Your Reading List

What Fix For Beef Industry?

I recently posed the question to readers, “What is the fix for the Canadian beef industry?” and got some good feedback from several producers and industry observers.

In short, there doesn’t appear to be any silver bullets that will soon return the industry to improved profitability, but following are thoughts readers had to the above question (and if anyone else has thoughts or suggestion, don’t hesitate to send them along. We can always revisit this topic in another issue.)

RICHARD BAILEY VETERAN, ALBERTA

I think the first question is what will the industry realistically look like when it is “fixed?”

KEITH DOERKS ON TROCHU, ALBERTA

In my humble opinion I do not believe it will get fixed. When there is no competition, so to speak at the packing level there is no true price discovery. Nilssons and Cargill really don’t care what happens to the industry simply because they are private corporations and they could live 100 lifetimes on their accumulated wealth.

I believe the events during BSE, when the border was closed to producers, but not to packers, speak to my (low) opinion of these two companies.

What makes me wonder, though, is if a producer would have received just a few cents more for his product during this period, if there would have been more willingness to stick with this industry now.

I haven’t forgot about taking five cows to town and bringing home $800 for all instead of one. On the way home I heard Brian Nilsson on the radio stating how everyone in the cattle industry was in this together. He was right. I was in it to lose and the packers were in it to gain. This single event in the industry turned out to be one of the greatest equity transfers that ever happened.

I also noted on my (auction mart) cheque that all the fees stayed the same. Glad we’re all in it together. The rising dollar isn’t helping things out either. Unlike most, I am aware of how cattle are priced relative to the U. S. futures. Right now (December) with a normal basis our fat market should be about $0.84 not $0.77. I do realize there are extra costs in this country, but are they amounting to an additional $90 to $100 per head?

I would love to know if we have regained any lost markets because of our approach to specified risk material. At least the regulators can wrap themselves in our flag, run around, and beat their chests saying look what we have done. Kiss my ass. I want to see something that puts money in people’s pockets, not another cost borne by the producers. Speaking of government geniuses, I read with interest the articles on the latest slate of ag programs that are designed to keep the producer afloat in tough times. I guess they work if you are strictly in one industry.

My experience was not a good one. I had 400 cows and farm grainland also. In 2002 those cows according to the Canadian Agriculture Income Stabilization program (CIAS) inventory model were worth $1,200 (a few years later about one-third of that). In February 2007 I woke up one morning, didn’t recognize myself, walked to the phone and called the trucks and the auction mart. I took home $450 per head.

To this day I am fine with what I received. It was the best thing I ever did. My stress is gone and I have a life again. I can take holidays and I can go to the lake whenever I want. I don’t have to get done farming to go ranching, while telling the wife and kids I am too busy to go. My point is, that when you are consistently losing money, why bother any more. Good thing I woke up that morning.

But, getting back to the CIAS program, in 2002 cows were valued at $1,200 and in 2007 they were $450. Sounds like I had a cash loss of $750 over six years. Not according to the people in the CAIS department. You see every year there was a steady erosion in the inventory value that is used to value the cows. I knew this was the way it worked, but this point goes to address the amount of equity that I lost. By the way, I did make a point of ensuring the geniuses that design these programs knew about it. Their response was that the cows were worth $750 each on Jan. 1, 2007 and that the program would work for me. But, not so fast. Being a grain farmer, my inventory values rose enough to offset my loss. Again, sadly I knew this was going to be the outcome when I filed the paperwork. So much for programs and how well they work.

I guess I just don’t see a future in the cattle industry, when you can’t see any light at the end of the tunnel. And let’s face it, if all one can expect to make is $50 per head going forward, you’d need 1,000 head just to survive. You might as well get a job. Hell, even teaching sounds good to me. Three months off and benefits and no threat of ever losing your job. So again, why would anybody stay, yet alone, enter this industry? It is unfortunate this industry has gone the way it has. Seeing that our livestock industry is in shambles, I was wondering if maybe we could have the Crow back. As for myself, with every end comes a new beginning.

I have, in addition to my Alberta farm, started another one in Saskatchewan. At least when I put on crop insurance I know what my downside is and what my risk is. This is something I could never do in the cattle industry and that is the problem that needs to be fixed. Unfortunately, I don’t think it will ever be addressed. What we have now is a case of the gate is open, the cattle are gone, and the politicians are standing with their rose-colored glasses on — waiting for them to come back. But, guess what, they’re not coming back.

NORMAN STORCH HANNA, ALBERTA.

A few brief thoughts that arose from your question of what is the fix for the Canadian beef industry.

The greatest impediment to change to this point has been trying to find a solution to a multiplicity of problems in a very diverse and fragmented industry.

As a 200 head cow/calf producer, I am too big to be small and too small to be big. We are mixed farmers at Hanna. We understand drought and adversity out here.

The beef industry is one that feeds off someone else’s misfortune. For one segment to make a profit another segment has to suffer. It has been very rare for the whole beef chain (including barley growers) to be profitable at the same time.

Certainly the days of producing commodity beef are over for the most part. If that is the case, then the days of the mega processors are numbered as well.

Regulation is strangling the industry and restraining the entrepreneurial spirit that could move our industry forward. Outcome-measured regulation is all that really matters for safe and wholesome food. If, as in the “old days,” I could start a sausage plant in affordable surroundings, and prove by testing that the product was safe, then I would have the ability to grow a business. Everything worth while starts small. Many more people have suffered from hamburger disease from meat processed in a mega plant than gotten sick from making homemade sausage on a clean kitchen table.

Successful business planning always starts with a market pull and produces a product to meet that market. If the consumer favours the product, there is success. We have a number of specialty beef producers who are meeting a demand they have cultivated. Perhaps we need to replicate those specialty markets locally 100 times over and help facilitate export from those smaller operations. Not efficient, not practical, not profitable, well neither is me taking my 200 calves to the local auction, putting them into the commodity stream we have built to service the mega plants that market by the tonne rather than by the kilo.

In the 1990s our family and five other families worked long and hard to establish a sheep dairy industry in this province. After 10 years of fighting the system we gave up.

The support network available to us at the time was only interested in volume. How much could we produce? How many people could we employee? It did not seem to matter that the relatively small amount of product we produced was sold profitably and the potential for growth was significant. The large specialty cheese plant built in Ponoka by Saputo sits empty to this day. It seems like that same system is standing in the way of change in the beef industry today. It may well be that we need less cows. Selling half as much for twice as much seems like progress to me. Maybe grass fed is the answer for some. Hormone free or UTM BSE-tested markets seem to be out of our reach because the large plants cannot find a profitable way to segregate the carcasses.

I marvel at the way my university grad kids embrace and accept change and here I am in an industry that seems to go out of its way to resist change. The fix does not exist. Solutions found to meet identified markets, that are supported and encouraged by the regulatory system, will ultimately be sustainable.

We are the solutions!

ED CURRY YOUNGSTOWN, ALBERTA

Since you invited comments here are my two cents worth.

The most important thing we can do for the viability of the beef industry is to keep our regulatory burden comparable to that of the U. S. The enhanced feed ban has been a useless and expensive mistake.

About one cow in a million has BSE, yet we cannot make fertilizer from offal!!?? A dead cow is hazardous material!!?? Our business is based on selling dead cows to people for food. Harmonizing our slaughter standards with our southern neighbours would improve our competitiveness and should be done.

Presently our governments are proposing another expensive and useless exercise in the ID tag tracking plan. It has the potential to inflate our operating costs and interfere with cattle marketing for very questionable benefits.

So there you have it. When the man says he is from the government and is here to help you… just say no! Let’s get rid of the enhanced feed ban and resist further restrictions on the sale of cattle to improve the beef business.

Which one of these photos best represents the present or future of the beef industry as you see it?

MORGAN WILSON NANTON, ALBERTA

I’m not sure I have any fixes for the industry. I’ve just weaned one of the best looking calf crops I’ve ever had and barely got $600 for the steers and nearly gave the heifers away. I do know that the internal bickering by the groups that claim to know it all (BIA et al) have reduced our industry’s credibility in the eyes of our international customers. They (the bickerers) claim that Canadian Cattleman’s Assoc. (CCA) and Alberta Beef Producers (ABP) have lost credibility and some folks (including the provincial government) are listening to them. If it wasn’t for those dedicated producer groups, our entire industry would have been flushed by the likes of R-CALF and Oprah and other paranoid influences.

All hail the Canadian consumer for supporting us — let’s keep them happy! Let’s keep building partnerships with the consumer front line at the burger joints, restaurants and meat counters. But, lets keep on being diligent marketing our products abroad.

The Europeans have always been reluctant, but we cannot give up our efforts to trade with them. If we do, that will be a precedent for them to close doors to other commodities. We have to help keep our toes in that door. The Asian market is very lucrative. We have to be able to approach them with one confident voice, not fractured messages. They value tradition and protocol. If we are fractured, they will see it. Any excuse to source elsewhere will cost many millions in potential trade.

Is anything new? I’m sure you saw this happening when Dad (Stan Wilson) was president of the CCA and countervails and subsidies were the thorns in our sides then. Our industry is fast becoming divided — stress will do that. We need to be united, strong, co-operative and confident. I have confidence in the people who represent our industry at the provincial and national levels.

Sure, there are paradigms that need to be challenged, that’s why producers can participate. There doesn’t need to be a noisy revolution, that just looks like instability and incompetence in the eyes of our customers. You know how we felt about the R-CALF disruptions; even the NCBA disagreed with them. Let’s not go down that road ourselves. I’ll continue to send my check off to ABP with the knowledge that people with expertise and dedication will help position our industry on the world stage among the leaders.

My thoughts only, or are they?

ANDY SIRSKI, WINNIPEG, MB GRAINEWS EDITOR (RETIRED)/CONSULTANT

Sadly there isn’t as much optimism in the beef industry as I would like to share with you. But I will give you some ideas on why I think the beef industry is in for some tough times for years to come.

1. It all started when EEP (Export Enhancement Program) cut $1 a bushel off the price of grain, which knocked a buck off our grain prices. Suddenly a farmer could buy grain for less than he could grow it. The livestock industry thrived.

2. Prices do go in cycles. They peaked in 1951 according to Boyd Anderson, and then not again until 1969. That was 19 years. Good times returned in 1984 and ended with BSE in 2003 — 19 years. Hmmm. Coincidence? Not likely.

3. China has 400 million households. If each one just ate the equivalent of one loaf of bread a week, the country would need to import 12 million tonnes of wheat. It’s not out there. Add in ethanol, and there are new demands. Mind you, the offsetting factor is that if the cow herd and hog barns shut down to half, the demand for feed grains will drop and so might the price, but other crops are paying better so farmers won’t grow feed unless by accident. So, I believe what used to be the ceiling on the price of crops will now be a floor. That is bad for livestock.

4. COOL (country-of-origin labelling)

5. Meat losing its appeal in diets.

6. Livestock industry has not learned to market our meats.

7. Higher Cdn $$ not likely to drop anytime in the near future.

8. Feedlots either have their own cows or contracts with cow/ calf and backgrounders, so they won’t need to pay top dollar to fill the cutting floor. Without top dollar there will be no margin feeding livestock.

It all adds up to what I would call a permanent shift for the livestock industry. When EEP hit, the mid-sized farmer disappeared. It was either dual career or larger farm or keep livestock and a larger farm.

So low-cost producers who have gone from 150 cows to say 400 cows or more should be okay. I run $300,000 worth of stocks and sell covered calls on most of them. That is like running 400 cows. I make a lot more money with a lot less risk, and have reversible decision with a lot less work than a 400 cow producer. They may have to learn a new skill.

The other producer who keeps cows, will be the dual-career guy who has 50 head, and has a decent job or a business.

I think anyone who does not recognize this permanent shift, will be raising livestock for nothing for years to come.

About the author

Field Editor

Lee Hart

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

Lee Hart's recent articles

Comments

explore

Stories from our other publications