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On The Tipping Point

As we move into the second half of 2011 Canada’s beef industry seems to be at the tipping point on a few fronts. The first one has to do with the national traceability system. A recent report by Alberta Beef Producers (ABP) says the mood coming out of a Beef Traceability Round Table meeting in Calgary last month was that “the industry is past the point of wondering if we need to have a traceability system or not.”

“We do and we need to focus on national implementation starting with premise identifications across the country. Animal identification and a standard national database are important and animal movement comes after that.”

That doesn’t mean all the concerns have been swept aside. There are still plenty of unanswered questions. What will it cost? Who will pay? And how will those costs be equally shared across the whole industry?

The report on Alberta’s traceability study in six auction markets released in late April gave some answers.

It showed it is possible to scan RFID tags in a market setting at the government’s minimum 95 per cent read rate without slowing down normal operations. The biggest challenge was making sure the cattle arrived with a functioning tag. Some tags didn’t scan nearly as well as others and that needs to be sorted out by the Canadian Cattle Identification Agency and the manufacturers. There’s more on that inside this issue.

The study also looked at the costs of scanning cattle coming in versus doing it as they come in and go out. Ottawa still hasn’t decided what the national program will require so the markets wanted some idea of the costs with both options. Not knowing the rules of the game is just one of the things that is driving auction market owners nuts. The other is a fear that they will be stuck with extra costs, and charging extra fees, while direct marketers will be let off scot free.

They also looked at reporting their results on a permit, such as the electronic manifest Alberta’s brand agency has developed (pg. 27) or directly to the Canadian Livestock Tracking System database. Scanning them in-out on a permit is the best for tracking purposes, but also the most costly. There may be labour savings if they could get brand inspectors involved at the scanning chute, but they didn’t look at that.

Another problem: the internal management software used by Alberta auction markets doesn’t talk to the scanning software, which negates most of the value-added benefits the markets could get out of this exercise.

It’s all fixable with money and the ABP says that is where the national debate on traceability is now focused. “It’s become one of recognizing the economics of the program for producers and conveying the benefits of a health policy for consumers,” says the ABP report. “The difficulty is balancing economic costs and benefits for each sector of the producers’ value chain with benefits and payment transfer(s) to agriculture by food consumers.”

The other tipping point is our ever-shrinking cow herd. We’ve already seen two packing houses close so it was not surprising that Canfax noted some losses in its annual survey of finishing feedlots in Alberta and Saskatchewan. More than market forces might be at work in this sector though since all the lost capacity occurred in Saskatchewan which was hit hard by rain last year. Alberta’s finishing feedlot capacity actually increased slightly from 2010.

Everyone is watching now to see if the better markets will bring on any expansion in the cow herd. Nationally the herd is down 10 per cent from what it was in 2003, and off 19 per cent from the BSE swollen herd in 2005. But we just may have turned the corner this year. At least that is the conclusion of analysts in Canfax research services. In a fact sheet put out last month they looked at all the cyclical and market indicators and determined Canada’s beef industry is entering another expansion phase.

How large and rapid that expansion will be is yet to play out. Certainly no one is predicting a jump in cow numbers next January but the heifer retention reported this year seems to be real and soundly based.

The route in the fed market late last month may have shaken the confidence of some but maybe others took heart from the leaked report as this issue went to press that the WTO panel has sided with Canada and Mexico in their dispute with the U.S. over country-of-origin labelling. The U.S. can still appeal and drag out the process but perhaps the Obama administration will finally gain some common sense and rewrite its rule to restore fair trade in beef. Now that would be a tipping point.

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Thingsare changing

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Gren Winslow

Gren Winslow is a past editor of Canadian Cattlemen.

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