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Another One Bites The Dust – for Sep. 6, 2010

Well, it’s now official. XL Moose Jaw will close. In a span of 18 months Western Canada’s slaughter capacity/diversity has become bleaker, with one packer (Tyson Foods) and one more packing plant moving out of the Canadian system. It really makes me wonder what has to happen before we turn a corner.

I know that we can all get caught up pointing fingers at the packer and blaming them for our miseries, but the reality is its beyond the packer’s loading dock. It’s the consumers’ attitude that food needs to be cheap, and our believing that beef is a staple necessity for life. It’s the meat-trading world and its dog-eat-dog attitude of price wrangling and undercutting. It’s a painful regulatory system like CFIA that can make mountains out of molehills and it’s our cowboy complacency.

Most of us all would rather stay home on the range and stay production paralyzed rather than steer our industry in the right direction. The beef industry became lazy during the days of a Canadian Peso and failed to notice costs rising, while in reality the purchasing power of our product, and our margins were eroding right underneath our feet. Yes, the packers that remain have a goal of making money and they probably will, however I doubt very much that they have a mission statement in their office that states, “Our goal is to raise the value of beef at the farm gate level so that we can have intergenerational ranches that are both economically and ecologically viable.” That may sound funny but in reality it is exactly what needs to happen in order for this industry to turn the corner and become sustainable.

Domestically, I see three major issues. First the margins that retailers expect for themselves are now absurd. In the ’70s the Canadian retailer’s chunk of the pie was estimated at 19 per cent. In the mid ’80s that number jumped to 35 per cent. In the ’90s it was 42 per cent and now in some circumstances it’s over 50 per cent. I am all for fair and reasonable profits, but when someone owns product for as short a time as a retailer and then takes half the pie, it’s a little too much.

Next is our domestic consumer’s attitude about beef. They all want it cheap and cheerful, yet in reality beef is a luxury item that is very energy and time intensive in terms of production. We have organizations like the Beef Information Centre and Canada Beef Export Federation who promote the sale and consumption of beef but somehow raising the dollar value of the product seems to be lost in translation. Just like a purebred breeder’s fixation with weaning weights and average daily gain, it seems these organizations can get transfixed by tonnage rather than measuring the incremental value of a carcass created by growing its value. This said, in order to create value you have to short the market and create a differentiated product, which currently is not happening and will not happen unless we take the bull by the horn.

I do not want to come across as another CFIA basher, since I am all for food safety, however the costs of food inspection and testing need to be borne by the consumer and/or the taxpayer, and taken off the backs of primary producers. Since the spring of 2009 all cuts of beef that “could” be destined for grinds must be tested forE. coli 0157.Those testing costs add up. Not to mention the value of the millions of pounds of beef trim that is traded at discounted prices because of presumptive positives. In addition to the regulatory costs, we now also have SRM and byproduct disposal to contend with not to mention a new way to discount beef that has a few extra teeth.

We think of our packing plants as being consolidated. I suggest looking at the rendering business. Now there is a monopoly. Beef byproduct values for things like tallow and meat meal have gone through the roof, yet the rendering industry has this industry and government convinced that we must pay more for its disposal. That’s good marketing. Maybe we should hire them to sell our beef.

Yes, there is one less packing plant, but there are also fewer of us than a year ago, as well. We continue to think of our products as calves, yearlings and/or fats, when we really need to think of our products as everything from 85 per cent lean trimmings to inside rounds, strip loins and tallow. If we disagree with rules and regulations that are put in place maybe the complaining should go beyond the coffee shop and be taken up with those who fail to see the ramifications of their intentions. Somehow more effort will need to be taken to market the box of beef rather than just sell it, and the only way this will happen is when those who have the most to lose (primary producers) move further up the chain.

This fall will see new elections for provincial and national cattle organizations. If you don’t like what is going on maybe it’s time you became part of the change rather than sitting on the sidelines and griping about them. These organizations need to start envisioning a model for the Canadian beef industry based on raising the value of beef and getting a larger chunk of the pie to move down the chain rather than just selling another pound of beef.

The industry needs to set a sustainability goal that covers cost of production, return on investment and reasonable profit and only then will we see a turn in the corner.

Dr. Christoph E. Weder is a purebred Angus breeder in the Peace region of Alberta and also runs SVR Ranch Consulting. He is also a founding member of Prairie Heritage Beef Producers. For additional info check outwww.spiritviewranch.com.

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