What happens next?

[grassfarmer]

Where are we at as an industry? If the border doesn't open to live cattle for another 6 or 12 months what happens?
I would appreciate anyones view on the number of cattle on feed currently. Were the firmer prices of recent months caused by shorter supply and feedlots keeping current or was there a bit of bluffing going on with feedlots playing that hand to put pressure on the packers? Or are feedlots in fact sitting on a very large inventory of cattle on holding rations awaiting the border opening. If that is the case will these now glut the captive market causing a large price drop which no doubt would be passed onto cow calf producers who have feeders to market?
I hear rumours that some of the feedlots are going to be in big trouble shortly as they had based borrowing on an open border and the banks are getting nervous - again.
Is this true or is it just posturing to get the feedlots to the head of the queue for the next round of bailout money which the Feds have indicated may be coming?

[farmers_son]

You asked two questions.

The first where are we at as an industry. As an industry we are not doing badly at all. We are still selling volumes of beef into the U.S., nothing has changed there. Domestic packing plant capacity is coming on stream and not all of it belongs to Cargill or Tyson. And the present mess will no doubt encourage more to come onstream. Based upon all accounts we did not have a tsunami of live cattle waiting to cross into the U.S. so concerns about a backup of UTM cattle may not be a huge concern. We were going to have to deal with our OTM situation in any case after the USDA changed the proposed rule allowing cow beef to enter the U.S. The problem of the packers ripping off the producer will continue but the bright side is their greed will encourage others to build packing plant capacity in Alberta/Canada.

As individuals, it is a more discouraging picture. How much longer can we hang on? On our operation we had managed the BSE crisis as well as possible given the circumstances but can not go on indefinitely. Are we facing another situation like last year where our future will depend upon whether there is pasture and feed available to keep forage in front of all those hungry mouths.

Your second question...We are not necessarily, not even likely, looking at a 6 to 12 month time frame. It is simply a matter of when, not if the USDA appeals the R-Calf injunction. The timeline gets kind of vague after that but if the USDA wins the appeal the border could open the next day with the actual R-Calf lawsuit heard at a later date, if it is ever heard. If the USDA looses the appeal the lawsuit must be heard and Cebull has already told the two sides to pick a date.

Consider this, if you will. If we took your example of 6 to 12 months before the border opened and trade resumed with Japan before that, say 3 months, it would cause a wreck in the U.S. beef industry. There simply would not be beef available.

Something the Americans can’t even consider is that Canada may ship beef to Japan before the U.S. does because we are already working to get age verified beef, we are way ahead of the Americans in that regard.

But I digress…I don’t think the Americans can see this tied up for 12 months in court, it is just not in their best interests to do so. I should qualify that statement by saying I have been wrong before.

[kpb]

I think the last year or so has not been too bad from a financial point of view--feeders have done well this winter and producers have also done ok in the last while and, of course, we've all got our regular government cheques. But where I think the problem lies is not so much in real dollars but in the future risk in this industry and what that means to the cattleman.
It is clear to me after reading the posts on this board for the last six months that everyone, and I mean everyone, who posts on here loves what they do, provide good care for their animals and want better things for this business in the future. We have people like rkaiser who work actively to change things for the better and people like grassfarmer who have a different and brighter way of doing things. And lots of others. We dont agree with all of them all of the time but it's safe to say that they all care.
But my concern is that no matter what happens in the near future with the border, the uncertainty in this industry will remain. What happens when we get another case of BSE? Does the border slam shut again? And what if we had 10 more cases in the next six months--do we lose our ability to even ship beef again? Even if we are able to develop our own packing industry there are still many, many variables--can a domestic plant survive? And, again, what happens if we lose our ability to ship beef?
I think about these questions a lot because I've got a lot of money tied up in my operation. So does everyone else who posts here because we've all got land, machinery, cows. And are we getting a reasonable return on our money? If you've got assets worth $1 million which is not hard to do, are you making $50,000 net a year? Because if you're not, you'd make more from the bank with no risk at all and no work (and still keep a few cows to feed your habit).
And, even more than that, if you say that you love this life, like we all do, can you live with the fact that we may be forced to repeat the last two years again at any time in the future? Who wants to expand any business when your assets can be halved overnight at any time beyond your control? Every fall I buy 1,000 feeders--next fall, border open or not, should I do this knowing that if we have a BSE case next winter I could lose $200,000 overnight?
This is what worries me most about the future--the uncertainty of trying to deal with the consequences of another BSE case (or 12). And that is why I worry about the future of our industry.


kpb

[15444]

farmers_son:

'Your second question...We are not necessarily, not even likely, looking at a 6 to 12 month time frame.'

What happens if USDA loses the appeal (basically 50/50 chance) and the trial(against a judge we all basically know is biased against USDA)?

If USDA loses the appeal, we are looking at probably a couple of weeks to a month before the trial begins. If they lose the trial, all bets are off?

[15444]

heard on the news this evening that Martin and Bush spoke this morning and Bush has indicated that he wants to see a panel of three judges deal with the Montana Judge's ruling.....took Bush a week to return Martin's call but apparently he did make some noise about getting the border open.

[kato]

I also worry about the future when I see what goes on in the wheat and softwood lumber sectors. It's one lawsuit after another, seemingly until the end of time.

Is this the future we want? I'm afraid it's the future we will have if we just merrily go on our way and go back to shipping live cattle across like the pre-BSE days. Those days are not coming back. We may as well come to terms with it, and use that as motivation to keep ourselves off the rollercoaster.

We need to process them here, and do whatever it takes to gain access to markets like Japan, China and Europe. If that means testing, then test. No implants? No problem. Tick off the Americans by raising the bar? To bad, so sad.

We've come a long way in the past two years, and we're stronger and wiser for it.

[kato]

talked to a local auction market rep this evening and the prices were steady at a bred cow sale here yesterday. One lot of 200 bred heifers brought from $950-$1100.00 and cows were bringing up to .40 on Thursday after the Montana ruling.
Hopefully things will evolve without a year long court battle, particularily when dollars spent fighting the Montana ruling could be better spent building slaughter capacity.

[cowman]

We are shipping more UTM meat across the border than before. More jobs for us. Soon we'll have more OTM capacity and I suspect OTM beef will be going across in boxes before the year is out?
Again more jobs for us?
I would think the American packers are getting nervous by how this whole thing is unfolding? They realize the idiots at R-CALF are destroying a NORTH AMERICAN industry with their asinine comments and silly lawsuits? It must be very frustrating to see a bunch of halfwits get in bed with the animal rights psychos and try their best to destroy the industry?
Hopefully they have enough clout to get this thing back on track and not let a bunch of dumbies, who have no clue, ruin our industry?

[grassfarmer]

Emrald1, "Hopefully things will evolve without a year long court battle, particularily when dollars spent fighting the Montana ruling could be better spent building slaughter capacity."
If only we had the chance to decide where to spend the money - in reality the Government may or may not decide to spend money fighting the Montana ruling but it seems clear they won't spend any building slaughter plants.

Cowman, What are these great new packing plant jobs worth to us? a few poor immigrant workers brought in to do a dirty job for minimal wages.
How can you be fooled into thinking this is all caused by "R-CALF idiots"?
The hardship felt by primary producers in Canada today has been caused by the Transnational corporations who have a noose around the neck of the industry not R-CALF. You say of the corporations "Hopefully they have enough clout to get this thing back on track and not let a bunch of dummies, who have no clue, ruin our industry"
They certainly have enough clout - enough clout to ruin primary producers in both Canada and the US. R-CALF are only a distraction - if they allegedly single-handedly kept the border closed (which I don't believe for a minute) how much money did they withhold from Canadian producers? If the border did open tomorrow how much more money would come back to the pockets of Canadian producers? I suspect very little - because of our real problem - the packer monopoly.

[cowman]

grassfarmer: Somehow you have come to the conclusion that I love the international packers or something? I do not blame anyone for trying to make a buck! But ask yourself who let these scoundrels operate in whatever way they wanted? The answer...the federal and provincial governments! Who elected them?...You and I? Or at least around 60% of us did!
Somewhere along the line something is just not all that right in this "democracy"?
But whatever...we live in this system and that is just how it is? Today the packers are our allies...R-CALF are the ones keeping the border closed? If they hadn't filed the injunction the border would be open March 7th? So yes, right now the only thing keeping the border closed is R-CALF?
I do understand where you are coming from and I suspect you are a man of principles. Unfortunately in business principles are not really very important and some times we have very strange bed fellows if we want to succeeed?

[grassfarmer]

How are the packers on our side? What has happened since last Wednesday that affects Canadian producers? The Canadian packer monopoly has dropped their buying price by $5-8 cwt that's all.
R-CALF haven't made a cent extra off us in the same timespan. We have all looked to the border opening to bring some form of relief but in reality it only means having three big packing corporations to sell to instead of the present two. Tyson and Cargill's US plants aren't going to outbid their Canadian plants to get extra cattle - why would they? the profits they make all go to the same corporate bank accounts. R-CALF have done some stupid stuff but I still think they have merely been a distraction at best or a front for more widespread anti-Canadian protectionism at worst.

[kpb]

There are basic problems in the beef industry in this country and they are not all related to the BSE crisis. Some of them existed before BSE when most producers were still not receiving a great return on their investment.
The problems, as I see them, are:
1. U.S. packers control the processing of our finished product.
2. the primary producer does not have the facilities or inclination to maximize his return by holding his animals to finish.
3. there are too many middle-men in the business--cattle buyers, auction marts, check-offs to beef associations, brand inspectors, etc. all of whom take money out of the pockets of the primary producers.
4. the price on the grocery shelf has no relation to the price the primary producer receives because producers do not have a stake, for the most part, in feedlots, slaughterhouses or stores.
5. there are too many cows in Canada because the price to entry to our business is too low. As Grassfarmer publisher Allan Nation has said, if you produce a commodity in an industry where there is easy entrance, the price of that commodity will always revert back to a near-break-even point. There are many, many herds of 20 or 30 cows being managed by people with off-farm income who do not care if they make money or not. Because of that, the price that any producer receives for his fall calves will always barely cover costs since he is competing against ranchers who have the advantage of never having to actually make money. The only way around this trap is to add value to your commodity (calves) by backgrounding or finishing them yourself which most people will not or cannot do.
I believe that primary producers should always hold their calves but I think it is unlikely to happen. Also, I think we have to have our own processing facilities and, eventually, our own, producer-owned retail meat brand. Imagine that--owning our calves all the way to the barbeque. I think consumers would buy our producer-owned beef ahead of any others. And I think we could all make more money. rkaiser--how about incorporating that into the the BIG C proposal--how about having a special BIG C labelling? Or maybe let individual producers slaughter their animals at BIG C and use their own labelling? That's one of the most attractive aspects of the Sunterra proposal--you could slaughter your own animals there and put your own label on the beef.

[rkaiser]

Good stuff kpb. I agree that the Sunterra custom federal kill is something desperately needed in this country. Our branded beef program is already discussing options with Sunterra.

As far as BIG C branding a product, again I say great. You have hit the problem with primary producer profits right on the nose. Not that we are all going to become wealthy if we own cattle all the way through, but we will certainly have no one to blame if we don't see profit. Profit which I know is there.