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Real cattle values cut in half since 1989: NFU

Canadian cow-calf producers and smaller-scale feeders are today getting half as much money, adjusted for inflation, for their animals as they did in the 1940s through 1980s.

That’s the finding of a year-long study of prices and profitability in the cattle sector by the National Farmers Union, the results of which were released in a report (PDF, 128 pages) by the Saskatoon-based farmers’ group Wednesday.

“Packers are paying feedlot operators half of what packers paid those feeders’ parents and grandparents,” the report said. “In turn, cattle feeders are paying cow-calf producers half of what their parents and grandparents received. These half-price cattle are bankrupting family farmers across Canada and creating the most severe crisis in the sector since the Great Depression.”

Pointing to circa 1989 as the period when the drop began, the NFU report says “not once in the 47 years between 1942 and 1989 did the price of Alberta slaughter steers fall below $120 per hundredweight, live-weight, adjusted for inflation.”

Since 2003, prices have not once climbed as high as $120, the report said, and fed cattle prices in Alberta over the past year (September 2007 to August 2008) averaged $87/cwt. But the inflation-adjusted average price for the period between 1942 and 1989 was $167/cwt, or almost double the more recent average, the NFU said.

The report cites “structural changes” in the beef sector in Canada from 1989 onward, such as the “transfer of ownership of the Canadian packing sector,” the “dramatic” reduction in the number of packing plants, the “continental integration” of Canadian and U.S. markets and the “increase in power of the dominant food retailers.”

Some cattle producers “may object to this assessment,” the report said, and they may note they had several profitable years between 1989 and 2003 when cattle and calf prices paid the bills and provided a modest living. “Why this
continued prosperity even after the 1989 cattle price collapse? The answer is simple: grain prices,” the report said.

Cost of gain

The collapse of cattle prices in 1989 has been, until recently, partly masked by a similarly timed collapse in the prices of feed grains, the NFU said. “Grain prices fell in the latter 1980s to levels far below normals — to levels below those of the 1930s. Thus, although packers reduced the prices they paid feedlots for fat slaughter cattle, feedlots’ ‘costs-of-gain’ also fell.”

The NFU said its particular hope is that the report will spur discussion in Canada about the negative effects of captive supply, which it described as a tactic in which packers own or control cattle in feedlots and use those cattle to push down prices paid to independent sellers.

Captive supply has already been a topic of discussion in the U.S. for some time, the NFU said, but described the issue as being “largely ignored” by Canada’s cattle industry organizations.

The NFU cited the increase in captive supply as one of the events around 1989 that led to the cattle price downturn. Among others, it also cited:

  • the opening of Cargill’s beef packing plant at High River, Alta., in May 1989, marking “a dramatic acceleration in the transfer of control of
    this industry, from a relatively large number of Canadian-based packers operating a large number of plants to two U.S.-based corporations that have concentrated production into a few huge plants;”
  • the implementation of the Canada-U.S. Free Trade Agreement in January that year; and
  • a ramp-up of Canadian cattle and beef exports, mostly to the U.S., due to the “continental integration” spurred by the Canada-U.S. FTA.

“These major changes occurred in Canada, and changes here mirrored and amplified similar shifts occurring in the U.S.,” the report said. “These events, on both sides of the Canada-US border, have had the effect of driving down cattle farmers’ prices here, in the U.S., in Mexico, and around the world.”

The report also warned that the pending sale of Tyson Foods’ Lakeside Packers plant at Brooks, Alta.. to XL Foods, if approved, would become “the latest in a long series of moves leading to ever-greater market power for the dominant corporations in the Canadian and North American meat and cattle sectors.”

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