COLUMN - The Bottom Line

by Rick Wright

“Enough is Enough Already!”
Just when we thought we had seen it all in this business, something that defies all reason and common sense comes to the surface.

The National Farmers Union of Canada’s reported support of R-Calf has betrayed the Canadian cattle industry. And while the NFU has worked overtime to deny any alliance with R-Calf (regardless of their official stance) the damage has been done.

R-Calf has reported in a press release that NFU director, Neil Peacock, stated:
“NFU no longer views R-Calf as a threat because our cattle producers are facing the same challenges as the independent, U.S. cattle producers.” Peacock was also quoted as saying, “Just like R-Calf members in the U.S., we are fighting the packers, the mega corporations and the ramifications of NAFTA and the WTO.” NFU director Jan Slomp was quoted as saying, “We need to be allies with R-Calf.”

If R-Calf is not a threat to the Canadian cattle business then who is? For the past ten years they have worked very hard to close the border to imports of Canadian cattle and beef products. They have been a major supporter of M-COOL in its most stringent form. R-Calf seems to have the ear of Tom Vilsack, Secretary of Agriculture and the last thing Canada needs is R-Calf claiming support from a national farm organization in Canada.

Since the press release, the NFU claims that they do not support R-CALF. Maybe they learned a lesson that most of the Canadian cattle industry already knew —in the past R-Calf has stretched the truth to further its own goals, and cannot be trusted!
The NFU turned its attention to the beef business in an effort to recruit more members from an industry in crisis. Their report on the packing industry contains nothing new. It is long on criticism and short on realistic solutions.

In other news, the Competition Bureau announced that it would not challenge the acquisition of Lakeside Packers in Brooks, Alberta by XL Foods Inc. This should clear the way for XL to take over the packing plant and other assets in the very near future.
The interesting part of the story is that the Competition Bureau found that after interviewing 50 industry representatives, that those interviewed were more concerned about keeping the packing plant open and operating than the reduction of competition in the meat processing business. It is no secret that there has been very little interest by other parties in purchasing the Lakeside operation. Even though we all want more competition the industry, it is good that Nilsson’s took the chance on the Lakeside operation. Another plant in mothballs will do nothing to increase the chances of opening overseas markets in the future. If the Competition Bureau had stopped the sale, the plant could have closed, making Canadian cattle feeders even more dependant on the U.S. market.

The fear factor of the unknowns surrounding M-COOL has surfaced again.
The rules as published by the Bush administration will come into effect March 16, 2009. However, U.S. Secretary of Agriculture, Tom Vilsack, has strongly suggested that if the packers do not segregate the cattle and products and label accordingly, he will pursue changes that will force them to do so. It will be very interesting to see how the packers react over the next six months. U.S. packers and cattle feeders had asked the Bush administration to lighten up on COOL so that they could remain cost competitive. Meat industry representatives feel that there will be a big enough percentage of product labelled “product of USA” to meet consumer needs.

Protectionist groups like R-Calf are using M-COOL as a trade barrier. Fear tactics over BSE and food safety are being used to encourage the U.S. government to tighten rules like M-COOL. The fact is, country of origin labelling has nothing to do with guaranteeing food safety. Independent inspection at processors and retailers, along with enforced food safety production protocols throughout the food chain, will help address food safety concerns—not a label stating where the product was born!
Canadian imports for direct slaughter account for a very small percentage of the weekly U.S. kill, however the affects of COOL on the feeder cattle business could be severe.

In 2008 we exported 573,000 feeder cattle to the U.S, up 6.4% from the previous year. As of February 21, 2009 we had already exported 56,200 feeder cattle south. We exported 649,000 fed cattle south last year, the equivalent of one week’s USDA reported average kill in the U.S., down 23.3% from last year.

Last year we exported 157,000 cull cows and 43,300 bulls to the U.S. The total number of cattle exported was 1.432 million head. One interesting fact is that 24% of the beef exported from the United States came back to Canada.

Even though we think we are short on cattle, the shortage has yet to arrive. Cow cull was running about 15% last year, while the 15-year average was 10%. The beef herd shrank about 6.6% last year with Manitoba losing about 6.1% of its base cowherd. These numbers put inventory close to the spring 2003. If that is a fact, then we have finally gotten rid of the extra inventory created during the BSE crisis. The beef cow cull projections for 2009 are estimated at 927,000 cows - a huge decrease in the number of Canadian beef cows. In comparison, the U.S. beef cowherd declined 764,000 head last year, resulting in the smallest cattle population in 50 years.

Combine the cattle supply ratio with projected cheap grain prices and it looks like there could be a very bright light at the end of the tunnel. Even though consumers are not purchasing as much beef as before— and U.S. exports are down due to the high value of their dollar—the current demand-driven market could easily change back to a supply driven market in the next two years.

The two keys for a successful Canadian market will be free access to export to the U.S. and a Canadian dollar worth under 80 cents.

As far as price projections go, expect steady prices on the cattle between 700 - 900 pounds, providing American feedlots do not lose interest due to COOL. Grass-type cattle will remain strong, as demand will outlast supplies of green feeders less than 650 pounds. Kill cows should remain strong, while bred cows look like a good buy. Finished cattle prices will continue to struggle in the second and third quarters as beef retailers compete with cheap pork in the stores and consumer spot purchases.
Until next time . . . Read more!

National Farmers’ Union of Canada forms coalition with R-CALF

Submitted by the Canadian Cattlemen's Association

At home, the National Farmers’ Union of Canada (NFU) claims to be interested in advancing the interests of Canadian cattle producers. Abroad - they conspire with one of the most negative groups ever known to the Canadian cattle industry – R-CALF.
NFU shares a lot in common with R-CALF – putting it bluntly, both fringe groups prey on the emotions of honest cattle producers, many in desperate situations. In NFU Canada’s February 13 news release, Neil Peacock states the best way to advance their ‘shared interests for cattle farmers’ is by “Forming a coalition to pursue common objectives and speak to governments with a common voice is a critical step toward success for all North Americans”.

R-CALF and NFU Canada advocate trade barriers so that they don’t have to worry about competition. Unfortunately their beggar-thy-neighbour mindset fails to take into account that trade barriers generate far-reaching negative consequences within our industry and for other businesses in our inter-connected economies. Rather than creating opportunities for future generations of farm families to continue to work in the industry, the R-CALF and NFU Canada approach would eliminate them.

Long-term sustainability for our industry depends on increasing market opportunities to grow demand for Canadian cattle and beef. Statistics prove that the only way to grow demand for Canadian beef is beating out the competition in our domestic and international markets. The Canadian Cattlemen’s Association (CCA) knows this and puts it into practice.

That’s why we advocate government policies that competitively position Canadian producers at home and abroad.

The discriminatory stance shared by R-CALF and NFU says only some cattle producers have a right to be in the industry. For anyone who actually succeeds in making a profit, then re-invests it in their operation, resulting in growth, they suddenly become undesirable. Both organizations have stated many times that they consider growth bad - that large operations strangle out the small guy. Shouldn’t the small guy be able to get ahead, make a profit and grow his operation? Neither R-CALF nor NFU think so.

Well - as official allies now, NFU and R-CALF deserve each other, along with other anti-prosperity, protectionist groups they recently aligned with at a two-day conference sponsored by NFU Canada in Billings, Montana. Ironically named ‘Fair Trade for All,” the conference brought together like-minded, anti-prosperity activist groups, claiming to speak on behalf of consumers and livestock organizations from Canada, Mexico, and the United States. The conference called on governments to renegotiate the North American Free Trade Agreement and address concentration in livestock markets.

The CCA believes that the conclusions of these groups are out of touch with the complexities of the world in which cattle producers must operate and compete. We encourage all cattle producers to examine their statements closely and decide for themselves.

The CCA issued a detailed response to NFU’s recent recommendations for the Canadian cattle industry. To view this, visit our website at www.cattle.ca.

A summary of CCA’s response is featured in our January 2009 Monthly Report, also available on our website. Read more!

CEO participates in tri-lateral trade conference

R-CALF PRESS RELEASE

February 17, 2009 Billings, Mont. – Just days ago, R-CALF USA CEO Bill Bullard participated in a two-day conference hosted by the Western Organization of Resource Councils (WORC) that included representatives of the U.S., Canada and Mexico in discussions of the North American Free Trade Agreement (NAFTA) and the negative ramifications the trade agreement has wrought on producers in all three countries, while the multinational corporations in each country have reaped the benefits. Each group’s representatives made it clear that NAFTA should either be eliminated or renegotiated.

“R-CALF was originally viewed as a threat to cattle producers in Canada,” said Neil Peacock, who represented the National Farmers Union of Canada. “There is always misinformation going around, and several years ago, there was the rumor that R-CALF was established by the big packers.

“What has happened is that the mind shift of livestock owners in Canada has turned around,” he continued. “We no longer view R-CALF as a threat because our cattle producers are facing the same challenges as independent U.S. cattle producers. Just like R-CALF members in the U.S., we are fighting the packers, the mega-corporations and the ramifications of NAFTA and the WTO. It would be nice to unite with R-CALF to fight the issues we have in common.”

Jan Slomp, also of the National Farmers Union in Canada, said consumers in all three countries need to be able to know where their beef comes from and be able to support their domestic producers if that is what they wish to do.

“XL/Cargill keeps feeding us this line that R-CALF is just a protectionist organization against everything,” Slomp said. “We’ve been fed this bull about continental integration, that increases in exports will benefit ranchers and farmers, and that’s just not true. We’ve been sucked into this corporate structure that is very, very hard to correct. It’s all about a forced food system now. Trade should not be so complicated. Every nation has the right to look after is own producers.

“Authorities here are influenced by the Cargills and make R-CALF the enemy and try to mobilize all the Canadian ranchers against R-CALF, which is not helpful at all,” he continued. “I can totally understand and defend R-CALF in public now. We need to be allies with R-CALF.”

Dennis Olson, a senior policy analyst at the Institute for Agriculture and Trade Policy (IATP) said that promises made by the proponents of NAFTA have not been kept and that new policies are urgently needed.

“As far as NAFTA goes, it’s a failed agreement,” Olson said. “It has not curtailed the growing power of the global meat cartels, both in our livestock markets and in our politics. NAFTA impedes the rights of all three countries to establish their own food and agricultural policies that provide farmers with the cost of production, as long as those policies do not result in the dumping of agricultural commodities into the other markets at below the cost of production. We commit ourselves to building an alternative food system that is designed to make safe, affordable food a higher priority than increasing the profit margins for the global meat cartels.”

Patty Lovera, with Food and Water Watch, said she was at the meeting to talk about how to work together to stop the negative impacts caused by bad trade policies. She also noted that even as prices livestock producers receive continue to go down, retail food prices rarely do, and the result is that consumers do not end up spending less at the meat and dairy case.

“Consumers care about workers, farmers and the environment – all of which are damaged by trade policy that puts corporate controlled trade as its top priority,” she said. “But consumers also are directly impacted when trade policy means they are exposed to unsafe food or lose the ability to know what they are eating, where it is from or how it was processed.

“The growing number of food safety scares, from both domestic and imported food, has made it very clear that regulators are not doing enough to protect consumers,” continued Lovera. “Consumers have no way to influence the governments of other countries on what they do to regulate food safety, but have to live with the consequences of what those governments do, and there must be room in our trade policy for antitrust measures so we can restore competitive markets for producers and prevent a handful of corporations from calling all of the shots about how our food system works.”

R-CALF shared with the producers from Canada and Mexico the work it is doing to prevent the proposed acquisition of National Beef Packing Co. by JBS, the world’s largest beef packer based in Brazil.

“This merger would increase packer concentration to an unprecedented level, resulting in reduced competition that will harm both cattle producers and beef consumers,” said R-CALF USA CEO Bill Bullard. “We were pleased to learn that Canadian producers support R-CALF’s efforts to prevent further concentration in the meatpacking industry and to eliminate anticompetitive cattle procurement practices going on in each of our countries. We look forward to sharing information with Canadian producers that will help both Canada and the U.S. restore competition for all cattle farmers and ranchers.” Read more!