Check-off

[Sawbones]

Quote taken from "Past Present and how we can survive fo the Future in the beef cattle business by Benjamin C Roberts
The National Cattleman's Beef Association is controlled by the big packers. We certainly come full circle now, and the producers are still paying for advertisement and research for the packers. Although millions of dollars have been collected from the cattlemen to fund the check-off,there have been fewer than twelve months of profitability for producers since 1994. We have lost a large percentage of our cattlemen to bankruptcy and left them with a lot of debt. Evidently, the cattlemen thought the check-off dollars were spent advertising their product. If any other advertising agency were this successful, they would have gone out of business long before now. Considering past history, why in the world would cattlemen expent any kind of return on money they give to the big packers?"p 112
Much of this also applies to Canada. Cattlemen did not forget how to age verify their calves as the drop in numbers from 2006 to 2007 would indicate. They are merely stating that they need to be compensated for their efforts. By making this mandatory, we are merely assisting the packers in accessing markets for their profitability in a commodity market. The Ab government has spent 2 billion on the beef sector but until it realizes that we need to change the way we do business, no amount of money will fix the industry. They are merely listening to the lobby from the packers that animals killed relates directly to hook space without realizing that a true value chain actually spreads risk and reward from beginning to end and all the costs should not have to be carried by one sector namely the cow/calf producer. The ABP and the AB government have not realised THERE IS NO TRICKLE DOWN EFFECT. We as producers need to have direct influence in the development of our markets but under the current system, a true value chain cannot be developed. We need a directional check-off

[farmers_son]

I agree with much of this post. But you need to realize that ABP is the producer organization that is standing up to the Province with their ALMS and it the producer organization that is doing much of what you want.

Of the three dollar checkoff, one of those dollars has to go to the National Checkoff Agency. That leaves two dollars per head. If you want that $2 or a portion of the $2 to be directional then you are hurting the one organization that is representing just what you seem to want. If you reread the ABP letter from Eric Butters you would see that ABP is the organization that expresses concern over the use of the force of law and financial incentives to drive adoption of marketing attributues such as age verification. ABP is the organization that is expressing concern about the industry being lead by appointed bureaucrats instead of elected producers that represent you.

Presently ABP could be described as a modified one producer one vote system. What producers need to realize is that about ½ of the checkoff is paid by about 100 large feedlots and of that the majority is paid by about 30 mega feedlots. If the checkoff were to be made directional then instead of one producer one vote ABP would be controlled by one check off dollar one vote. If there was a directional checkoff ABP would be effectively controlled by about 30 feedlot operators and I think you know who they would be.

I realize producers are pissed off right now and looking for something to kick in the hopes it will make them feel better. Kind of hard to give George Groeneveld a kick in the pants (they are not letting George get within 50 miles of a cow producer right now) but ABP is always out there and handy. The other producer groups are like a bunch of poodles who are trying to outdo themselves seeing who can get table scraps or at least the ear of the minister. A strong producer organization like ABP can stand up to government and particularly needs your input and support as the Alberta industry is now at a crossroads. I note that you want to see producers have a direct influence in the development of markets. Well that is a big part of what ABP does.

In particular though cow calf producers need to realize their strength is their numbers while the feedlots strength is the amount of checkoff they pay. If you want the checkoff to be directional than you need to know the feedlots will use their strength, their checkoff dollars, to call the shots. So be careful what you wish for, you just might get it.

[grassfarmer]

Absolutely Sawbones, we need a directional or refundable levy. It is the only way to change the bankrupt status quo. This is THE issue affecting the cattle industry in Alberta at the moment, the reason the ABP are running scared and fanning flames of discontent over the AMLS non-issue as a distraction.
I disagree with you on the mandatory age verification though and the introduction of the AMLS. I believe this is the tool that could potentially unlock new export markets and thus give us an alternate market for our beef which is off the North American continent. There is no other way to break the packer stranglehold here.
I would ask you if the AMLS were not being introduced but we did have a directional levy how could producers address the issue of packer control in Canada? My answer would be that without Government involvement nothing would be achieved so we may as well work with an Ag minister who has shown enthusiasm to work with producer groups to alter the status quo. He is a very different Ag minister from his corporate loving predecessors!
I am encouraged that Mr Groeneveld sees the need to secure better markets, returns and a future for producers. ABP is the only organization standing in the way – clearly only interested in advancing the cause of the packers by maintaining the status quo. Time for a change!

[grassfarmer]

Farmers_son/Mr ABP, How wonderful that the heroic ABP are the only people standing up for cow/calf producers interests. Let's just review their achievements over the last year. At the Fall producer meetings last year ABP had the audacity to hand out a flyer explaining that we cow/calf producers didn’t realize how lucky we were to be receiving such high prices for our calves given the feedlots cost of gain. This at a time when calves were easily at their inflation adjusted worst since the great depression. The feedlots who bought these calves did very well but the ranchers who sold them have had to limp through a cash strapped year.
This was followed up by another round of ABP arrogance at the AGM when delegates again defeated producer moved resolutions to control packer ownership of cattle and to allow BSE testing for market access.
As the full disaster of calf price drops worsened the Agriculture Minister of this Province convened a meeting of various producer groups to tackle the crises. Of the B5 group formed, four organisations worked with the Minister and his aim of developing a future for beef producers and one worked against –ABP.
Remind me again how the ABP has protected the interests of cow/calf producers?
On the contrary ABP has done nothing to further the interests of cow/calf producers in recent years, even the Ag minister realizes that. They now appear to have committed political suicide and are trying furiously to back peddle their way into producers good books. Too late I say, the deeds are done.

As for your spin on the directional levy that was too funny. It’s not about whether a few mega feedlots would control the ABP if levy was made directional – you know as well as I do if levy is made directional its game over for ABP. Producers will send their money to other organizations that will truly represent their interests. The newly formed Beef Industry Alliance would be an obvious choice.

[Sawbones]

Farmers_Son, Two major frustrations I have had with ABP are their continued fascination with maintaining exports into the US that is heading into a recession where hamburger will be King and they clearly do not need our product so the basis will continue to grow. Even more important was ABP's endorsement to the changes in the Agristability program. By allowing AFSC to remove the beginning and ending value of the cow, the cow/calf producer lost millions in 2006. The other change was the dropping of the optional/mandatory inventory adjustment without recalculation of the margins. In our small operation of 200 cows, those changes accounted for a drop in potential claim of $37,000. Instead, this was clawed back by changes in the accounting rules, endorsed by ABP and a "gift" was declared. However this "gift of $300 million" was divided up so that feedlots would receive 150% that allocated to the cow/calf producer. ($75/feelot steer vs $52/cow). Included in that gift would have been a payout to packers who would have owned/controlled calves in custom lots to the tune of about another $30 million. I believe the ABP executive owes cow/calf producers an apology for their lack of foresight in this manner.
Grassfarmer. Even if all our calves are age verified, I fail to see why packers would feel any obligation to pass on the profits to the producers. The producer should still own that information and the market will dictate the value and packers will then have to pay. Our present packer situation does not allow us to get out of the commodity mindset and yes we will probalby need government assistance with that transition.

[farmers_son]

Eric Butters letter clearly stated we are at a crossroads. And we are. I started a thread some months back to the effect that the Government of Alberta is taking over the Provinces cattle industry and that is still how I see it. We have a Government in this Province that wants to legislate our industry, in particular the cow calf producer. Some will think that is good and Government knows best. Others like myself have concerns that the Province really does not have the best interests of cow calf producers at heart and instead is looking to support the Provinces packing industry. Now we do need packers like we do need feedlots but I think it is a fair question to ask if the best way to do that is to force costs upon the cow calf producer with no tangible expectation of return from the marketplace.

I was reading in the paper a couple of days ago about a couple who immigrated to Canada from Europe some years ago. What attracted them to Canada was the freedom they could enjoy and the ability to farm as they wish. That freedom is going to be eroded after this year as the Province legislates George Groeneveld's vision of how we need to be doing things. We tend not to appreciate what we got until we loose it and we are going to loose our freedom to make our own choices and our ability to earn a return from the marketplace is going to be reduced.

Now if you think George Groeneveld is on the right track, that Government needs to impose legislation and regulation on producers, take away opportunities to earn money from the marketplace and force us under threat of law to participate in the Governments initiatives then you probably are not real happy with ABP right now. But thank goodness there is at least well funded elected producer organization that has the ability and resources to stand up to George Groeneveld and say maybe this is not the best way to save the industry. A host of small special interest groups could not take such a difficult position with Government.

And really ABP is on record as supporting some of what the ALMS is about. And some of what ALMS is saying they will do is taken right from ABP and CCA. However those initiatives were supposed to be market driven and voluntary and not forced down producers throats by a Government that is acting more like the NDP than the NDP.

[farmers_son]

Sawbones: Regarding exports...I think we need to keep in mind that we as primary producers export live cattle and the packers export the beef. When it comes to live cattle exports the U.S. and to a much lessor extent Mexico would be our logical export markets. We will never export live cattle to Asia in any volumes, or Europe or elsewhere. Those are beef markets, packers markets. I pointed out in another thread that beef exports do not translate back to higher live cattle prices as evidenced in the major beef exporting countries like Australia and Brazil that have lower live cattle prices than we do. I think the best way to boost our live cattle prices is to maintain and further develop our live cattle export markets which will most likely be to the U.S.

As far as the U.S. recession goes it is very doubtful that if the U.S. economy tanks that the rest of the global economy is going to avoid the same fate. The U.S. remains our only real market for live cattle exports and lest we forget is still the world’s number one importer of beef but there is no doubt a global recession will impact demand for live cattle and beef.

ABP did get bred heifers included in the CITI inventory adjustments which earned Alberta producers millions of dollars that the Province was very reluctant to let them have. There was nothing ABP or CCA could do to change the Federal Governments stance on inventory adjustment of bred cows and yes that would have been worth millions to producers at a time they needed it most. But that never ever was open to negotiation by the Feds or the Province of Alberta either.

I am becoming increasing wary of government support payments for the very reason you point out, that is they tend to go to the wrong place and we cow calf producers are left holding the bag. I can remember when we actually got paid from the marketplace. Those seem like the good old days now.

[grassfarmer]

Sawbones, You are right there is no obligation for the packers to pass on the profits they may gain from age verification under the current set up. This is where programs like Canada Gold come in – the packers do not own the cattle at any stage. Programs like Canada gold hold the potential to pass the returns through to all the participants in the chain and the AMLS is necessary to make programs like CG succeed.

farmers_son, This live cattle vs beef sales theory isn’t really well thought out. Sure, when a feedlot sells fat cattle he delivers them live whereas the packer sells beef but the argument you seem to be making is that our live cattle exports to the US of fat cattle are the way to break the packer stranglehold in Canada. This conveniently ignores the fact that the US slaughter sector is also controlled by very few players. In 2006 the biggest 4 packers in the US slaughtered 79.2% of the cattle versus the Canadian position of at least 89% between the big three. Given that both Cargill and Tyson feature in the big 4 in the US and big 3 in Canada the buyers are even more limited – essentially 5 buyers in North America.
There is no clearly no worthwhile competition in either marketplace so you are kidding yourself by implying that having access to a live cattle market in the US somehow keeps the packers here honest.
However although the markets in Asia and Europe you mention may be for beef rather than live cattle this need not prevent us accessing them. For the producer to benefit from these enhanced markets it requires a change – so that producers can sell beef rather than the packer selling the beef. This is what ABP is against – every time they vote to allow unrestricted packer ownership of fed cattle, when they veto the right for BSE testing and when they oppose the introduction of the AMLS. ABP is all about maintaining the status quo and maintaining packer profits even when this clearly hurts producer profits.
You conclude “I can remember when we actually got paid from the marketplace. Those seem like the good old days now.”
Yes and as long as you maintain those old ABP "head in the sand" attitudes these days will remain memories. Instead why not get with the program and seek change - a change where producers might once again get their returns from the marketplace?

[Sawbones]

F_S I am concerned with your statement "There was nothing ABP or CCA could do to change the Federal Governments stance on inventory adjustment of bred cows and yes that would have been worth millions to producers at a time they needed it most." When the equity loss payout was made in 2004, it did exactly what it was intended to do, ranchers paid their bills, confidence was restored and cow prices rose. However, the clawback of those dollars by changing the grant to a loan cost the cow/calf producer millions and gave many a debt that did not plan on. ABP was silent. When in 2006, the government decided that change in equity was not important, and this again cost the cow/calf producer millions, again ABP was silent. Now we see a change in attitude because ABP did not give their blessing to all the new regulations. The $250 dollars to any producer wanting to obtain QAP is a nice touch but will that still be in place in 2010 when the AB gov makes it mandatory and all 20,000 producers are forced to comply (20,000 * $250 = $5 million) That'll make it hard to balance the budget. Or are we expecting the government to pick up the entire tab. That's $10 million Peobably not, it'll be the producer that will be left again holding the bag. As far as Canada Gold, the provincial QAP is not good enough so what will the extra requirements be for that program. A lot of discontent and we still haven't addressed the problem. If we want to change the way we market, we have to change our slaughter industry. We need to have access to plants such as Rancher's Beef and Natural Valley that are small enough to be flexible yet large enough to be efficient.

[grassfarmer]

I must say I'm amazed at the decidedly underwhelming show of support from forum readers in defense of ABP/CCA on this topic. You'd have thought on such an important issue as the organisations' survival it would be all hands on deck to bail out the water. Instead it seems some are jumping ship Kee Jim, Darcy Davis etc. Perhaps the end is nigh??

[smcgrath76]

While I share concerns regarding directional checkoff and splintering of the funding base across a variety of groups, I also think that some form of directional or refundable checkoff is a good move. If you look at what beef spends on promotion vs. what dairy or chicken or other industries do, it is pretty much a joke. That said I think with the current industry structure we do see a lot of the grass roots supporting the profitability of those further up the chain.
So my thoughts are concerned with directional, full support of refundable.

[BFW]

Its interesting to listen listen to ABP's argument against the ALMS as being undemocratic and forcing mandatory age verification etc upon producers when in fact their very existence depends upon government legislation and their funding upon a mandatory, nonrefundable check-off. Clearly this type of organization has little or no value to today's industry. Ultimately making the check-off refundable will be the savior of the ABP as it will force it to become responsible to the people and businesses who chose to support it. Cruel irony. Remember CHOICE MATTERS!!!

[coppertop]

For the record Kee Jim and Darcy Davis received government appointments and would have been total fools to turn them down.
I was impressed with Kee's remarks regarding the new ALMS at the Beef Beyond Borders conference last July, and honestly think he will be an asset to the producers in his role with the Secretariat.

[grassfarmer]

Oh I wasn't implying Kee Jim was any fool, he is a smart guy and will be a great asset to the ALMS. He probably also realises the days of ABP/CCA playing a significant role in producer representation are coming to an end.

[per]

Once again I applaud your insight into this issue grassfarmer. If Kee Jim focuses on the greater good rather than Kee Jim's good he will be a huge assest. As far as the ABP being the democratic voice of the producers, we voted for the present GOA and the Ag Minister is just as democraticly elected as the Chairman of the ABP. It is a strange argument especially when their funding is not voluntary. We will see what relevence the voice of the ABP has when the check-off is refundable. I for one, will ask for it to be sent back to me so I can direct it where I think it will be of good use. I also believe it is important that the best use is in an industry organization and not in our own pockets. I suppose on that note if the APB gets it's head out of the sand it will most likely continue to be a winner in the check-off battle.