't think outside the box. It is all based on us trying to feed cattle cheaper in feedlots than the Americans can. If as you predict there is a major downsizing of the cow/feeder sector in Canada that will free up a huge landbase of land that can grow forage, not all could be converted to grain by any means. Given an increase in available pasture at what price would we then be able to produce fat cattle off grass/forage rations? We could restructure to a sustainable grass based production model and market this beef around the world to discerning customers. Bottom line this would be sustainable, this subsidised ethanol nonsense isn't. I doubt the US will be able to fund this for much longer anyway given their current financial woes.

I enjoyed reading the grainnews article on this subject where the writer advocated dumping the fossil fuel model - I'm all for that, In my mind the future is green! Green grass for our cattle, a more environmentally green system of beef production and potentially plenty of green bank notes finding their way into producers back pockets.

[wd9]

Someone has to pay for the 9% tariff in china whereas the soy reduced from 3 to 1% affords better prices to farmers but makes canola look expensive. How else other than in the the basis?

Over 600,000 tonnes booked canola biz was lost in August alone over that tariff change. By now, over a million tonnes. Frustrating.

[cakadu]

How would you factor in the whole biofuels issue?

It is my understanding that it won't be as devastating to animal production as the biofuel process will net distiller type meal that can be used as feed for animals. It isn't all the gloom and doom that is predicted because we have had huge grain surpluses for years and it isn't food quality grains and oilseeds that go into biofuel production. In fact, even as we speak, they are developing grain and oilseed varieties that will be used exclusively for biofuel production.

Part of me feels that the whole grain shortage due to biofuel production is a way to justify hiking prices. Might not be the whole story, but we are seeing grocery prices rise and it isn't solely the result of higher transportation costs etc.

[grassfarmer]

Cakadu, perhaps you are misunderstanding the situation with the ethanol deal. It is because of the cheap "subsidised" ethanol byproducts being used for animal feed in the US midwest that the "conventional" Canadian feeding industry (ie feedlots) are unable to compete on cost of feed with their US counterparts. It's not so much the shortage of grain forcing up price here that is making the feedlots uncompetitive as it is the fact that the US ones are being artificially subsidised.
Of course the whole ethanol thing is unsustainable and may die out pretty quick. Biofuels are a better proposition but still only produce a negligible return on fossil fuels expended. Compare that to properly managed grass and the difference is obvious. I'm real interested in some work coming out of Australia indicating that carbon credits for properly managed pasture should be as high as $100. Now that should alter some peoples thinking on the efficiency of feeding cattle on grass versus fossil fuel grown grains.

[cakadu]

Thanks for the clarification grassfarmer. We have had to deal with the U.S. subsidies for quite some time now, even to the point of there being over-production of all grains.

I have heard rumblings about there being grain shortages in Canada because of biofuel production, which I don't believe at this point in time. As I said, I believe it is a means of increasing prices further down the line and the producer will likely not see all that much more.

I also couldn't agree with you more with respect to the fact that biofuel production is highly inefficient right now and takes far more energy than is produced. The millions being put into biofuel production is what is essentially driving it at the moment.

It will be interesting to hear more about what the Aussies are doing. I don't think we have properly calculated the true cost of biofuels i.e. adding in the cost of plowing up all that land and planting it, increased fertilizer and herbicide/pesticide use etc.

There is no doubt about it, the face of agriculture is changing.

[rkaiser]

Where'd you go batman? I didn't expose your secret identity. I simply compared your thoughts to those of ABP leadership. No answers to my questions - or are you busy getting ready for an AGM or something?

I am personally planning to run from the floor for the board and then run fro the executive as well. Under the name Randy Kaiser.............

[farmers_son]

Rkaiser: First I wish you the best in your efforts to run for a seat on the Board of Directors of ABP.

I thought you were referring to Cowman for a minute. You cannot expose my secret identity because you do not know it, but keep guessing. The opinions and views I express here are my own. I do not see how I am insulated. I have enough debt to choke a horse, no insulation there but I think I can make it. The future is never as dark as it seems but we still need to sit up and take a look around every once in a while just to see which way the wind is blowing.

To reply to your queries….I do not see producers will be expendable although some cows may be. There is no question acres will be diverted from pasture/forage production to grain production just as the reverse happened after 1990. Really the grain fed cattle industry was not truly sustainable in the long term if the Canadian grain industry was destined for financial ruin which would have happened with todays high energy costs if grain prices had not rallied. The true blue cattleman will be producing cattle but a lot of producers are flexible and there is no doubt they will shift production towards grain, meaning fewer cows and less beef for export.

Certainly the future can be changed but we need to be realistic. There are certain economic realities that are beyond our control. Sometimes you have to play the hand you are dealt.

I thought one comment in the manifesto was most interesting…. "Our survival hinges on trade, including trade with non-NAFTA markets, and we require in the long term a more diversified marketplace.” That is very motherhood and apple pie. But the reality is cattle and beef production in Canada had peaked and is going to shrink. In hindsight our survival depended a great deal more on cheap grain prices than it did on beef trade. The growth in the cattle herd and beef exports from 1990 to 2002 was 100% tied to cheap grain on the prairies and a lower cost of feeding when compared to the U.S. That has changed and we need to face it.

I think when Canadian cattle producers talk trade they need to look in the mirror. For Canadians that mirror is the U.S. cattle producer. We can look to our neighbouring U.S. producers who also want to trade with non-NAFTA markets but at the same time seek protections from live cattle and beef imports from Canada and the rest of the world. BIG C offers non-NAFTA trade as the iconic hope for the future without considering that every pound of beef exported would have to be, and is replaced with imported beef. We cannot and will not be expanding cattle and beef production in the present grain market. While there are benefits of trade for the packing plants live cattle prices cannot go up due to market supply and demand factors if we continually replace exported beef with imported beef. And even the Americans are slowly starting to realize that if they want to trade beef they need to be open to imports. Beef trade is not the easy answer. I would remind you that our live cattle prices are set in the U.S. minus a basis and it is live cattle trade that puts jingle in my jeans. Beef trade without competition for live cattle benefits the packers as we clearly saw in 2004 when the Canadian packers were selling beef to the U.S. at U.S. prices but paying Canadian producers rock bottom distress prices because we did not have the ability to ship live cattle to an alternative competitive market.

There are solutions but they are not easy solutions. It is important to offer hope to producers but it must be realistic hope and if hope is continually offered but nothing concrete comes of it producers will seek their hope elsewhere or leave the industry. We need to be careful that we offer doable solutions and even though results may be slow in coming it is important to base the industry on a solid foundation. I assure you that the problems Canadian producers are facing are the same problems as producers in other major cattle regions face on a daily basis. If the packers are global in scope then any producer solutions must be global in scope. In broad terms I see BIG C as having at best an Alberta and a little bit of Saskatchewan focus. I think the scope of the focus is too narrow and the problems are bigger than that. But that is just my opinion. Even though I agree with some of your efforts I believe BIG C will not be successful in significantly changing the financial fortunes of Alberta and Saskatchewan cattle producers in isolation from the larger live cattle industry. We can do a little to improve the live cattle basis between Alberta and the U.S. but if we are going to fundamentally improve the live cattle industry we will need to form alliances and harmonize our efforts with other producers in other regions. Just my opinion but I am entitled to an opinion just like you.