Let¹s Get While the Gettins¹ Good

[farmers_son]

You people are confusing the price producers get paid for food with the consumer demand and say if we are not getting paid then there must be no need for our product.

The retail price of food continues to escalate while the producer price tends to be declining. This is not a problem of a lack of consumer demand rather our inability to capture our share of the consumers food dollar. Ceasing production would be an incorrect response to this situation.

Chronically low farm returns is not feature of supply and demand. There are other sectors of the economy that produce commodities that are affected by supply and demand yet those industries enjoy competitive pricing for their production. The energy sector comes to mind. If the junior oil companies had to sell their gas and oil to Cargill and Tyson they would be getting under $10 a barrel.

[madcow]

f_s ,you hit the nail on the head!

[cakadu]

There is a correlation between the two, farmers_son. If we keep growing commodity crops, then we will get commodity prices, which are sadly no where near what producers should be getting paid for them. If AB was like Sask where there wasn't as much call for feed barley, where would the price of barley be here?

Getting into a value chain where your products - even the commodity products - are in demand, will see the producer getting paid more for their product. To grow Red Hard Spring wheat when there really isn't a huge market for it will result in lower prices. Most bread we get from stores today is made from frozen bread dough, which is not made fro RHS wheat because there are other varieties that lend themselves better to making frozen bread dough.

What other sectors are you referring to when it comes to supply and demand and getting paid appropriately?

Customers aren't necessarily the ones that end up buying your product in the store - there are many forms of customers and if they don't want your commodity to turn it into something else, then what do you do with it? We need to grow what we can sell, not sell what we grow.

I have no dispute at all with the fact that processing sees the lion's share of the prices paid with respect to agricultural goods - there is absolutely no doubt in that.

That is why in some respects having things like growth in the biodiesel/alternative fuel area will be a very good thing for producers as that will create a greater demand for these commodities i.e. from biodiesel makers and from the food sector.

[cakadu]

Linda the more value added to a product the better the return. We have been content to produce the raw product whether it be grain or livestock and let someone else add value to it and reep the benefits.

Some producers have added value to their product and are doing very well. I am thinking of dairy producers that add a yogurt component to their operation thus adding value to their raw product which of course is milk.

The main incentive for folks to do this is to capitalize on opportunities for added returns on their investment. We will always receive what the market will pay for our raw products and it is doubtful if that will ever change. The success our farmers have achieved in yields of grain crops, pounds weaned per animal in the livestock industry etc. is a credit to good management practices and using whatever technologies are available to their particular sector. It is unfortunate that the financial return isn't fair value for the input costs and labor involved.

[cowman]

The fact is we can only grow certain crops due to our climate and although through technology we have been able to do a better job on some things we just can't compete on certain crops.
At one time the prairies were basically one big grain basket that exported a lot of grain but was barely self sufficient in cattle and hogs? Government policy actually encouraged grain production over livestock.
After world war two production started to rise dramatically all over the world, due to the introduction of chemical fertilizer, sprays, better varieties, better equipment. Eventually we were producing too much for the market(the paying market)? Various government schemes helped mask the problem.
When the government scrapped the CROW the writing was on the wall? The end of the export trade market for grain? Let's face it when the freight from Red Deer to Vancouver is worth 50% of the product price it doesn't make much sense to sell it?
The only option was to find a way to sell our feed grain locally...and this led to an expansion in cattle and hogs. Soon we had created a surplus...that found a ready market south of the border.
Now you might contend that farmers are dumb to keep growing what nobody wants but the fact is(in central Alberta) our options are limited? Barley really does well here, so does canola, so does CPS wheat. Everything else is pretty iffy?
Farmers who have diversified out of this type of production, even in a small way, have quite often found it was very much a money loser! A good example is the group of producers who went into black currents? They found out that the marketing and manufacturing head aches weren't really worthwhile to continue!
The concept of how farmers are going to take over the whole value chain is not very realistic? The idea of hey we build a cow plant and we will get paid accordingly...is that realistic? Who are you going to sell to?
Cargill owns Caravelle meats...I believe the sole provider of hamburger patties for MacDonalds as well as Wendys, in Canada? You going to try to muscle that market away from them? Sorry...it just won't happen? Now they probably will be very happy to buy your cow meat...but at their price...not yours...and probably a few cents less than what it costs them to kill cows!
Your only hope of achieving anything of value is to build your own fast food joints....and then you're going to compete with MacDonalds...I don't think so.
But somehow or other all these farmers, who don't have a clue about the packing business or the fast food business are going to run these guys out of business? I suspect the likes of Cargill/IBP will teach them a valuable lesson real fast?
The other way the producer might be able to survive in this game is for the government to legislate some protections for the little guy against the giants? But is this realistic? Has the government ever indicated they would support this sort of thing? I don't think so?

[farmers_son]

Cowman: The big companies are more vulnerable than you imagine. They are completely dependent upon being able to purchase our live cattle cheaply. As for Caravelle, they are not buying cow beef from western Canada now. Farmers do not have to take over the food value chain. All that is required is to inject fair competition for our live cattle to make the marketplace work. It is not in our best interest to run Cargill and Tyson out of town, but it is in our best interest to see we get paid fair prices for our live cattle.

[cowman]

Now I'm not sure about this but Caravelle had a grinding plant in Calgary that served Macdonalds and Wendys? It was still very much in operation around 1988. Many people think cull cows simply end up as hamburger when the fact is probably quite a bit less than 25% of the carcass goes for hamburger. A modern cow breaking line leaves very little for grinding.
How do you create a competitive market without safeguards in place to stop predatory business practices? IBP and Cargill are both famous for eating losses to eliminate the competition. Why would any new kid on the block expect anything different?

[farmers_son]

See: http://www.cargill.com/news/news_releases/2004/040728_caravelle.htm

Not that it matters but Caravelle Foods has plants at Spruce Grove and Brampton. To the best of my knowledge Caravelle does not source any beef from western Canada, at least since BSE. Caravelle is a partnership between two Ontario packers.

Are you sure Caravelle supplies burgers to Wendys? Caravelle had an exclusive arrangement with McDonalds that would likely preclude sales to a competitor.

Re competition. It could be done. But not by conventional means and not with a conventional packing plant business structure, as you say a new kid on the block. It would take an unique business structure with performance measured by narrowing of the basis between Canadian live cattle and U.S. live cattle rather than ROE. And as long as IBP and Cargill wanted to eat losses incurred as a result of bidding up for live cattle that would be just fine by Canadian producers.

[myopinion]

Well Albertan's you think seperating is a great idea now that the oil and gas sector is booming. Everything I see in Alberta is based on one industry, yes it is very profitable right now but do you seriously think you can ride this out for the next 500 years. On your own you will have to! Also you want one ally and one neighbour, the U.S. Doesn't seem to me to be a well thought out plan. To have a export based economy should you not own a port, maybe consider trying to get B.C. on your side so you can access the world market. Better yet Talk to Sk and Mb, Churchill has a port as well. Yes we are all resource based economies but then at least it would be diversified as Sk and Mb are sitting on huge mineral deposits and a well developed mining industry. All I am saying is open your eyes Alberta, you are not the only place in Canada that has potential and if you want to turn your backs on everybody else expect a kick in the Ass coming someday.

[cowman]

Well thats your opinion and you are entitled to it! In the end it will be the people who decide not you or me. BC is almost more alienated than Alberta and Saskatchewan is coming around!
To think that oil and gas explain away Western Alienation is simplistic? Try looking at the exploitation of the region over the last one hundred years by central Canada? Try to get the idea out of your head that we are greedy and only interested in keeping the wealth to ourselves. The theme of the original Reform party was "The West Wants In"! Well we saw how that worked! Soon the theme might be "The West Wants Out"!
We can never attain our goals in the west as long as we are outvoted by central Canada...it is democracy at its very worst...where the majority(Ontario and Quebec) can outvote and **** the minority!
A triple E senate could have saved this country, but Martin couldn't even appoint our elected senators? Instead he put in some hacks. Yea, that is really going the distance to stop western Alienation!
An elected senator has credibility? Just like an elected MP? As the senate now stands they are absolutely worthless, nothing more than a retirement home for old Liberal bagmen.
In the end Alberta and the west will decide its fate, just like Quebec will do? Ontario will have nothing to say about it.