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New Marketing Structure Proposed For Canadian Beef

Whether it’s been on their radar or not, cow-calf producers should note there is a re-organization taking place in the marketing effort of the Canadian beef industry.

And while it doesn’t affect the day-to-day operation of farms and ranches per se, the success of this marketing effort ultimately influences the consumption of Canadian beef at home and abroad. And every time you get another two or three families in the world eating more Canadian beef, it means you can probably add another replacement heifer to the herd, and hopefully the calf from that heifer will be worth a little more next fall. And when you talk about billions of dollars worth of beef trade and economic beef industry activity, the collective effort is significant.

The two primary agencies involved in marketing for many years are: — the Canada Beef Export Federation (CBEF) which is responsible for promoting Canadian beef outside of Canada, and the Beef Information Centre (BIC) with beats the drum for Canadian beef at the retail, restaurant and commercial food level in Canada and the U.S. Another important, but perhaps lower profile agency which is integral to the whole process is the National Check-off Agency which collects and manages the $1 from every head you sell to help fund marketing and research.

So there have been three agencies — CBEF, BIC and National Check-off — all involved at some level in marketing Canadian beef. That meant, three offices, three boards with 40-some directors, and three administrations all fairly independent of each other working toward the same end — to get more people in the world eating more Canadian beef.

The plan unveiled in early January by a body called the Canada Beef Working Group (CBWG) is to create a new single agency called Canada Beef, which brings all three of these entities under one agency roof, as one big happy family. (Perhaps I shouldn’t rush things, because every time you bring two or three cow herds together, it takes a while to sort out the socializing. I know people are smarter than cows, but let’s face it, any time you reorganize or merge a business it takes a while for true-blue happiness to set in.)

But the concept behind this merger or blending of the marketing families is to create a much more unified and co-ordinated approach to beef marketing in Canada and around the world, and hopefully save a few bucks.

As Saskatchewan beef producer Brad Wildeman, who co-chaired the CBWG along with Brian Ross, rancher from Estevan, Sask. and a CBEF director, said in a recent press conference — there was nothing wrong with what BIC and CBEF were doing before, but the single, more co-ordinated, under-one- roof marketing approach makes more sense. And I would bet anyone who has ever travelled 20 miles in different directions to bring cattle to pasture, can appreciate how nice it would be to have everything connected to the home place.

So what would the new agency look like? It would be one organization called Canada Beef headed by a new, as-yet unknown CEO and then within that would be the three divisions responsible for BIC, CBEF and check-off activities. It is estimated the efficiencies of a single agency would generate a savings of $1.3 million per year (including about 12 fewer jobs). Head office would be in Calgary with a satellite office(s) in Ottawa, or somewhere in Ontario much like there is now. Some money saved, and the big feature is a more co-ordinated approach to the marketing effort.

So what are some of the figures under the current structure? The total budget to operate BIC, CBEF, Beef Cattle Research Council (also supported by check-off) and the National Check-off Agency is roughly $22.5 million for the 2010-11 year. That’s their total operating cost.

The national check-off itself, that $1 from every head sold, contributes roughly $5.5 million toward the cost of the above agencies. Actually, the National Checkoff Agency does a pretty good job of parlaying every check-off dollar into multiples of government funding. Historically there has been a three to one return on each check-off dollar for marketing and a nine to one return on each check-off dollar for research.

Historically the national checkoff has collected about $8 million annually from beef marketings, but last year with lower marketings and with Alberta tinkering with the voluntary/mandatory aspects of check-off, receipts dropped to about $5.5 million. But for 2011- 12 the check-off is forecast to settle out at about $6.5 to $6.75 million. Also to be added to the kitty, after several years of negotiation, is a new import levy on U.S. beef coming into Canada which is expected to generate $500,000 for the checkoff agency.

So ranchers and other taxpayers are putting about $22.5 million into the beef marketing effort each year, so what kind of results do they get? BIC says total domestic spending at the retail level for beef was about $9.6 billion, with another $2.3 billion in wholesale beef exports to the U.S. in 2009. Looking at beef exports to Canada’s top 10 customers in the world, CBEF pegs the value of beef exports at $1.26 billion in 2009.

So anyway you slice it, the $22.5 million spent on marketing and research generates a few billion dollars in beef sales at home and abroad. Unfortunately not enough of those billions trickle back to the primary producer who may be freezing parts off this winter trying to keep the Canadian cow herd fed. But that is a bigger issue than marketing.

Provincial beef producer associations have already supported the concept of creating the new Canada Beef marketing agency, now it is up to the CBWG to float the proposal passed BIC, CBEF and National Check-off Agency boards. Assuming the new Canada Beef idea is accepted there, the CBWG hopes this new calf of an agency would be in on its feet in June. Then comes the walking and running part.

Lee Hart

INDUSTRY NEWS

Gloria Fantin,of GA Fantin Services based in Calgary, who has long been involved with the Canadian livestock industry, has recently taken on duties as secretary of The Canadian South Devon Association. The association can be reached at (403) 289-3836 or at [email protected] or [email protected]

The ManitobaGrass Fed Beef Association continues to develop markets and services for members and the grass fed beef products they produce. The association has just launched a new website and has posted a current newsletter. It is looking for more growers and new retail partners. For more information visit their website at www.manitobagrassfedbeef.ca or contact Corie Arbuckle at (204) 254-4192 or email: [email protected]

DO AS YOU’RE TOLD

A beef producer at a recent conference was telling the fella next to him about an episode with his wife, who is decidedly blonde.

Apparently a Saskatoon radio announcer one morning said: “We are going to have eight to 10 inches of snow today. You must park your car on the even-numbered side of the street, so the snowplows can get through.” So the good wife went out and moved her car.

A week later while they are eating breakfast again, the radio announcer said, “We are expecting 10 to12 inches of snow today. You must park your car on the odd-numbered side of the street, so the snowplows can get through.” The good wife went out and moved her car again.

The next week they are again having breakfast, when the radio announcer says, “We are expecting 12 to 14 inches of snow today. You must park….” Then the electric power went out. The good wife was very upset, and with a worried look on her face she said, “Honey, I don’t know what to do. Which side of the street do I need to park on so the snowplows can get through?”

With the love and understanding in his voice that all men who are married to blondes exhibit, the husband replied, “Why don’t you just leave it in the garage this time.”

FACS BOARD MEMBERS

Mark Silzer, a bison producer from Humboldt, Sask. has been named the new chair of the Farm Animal Council of Saskatchewan (FACS).

Also serving on the FACS board are:

Dr. Betty Althouse, representative of the Canadian Food Inspection Agency;

Bob Brickley, producer representative of the Saskatchewan Equine Ranchers Association;

Dr. Greg Douglas, provincial veterinarian, representing the Saskatchewan Ministry of Agriculture;

Dennis Edwards, producer representative of the Saskatchewan Cattle Feeders Association;

David Entz, producer representative of Saskatchewan Milk;

Dr. Gary Hoium, representative of the Saskatchewan Veterinary Medical Association;

Dr. Murray Jelinski, industry consultant;

Tim Keet, producer representative of the Chicken Farmers of Saskatchewan;

Joe Kleinsasser, producer representative of SPI Marketing;

Bob Mahon, producer representative of the Saskatchewan Stock Growers Association;

Dr. Grant Royal of Intervet Schering-Plough Animal Health, representing the pharmaceutical Industry;

Regan Sloboshan, producer representative of the Saskatchewan Egg Producers;

Harvey Wagner, representative of the Saskatchewan Pork Development Board; and

Tim Wiens, immediate past chair, representing corporate agribusiness.

SNOW DOESN’T WORK FOR HORSES

Horse specialists say leaving horses to eat snow in winter as a water source is not a good idea.

Here’s why. All animals do better if they have access to a source of water that has had the chill removed (between 4 C to 7 C). The biggest issue with horses eating snow for moisture is that owners do not check the condition of snow frequently enough to know whether horses can paw through it and actually consume sufficient snow for a reasonable level of water intake.

Also if horse owners are not careful when relying on snow as a water source, horses become more prone to impaction colic.

It is not possible for a horse to consume sufficient water from eating snow.

Horses basically need three pounds of water for every pound of dry feed intake, which means the average horse (1,000 lbs.) will be eating 20-plus pounds per day in the winter. This means that it will require 60 pounds of water or six-plus gallons. If on average it takes 10 gallons of snow to make one gallon of water it means the horse is required to eat 60 gallons of snow. This is not going to happen.

WSGA REPORT

The Western Stock Growers Association has issued a statement on changes it sees as necessary for the future well-being of the beef industry.

Bill Hanson, WSGA president, believes that all cattle producers should have a firm understanding of new livestock inventory num- bers and how these numbers may impact their own operations.

The WSGA says:

What we have now is sort of a good news/bad news scenario. As Canadian cattle numbers shrink, cow-calf producers will receive more for their calves. Unfortunately our industry may have overshot the critical mass mark in terms of numbers of cattle needed for a vibrant industry. As cow-calf producers exit the industry a ripple effect continues further down the chain causing a reduced need for truckers, suppliers and medium sized feedlots. Some Western Canadian auction markets may be the next to go with significantly reduced cattle numbers.

Fewer numbers will mean harder start up conditions for new value chains and value-added beef processors. What we don’t want to see is Canada continuing to lose critical infrastructure and becoming a big pasture producing feeders for the U.S. market.

So, what are some of the Western Stock Grower solutions?

Reduce regulatory costs imposed on our industry by Federal and Provincial governments. These costs are in excess of $150/head and become ever more significant with the appreciation of the Canadian dollar. And we are not finished adding regulation to our industry. The federal government is currently drafting legislation for a national traceability framework. Although cow beef will be in short supply, Canada will still need to export 56 per cent of our finished cattle. High regulatory costs make it very difficult to compete globally, and so these costs must be reduced in order for Canada to be competitive.

Deal with Canada’s protectionism of our auto industry and supply managed agriculture (poultry and milk), as both industries have severely hampered potential trade deals for fed beef. A current example is Canada’s beef negotiations with South Korea being held up by our protection of the auto industry. On December 3, 2010, the U.S. announced a negotiated reduction in tariffs for South Korean trucks and cars in return for greater beef, chicken, and pork access. We, as producers, need to ask ourselves if the Canadian Cattlemen’s Association has pushed our Federal government hard enough on these issues.

Stop being self-adsorbed as an industry. Last week the big news in Alberta was the reinstatement of non-refundable provision for the $1 per head national check-off. The big news globally was the U.S./South Korea trade deal which will see the elimination of a forty per cent tariff on imported U.S. beef. That Korean duty is calculated on the import value of the processed beef and could easily equate to $1,000 per head on a carcass equivalent basis. Canada spent the summer focused on re-organizing our marketing tool chest (BIC and CBEF) while the Americans simply went out and made a deal — what appears to be a good one at that.

Realize that we will gain new markets only by incremental access. Not all beef from every Canadian animal will qualify for every market — and that is OK. That is how we have achieved access in the markets we have regained since 2003.

Participate in diversified or niche markets that are critical to the future survival of our industry. These markets may vary from Halal, hormone free, organic, grass fed, all the way to a value chain’s ability to provide full traceability for the latest Canada/China deal that Canadian commodity beef was shut out of.

Value chains have been severely hindered by the lack of co-operative processing facilities. Our two major packers are focused on north/south commodity beef trade in North America, and are unable to respond to new emerging markets. What we may need is an “incubator” type of kill and processing plant capable of handling varied small product runs, but with enough capacity to sell left over beef cuts into the domestic commodity market. This is a big issue to tackle in the face of shrinking cattle numbers, but a solution that will definitely pay dividends into the future.

Is the lack of kill facilities for new products held up in part by high regulatory costs and Canada’s protectionism of certain industries? No doubt. Will our beef industry be stuck at these low inventory numbers, with Canada supplying highly regulated beef to protected industry consumers in North America? Possibly — but WSGA is committed to moving forward in a new direction with new products, new value chains, and new markets.

Cattle producers have responded predictably and appropriately to the market signals that have been made apparent. They have reduced supply in the face of ongoing losses that have eroded equity beyond a tipping point. Excluding breeding cows from the CAIS Inventory Transition Initiative, long list SRM policy, and stronger Canadian dollar haven’t helped. However, markets are also forward looking. Producers’ response to the lower cowherd will be, in part, determined by government and industry initiatives that implement the proposed solutions.

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KEEPERS &CULLS

About the author

Field Editor

Lee Hart

Lee Hart is editor of Cattleman’s Corner based in Calgary.

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