Check-off

[grassfarmer]

Come now Farmers_son, I wasn't suggesting we export to Australia versus the US. How about picking a high price market like Europe or some parts of Asia?

[per]

We've talked plenty about the ALMS, packer ownership, government control, other industry groups, the US market, etc... This thread was about the check-off f_s. It's not a case of avoiding the big issues by talking about the little distractions. It is a case of some of us are capable of discussing a variety of subjects. Are you trying to distract this discussion because you are uncomfortable with the topic?

[Sawbones]

I think we should concentrate what we agree on and try to achieve a solution.
1) The cow/calf sector is in serious financial distress
2) There is no trickle down from packers to producers
3) We need to develop alternative markets other than US
4) We need to get our of the commodity mindset
Others that may be contentious
a) The check-off is not giving us the desired return on our investment
b) The government does not have to control all aspects of our production
c) A one size fits all brand will not allow that differentiation that will deliver the results that we need
I believe that we need a choice in our packing plants. Counting hook space and # of animals to be slaughtered does not equate to maximum profitability for all sectors. We need flexibility and ability to access many different markets structure. We have the facilities but they are currently in a financial wreck. We can find the financial resources to purchase these facilities but we do need government assistance to backstop the startup costs until these plants can be operational. This could take 2 years. Plant space could be leased for as low as $18/head. Operational costs however would be quite variable until these plants are at capacity and these are the costs that would have to be covered. In Western Canada, we have the Balzac plant, Natural Valley plant, and the Winnipeg plant all originally financed by producer dollars. They have the capabilities of EU certification as well as Hallal slaughter. In Eastern Canada, there is Genecor and the Atlantic Beef. These plants could be used to develop new markets and once the value chains are established, processing could be transferred to the two major plants without the fear of them taking over the markets themselves and excluding the producers. Check-offs could be directed to these plants to help offset some of the start-up costs

[farmers_son]

Interesting comments…I have always been a supporter of producer packing plants and moving up the value chain to sell beef. I think the long time contributors to Agriville would acknowledge that.

However to be clear my focus is on increasing net producer returns. That has to happen. Potential sales to Asia and Europe are attention grabbing however I am not seeing the benefit at the producer level in the other major beef exporting regions so why would anyone expect to be different here? Part of the problem with beef exports not helping domestic live prices may be the high tariff barriers that exist in Asia and Europe, part of that may be that the consumer price of beef has very little to do with the producer returns for live cattle.

The brutal reality is that I need to improve my farm’s net returns right now and unless I can increase my return from cattle on our farm I am going to have to divert grass acres to grain acres. I do not have two years, five years to make that happen. I need to significantly improve my cash flow situation in the 2009 production year. To me, I do not need pie in the sky. I do not another government agency, I do not need the government forcing me to do this or that or else I do not get support that is genuinely needed.

Alternative export beef markets may sound great but the price of a live steer in the U.S. is 96 cents and the price of a live steer in Alberta is about 82 cents US this morning with the drop in our dollar Monday. That amounts to a basis of 14 cents US or about $200 per calf. Whether or not the competitive situation in the U.S. provides their producers a fair price for their live cattle the reality is their live price is $200 better than our live price. That suggests to me that we have a desirable live cattle export market right next door we should be focusing on more. There will remain a basis between the Alberta and U.S. price but I see the greatest opportunity to improve my cattle returns is to continue to work to reduce the live cattle basis between Canada and the U.S. Some of the causes of the wider basis are artificial non tariff trade barriers that the U.S. continues to have in place on our live cattle imports, COOL is part of that. Some of the wider basis is due to higher transportation costs and that is much harder to fix.

At least in Alberta I think the clear indication from Government is that they will support our two major packers at any and all cost. Even to the extent that they regulate ½ of the Provinces cattle producers right out of business. I guess producers are expendable, packing plants are not. And that may in fact be very true.

The Province of Alberta, as North America’s largest oil and gas producing region could be actively lobbying the U.S. for improved live cattle access to U.S. markets however that would be detrimental to the profitability of Alberta’s packing industry who would be forced to bid up for available live cattle. Instead the Agriculture Department is being shuffled yet again to be some kind of beef exporting wonder but even if that effort was successful it will clearly support the packing industry more than it will support the cattle producer and in fact the cattle producer may be worse off.

In short I think we already have a differentiated beef product and it is called grain feed beef. It is not so much we need to get out of the commodity mindset as we need to improve the net returns from our live cattle. It is not so much that the consumer needs to tricked or cajoled into paying more for a branded beef product through some clever branding initiative. It is that producers are not realizing a fair or adequate return for the live cattle they produce. The high retail price of beef is not filtering down to the producer level. My dream is to see producer packing plants but they will only improve producer returns if they are profitable. I am not willing to see their profit come at the expense of live cattle prices. And bottom-line I do not have the cash right now to be investing in anything other than paying down my debt.

In a lot of ways the Provinces ALMS could be thought of a diversionary tactic to take attention away from very real and immediate problems. We are in the midst of a global financial meltdown and the Province knows it at the same time the Province knows agriculture is burdened with a lot of debt. There is no way the present price of live cattle can afford that debt and there isn't time to be tinkering with or restructing our industry. We need today solutions for today problems. And the solution that stands the best chance of improving producer returns today and tomorrow is to continue to improve and maintain our live cattle access to the U.S.

[Sawbones]

F_S A real example based on my experience was an $8/cwt advantage by having age verified calves ready for Japanese market by slaughtering with Rancher's Beef. That would have equated to over $100/head. In the short term that RB was able to slaughter they had 53% of the Japanese marketshare from Canada. Our local plants are only interested in US and not developing the Korean or EU opportunities. We need specific sales contracts that give some of those dividends back to producers. Selling more hamburger to the US will not increase our profitability and it is more likely that the basis will widen rather than shrink based on their current economic situation

[grassfarmer]

Farmers_son, that has got to be one of the craziest ABP thinking posts you've made.
You state "However to be clear my focus is on increasing net producer returns. That has to happen.....The brutal reality is that I need to improve my farm's net returns right now and unless I can increase my return from cattle on our farm I am going to have to divert grass acres to grain acres."
You then go on to restate the old mantra about the US being our best and only market worth pursuing. If that were the case what are you complaining about? why do you need to improve your net returns right away? You have got your dream market right now - the wonderful US price less basis. Even the huge increase in cost that you claim(falsly in my opinion)will come with the ALMS hasn't happened yet. In fact at this moment you have a substantial cheque in your pocket for that with another to come in January for no extra work (assuming that you have actually age verified in the past). With current APB policy it just can't get any better for you than it is now so why is your farm struggling already?
If you could see through the woolly thinking that seems to cloud the ABP propaganda you would realise that the US market is not the be all and end all that they claim. Producers here are, and have been for a while, going broke supplying that market hence the need for change. And on top of this we have COOL - I read in the paper yesterday that US packing plants have vowed they will accept no live Canadian livestock - which is causing an immediate disaster to hog producers.