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PRIME CUTS – for Oct. 10, 2011

The big story in Canada s western provinces is the future of the Canadian Wheat Board. Its survival hinges on whether the federal government pushes ahead with its plan to end the board s monopoly power, against the wishes of a majority of producers. The story is more complicated than this, of course. But it will sound familiar to beef producers and other industry participants on both sides of the border.

Canadian packers and sellers of all slaughter cattle are still suffering from a decision by the Canadian government over specified risk materials. Despite widespread opposition, the government introduced an enhanced SRM ban in July 2008 that meant the removal and disposal of more SRMs than is required in the U.S.

The government s rationale was that the move would help Canadian beef regain access more quickly to key export markets. It argued that the cost of additional SRM removal and disposal would be offset by higher export returns. But this has not occurred. The industry since 2008 has been saddled with added costs ranging from $10 to $30 per head. This is one reason why XL Foods closed its Moose Jaw, Sask., plant.

USDA s proposed livestock marketing rule (known as the GIPSA rule) is an even more extreme example of a federal government acting against the wishes of a vast majority of producers and others. As I wrote last year (Cattlemen/ August 2010), the rule proposed sweeping restrictions on long-established livestock marketing practices. If implemented, it could wreak havoc on the value-based marketing of livestock in the U.S.

USDA received thousands of comments to this effect and faced unprecedented bipartisan criticism from members of Congress. The comment period on the rule ended last November and the agency has been largely silent since then about the rule. All we know is that it is conducting an economic analysis of the rule s impact, a move that critics demanded and should have occurred before the proposed rule was published.

As to the final rule, I suspect it will differ little from the proposed rule. USDA appears indifferent to the consequences and would rather continue to garner a few votes from the Prairie populists who support the rule. The U.S. is soon to start a presidential election year (it s started already on the Republican side) and Agriculture Secretary Tom Vilsack will want to deliver as many rural votes to his president as possible. I look for the industry to file a lawsuit the minute the final rule is published.

Which brings me back to the CWB. As you know, it has been the only seller of wheat and barley in the western provinces for 70 years. The Conservative government wants to end this, arguing that producers should have the right to market their own grain. This sounds noble but not to the 62 per cent of wheat growers and 51 per cent of barley growers who recently voted in favour of keeping the monopoly. The vote was commissioned by the CWB and is non-binding. So the federal government will press ahead and introduce legislation this fall.

This might seem nondemocratic to CWB supporters. But the Conservative Party campaigned with a promise to end the board s monopoly. So its election gave it a mandate of sorts. I also suspect that the growers of a majority of the Canadian wheat and barley harvest support the government and are already preparing their risk-management strategies. In every sector of North American agriculture, the largest players want more, not fewer, options as to how they market their products. But western Canadian grain growers need to be prepared for dealing with the kind of market volatility that beef producers face daily.

CattleBuyersWeeklycoverstheNorthAmericanmeatandlivestockindustry.Forsubscriptioninformation,contactSteveKayatP.O.Box2533,Petaluma,CA94953,orat707-765-1725,orgoto www.cattlebuyersweekly.com.

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ANorthAmericanviewofthemeatindustry.SteveKayispublisherandeditorofCattleBuyersWeekly

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In every sector of North American agriculture, the largest players want more not less options as to how they market their products

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A North American view of the meat industry. Steve Kay is publisher and editor of Cattle Buyers Weekly.

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