Beef Industry Conference

[cswilson]

How did you make out at the Conference rkaiser ? I was there for a day and a half, even had breakfast with Doc Edge....but didn't stay for any of the 'politics'.
I gather that the 'bear put' sessions today were supposed to be interesting.

[rkaiser]

We dropped our $175.00 each to get in the door, but Cam, Doug Fraser, and I each came home with a nice new leather breifcase.

Listening to Charlie Gracey speak was almost worth the price of admission, but listening to Cam talk of the need for change in this industry was worth even more.

His 2 minutes at the mike was almost cut short by the chairman, but he did get out the reality of the feedlot industry (mostly represented at the conference) becoming margin operators over the past 15 or 20 years, and the assumption that this middle group would simply pass down benefits down the line to the close to 100,000 grass roots producers holding the mortgage for the beef industry in Canada.
Not the fault of feeders of course, but certainly responsibility lies with all producers to change the way the industry is structured with control by the multinational packers, margins, or custom feeding by the feedlots, and bottom feeder price taking by the bulk of producers of this country.

Of course Cam needed a question to continue, which he directed at Ben Thorlackson. Ben was in a different peer group here, and chose the politically correct avenue of Capitalism and free enterprise. Not that Cam or myself disagree with either of these two things, but the tone was definately pro "whoever has the bucks to compete, will be treated well by CBEF".

Had a good chat with the new vice chairman of ABP myself, and saw a side of Ben afterward that I had not picked up on before. He, like so many other industry leaders have not had the time to even read the BIG C proposal, and simply see it as another Co-op idea. Once again, I support any new Canadian initiative including co-ops, however the words Charlie Gracey used to describe Cam and the BIG C plan were obviously not heard by many. Those words, "time to put a ship in the water along side the big boys, owned by all of the producers of this country".

Over all I was satisfied. Wish I could have had my 3 hour $175.00 admission paid like the ABP delegates, but that's life. Per diem and gas too.

[kpb]

rp kaiser, I agree totally with the idea of a check-off of some sort to finance a producer-owned packing plant. However I see support and even discussion for this diminishing as we get closer to the border opening and I think this is really wrong. We have to keep this idea alive or we will remain beholden to the multi's forever and forever at risk of having the border shut.
Having said all that, I am not aware of a plan by Big C or anyone else to incorporate feedlot or backgrounding operations into the whole concept of producer owned. Has Cam addressed what he thinks should happen to our feeding industry? I have read his report and notice that he says that the feeding industry is basically a real low profit or loss operation and I agree--but how do we change that? I don't think most producers are ready to finish their own calves. As someone who has cows and a backgrounding operation I have often pondered how to (a) cut out the middle man, broker, agent, auction markt,. etc and (b) maximize profits. I would like to know what you think of the future role of the feedlot and backgrounding industry in this country given that most producers do not want to background or finish their own calves. Although this year has been very good, most years are high risk, low profit and the margins are slim.


kpb

[kpb]

randy, glad you were able to be 'heard' at least. I am not surprised to hear that folks don't read material before they have an opinion on it, happens all the time.
Good for you, for attending and putting forth your comments.

[rkaiser]

I think that the best way that I can answer your question kpb is to say that grassroots producers and the feeding industry in Canada do not really have to change their daily excercises in chores.

The change that is needed is for all of these producers to become shareholders in a new venture; the packing industry. There are post harvest profits made. Cargil, Tyson Foods, and Conagra would not be three of the largest Corporate businesses in the world if there was not.

I don't feel that we are asking cow/calf guys to retain ownership, or feedlots to get into the cow/calf business. I feel we are showing a way to true competition with the big boys. With not only profits created by that competition, but post harvest profits back to the shareholders as well.

This concept is not about one plant to help out those who join in; it is about changing the landscape of the packing industry and diversifying every producers investment portfolio at the same time.

You are correct about dwindling support as times get better again, but this is a plan worth a better look from industry leadership, and we are struggling with communicating that to them.

[cowman]

Charles Gracy always had a lot of common sense, in my opinion.
The BIG C idea of a producer owned plant,paid by a checkoff on every animal sold, is still the best idea around! It would bring some stability into the marketplace for sure.
ABP has basically labeled this idea as socialism or something but in fact it is just common sense? Why do they think a checkoff to buy a plant amounts to socialism? What do they call their own checkoff? A checkoff that was forced on us to do what? Was it forced on us to represent all cattle producers and treat us all as equals? Or is it used to promote the interests of the chosen few?

[farmers_son]

I think there is considerable support for the concept of producer packing plants within the ABP and obviously within the grassroots producers.

There is nothing socialist about producers coming together to finally realize a fair return from the marketplace.

However I think Cam Ostercamp is right when he says producers can't afford to pay attention much less pay for a packing plant. Which leaves open the question how is the money going to be found. Therein lies the problem.

Government is presently denying producers in this country the right to sell their production from live cattle in the form of beef beyond their provincial boundaries unless it is slaughtered in a federally inspected packing plant, of which there only 13 in this country. And none of those will custom kill. This has effectively institutionalized the packer monopoly.

Unless the producer owns a packing plant they cannot sell their own beef within this country or internationally but instead are forced to sell their production as live cattle to the packer cartels. To that extent government has created the problem and it seems reasonable that government should be looked to for solutions to the problem.

[BFW]

I also spent the weekend at the beef industry conference (on my own dime by the way) and would like to add a slightly different perspective to Ostercamp's comments. His conclusions that somehow the packing and feeding industry's actions are responsible for keeping these 100,000 producers from prospering is ridiculous! How do you explain the growth of the past 15 or so years if you had bothered to hang around and listen to the Canfax presentation you would have heard that Canadian producers enjoy a $2.50/cwt advantage to their American counterparts on the sale of 550 weight calves. Certainly the competiveness of our feeding sector(both backgrounding and finishing) might have something to do with that. Of course we don't have the same type of conditons when it comes to marketing fat cattle but added capacity and the border opening will begin to remedy that situation. I got the sense that BIG C is trying to make this a case of big versus little with big holding little back. Producers already have the ability to participate further up the value chain much as Randy and Grassfarmer do or simply even background their calves to heavier weight or do things like dehorn and castrate bulls properly. The fact is that the average producer does not have either the financial or managerial ability to do this or lacks the drive or dertermination to go to the extra effort. Most likely they don't do it because the market returns them enough most years for calves for them to assume the risk of retained ownership even through to finish let alone anything beyond that. It is simple risk versus reward. Yet we still want the producer to own packing plants. It would seem more logical for them to own a feedlot first. Don't get me wrong, I respect the effort that BIG C has made towards a noble cause. Cam's paper raised valid concerns but there were no revalations there and his comments at the conference were little more than grandstanding. Clearly more processing capacity is needed in this country for OTM cattle in particular but boys with respect to the BIGC proposal the time has come to fish or cut bait.

[grassfarmer]

Is that a Canfax story on the 550lb calves being worth more here? Is it a 15 year average or how is it calculated?

I don't have figures for 550lb calves but the Alberta Ag website shows 1st October 2004 prices for 7 weight calves being US$68-74.5 in Canada versus US$110-128 south of the border. I would sure like to have been getting $2.50 cwt than the Yanks back then!

I think in time Cam's paper will get the recognition it deserves. It was an up to date assesment of the problems facing the industry - many of them things the NFU had been highlighting for 15 years with little success. It highlights the fact that the system was heading for disaster before BSE came along. ABP and all the others who have done nothing but wait for the border to open to cure all ills will find out in time that the problems run deeper. I think what really peeves ABP about Ostercamp is that he is a deep thinker who has shown leadership - both things ABP seem lacking in.

[BFW]

Grassfarmer the Canfax numbers represented data from late 80's or early 90's to 2002. Obviously prices in 2003 and 2004 are not included here as the calves were sold at a much wider basis than normal to US prices.

As for Cam Ostercamp's paper I was stating my opinion not that of ABP's.

[farmers_son]

BFW: I noted your comments “The fact is that the average producer does not have either the financial or managerial ability to do this or lacks the drive or dertermination to go to the extra effort.“ Do your consider yourself an average producer? Or do you consider yourself something other than an average producer in some way. If so please explain.

Underlying your remarks is the belief that the border will open and things will get back to normal. What happens when the border closes next time? This time around the big feedlots, who were most vulnerable, received millions in direct government support. Is that your preferred solution to Canada’s vulnerability to live cattle border closures? Or would you rely on CAIS or whatever government safety net is in place to save your operation. Of course that solution ignores the fact that not all big feedlots survived, thinking of Bonnets and AAA. I guess those people lacked the financial and managerial ability.

We have to face it. Depending upon live cattle sales leaves all of us, big and small producer both, vulnerable to border closures. There is no question that it was better to be selling beef rather than live cattle since May 20, 2003. Most producers have no practical way to sell beef as the industry is presently structured.

Your comments that the “average producer” should build a feedlot are well made. And I believe we will see more producers retaining ownership. The cow calf producer has more interest in owning a packing plant than the big feedlots because the big feedlots are margin operators and will make their profit no matter what the price of fats are. The cow calf guy takes what is left and often that is not enough. Even then, most of the big feedlots operators I have spoken with see the problems with the live fat cattle market in this country and are looking for solutions just like the “average” producer.

BFW, can I infer that your operation is already associated with a packing plant venture, e.g. Prices, and you view any more producer packing plants as competition.

[intr3est]

Canfax presentation you would have heard that Canadian producers enjoy a $2.50/cwt advantage to their American counterparts on the sale of 550 weight calves

Is this just a price advantage without taking into account cost of production?

[BFW]

Farmer's Son my comments regarding the "average producer" were not meant to be disrepectful but I stand by them for the simple fact that we have a feeding industry in existence today that has been allowed to develop and prosper by cow calf operators selling them fresh calves in the fall of the year or at any time for that matter. How is it that these people have managed to accomplish this while the large majority of cow calf producers have not? As for me being an average producer the fact is I don't even consider myself a producer. I am one of the margin operators, margin collectors, margin speculators that Cam Ostercamp was referring to at the conference but as far those go, I think that I am above average, well above.

In respect to the border Farmer's Son, I will clarify my previous comments by saying that in no way do I believe that the border reopening will return us to a more normal market situation but you have to admit it will help as we will agin have the ability to arbitrage the Canadian and American live cattle markets. Even with added capacity here it will be to our advantage to have the American processing plants available to sell cattle to. I understand clearly that we cannot return to normal and that as Ostercamp's paper points out we must not continue our almost total reliance on the US market for our excess of live cattle and beef products. The challenge for our industry, if we are to prosper, will be to find new markets that will return as much or more value for the beef that we produce. If we can achieve this and thus decrease our reliance on any one particular market we will all be the better as an industry and avoid the situation of having to have public funds injected which are of little value in the long run.

By the way I toured the Bonnet facility today and by the looks of things much more than BSE is responsible for it's demise. As for AAA Feeders don't believe everything you read here or in the newspaper. BSE has little or nothing to do with that situation and a flawed regulatory process has a lot to do with it and finally you shouldn't infer that my operation has anything to do with a new packing venture because it does not. Were you at the conference this weekend?

[BFW]

intr3est I think there are several factors at work to explain this:

1. We have enjoyed lower costs of production (lower feed grain and forage costs) during this time frame.

2. Strong demand for calves here in Canada.

3. We have better calves on average here when compared to the US.

[farmers_son]

BFW: Thanks for the reply. No I wasn’t at the conference. Got calves on feed and couldn’t get away. If by being well above average, you mean you operate a larger outfit, I would point out that there are no large outfits in Alberta, by global standards they are all small. There are feedlots far larger in the U.S. and operations in Brazil, Argentina and Australia that dwarf anything we would see in this country.

Depending upon shipping live cattle across international borders to establish arbitrage is a fools game and will be a fools game after March 7 as much as it was after May 20. Yes the border opening will help, until the next time and the next disease/next excuse.

I see the challenge for our industry is to vertically integrate closer to the consumer to capture benefits from value adding and branding. The consumer market is the only market there is and we need to find ways to shorten the value chain and capture our fair share of those returns. The successful operations in the next decade will be the ones that demonstrate the ability to form alliances with other producers to work together so as to capture sufficient profits to be competitive. The days of going it alone are probably over for as I pointed out each of us by ourselves lack sufficient scale in global or even North American terms to be competitive.