Canadian Packer Profits

[Bill]

3. The Gov't has a poor history in picking winners and losers. Can-Mag in High River not far from Cargill was a Gov't pick....that white elephant is still empty. Bombardier has been mentioned a few times, a Canadian company that keeps getting millions in gov't subsidies, seems like they would fail without gov't money. There is no other Canadian aerospace company competeing with them either. Competition is Boeing and McDonald Douglas and others.

Was Cargill a gov't pick when they set up shop at High River instead of another province?

 

[Cattleman]

Hi Agman, you asked why the packers didn't cut slaughter rates to create a large backlog. Well I think it would be foolish to throw away a guranteed profit, by taking on the risk of a chance of a greater future profit, or no profit had the border opened up! THis was the situation they faced, they did not face a situation where they new the border would not open.
Also, we have a set-aside program here in Canada, and this certainly ties the hands somewhat of the packers, and creates some price responsiveness to marketings.
Sure maybe if the packers had no interest in supporting the industry and were planning to close up shop in a year they could cut the throat of the cattlemen, but they need us to continue supplying them, in order to continue with their business. Therefore they have incentive to keep dragging us along, but once the equity runs out at the cow-calf level, it will be lights out for the industry....if it comes to that. And I think this is part of Randy's arguement that the packers are pushing to far.


Agman do you not think the packers in Canada are not benefitting from the situation? And if not, why did Tyson state in their financail statements last year that the low margins in the US were somewhat offset by the good profitability in the Canadian plant?

 

[agman]

Hi Agman, you asked why the packers didn't cut slaughter rates to create a large backlog. Well I think it would be foolish to throw away a guranteed profit, by taking on the risk of a chance of a greater future profit, or no profit had the border opened up! THis was the situation they faced, they did not face a situation where they new the border would not open.
Also, we have a set-aside program here in Canada, and this certainly ties the hands somewhat of the packers, and creates some price responsiveness to marketings.
Sure maybe if the packers had no interest in supporting the industry and were planning to close up shop in a year they could cut the throat of the cattlemen, but they need us to continue supplying them, in order to continue with their business. Therefore they have incentive to keep dragging us along, but once the equity runs out at the cow-calf level, it will be lights out for the industry....if it comes to that. And I think this is part of Randy's arguement that the packers are pushing to far.


Agman do you not think the packers in Canada are not benefitting from the situation? And if not, why did Tyson state in their financail statements last year that the low margins in the US were somewhat offset by the good profitability in the Canadian plant?

What exactly would they gain by eliminating their source of supply for their plants? Conspiracies abound and this one could challenge for first prize.

I have very clearly stated previously that packers benefited. In fact they have earned excessive profits short term. Where did you ever gather that I have ever suggested any differently? Thanks for your comments addn questions; have a great day.

 

[agman]

Has it not been the big packers who have been making every attempt to reopen the border to their benefit and yours?

What position has Cargill and Tyson held towards BSE testing in North America and Canada in particular?

Read my statement carefully. I referenced opening the border for trade. Major packers have opposed blanket testing since the science did not support blanket test. The more that has been learned the less blanket testing has any merit. Even Japan has recognized that fact. There was also no assurance that testing would result in the immediate resumption of exports. More importantly, what would happen the next time some outbreak occurred. Would we rely on science or politics? Which precedent do you want to establish and follow?

 

[Bill]

Has it not been the big packers who have been making every attempt to reopen the border to their benefit and yours?

What position has Cargill and Tyson held towards BSE testing in North America and Canada in particular?

Read my statement carefully. I referenced opening the border for trade. Major packers have opposed blanket testing since the science did not support blanket test. The more that has been learned the less blanket testing has any merit. Even Japan has recognized that fact. There was also no assurance that testing would result in the immediate resumption of exports. More importantly, what would happen the next time some outbreak occurred. Would we rely on science or politics? Which precedent do you want to establish and follow?

Whoa wait a minute there Agman! Read the following statement carefully by Ted Haney, President of the Canadian Beef Export Federation. In another statement Mr. Haney said that the Japanese have said for some time they will take BSE tested beef. Are you saying that the Canadian who has dealt with foreign customers in re-opening markets does not know what he is doing?
The main reason Cargill and Tyson oppose testing is it will derail the gravy train they have going and I suggest the science is a convenient crutch.



6/2/2005 3:47:00 PM
Canada Cattle Industry Prepares For Possible US Boxed-Beef Ban

WINNIPEG (Dow Jones)--The Canadian cattle industry has plans in place should the U.S. border to Canadian boxed beef exports be closed, according to industry sources. The Ranchers-Cattlemen Action Legal Fund, or R-CALF, has been after U.S. District Judge Richard F. Cebull of Montana to halt boxed-beef imports from Canada.

One analyst said that should a ban on boxed beef be implemented, prices for live cattle in Canada would plummet and likely would prompt calls for drastic action such as the immediate depopulation of the Canadian cattle herd - which is among four industry plans in place.

The R-CALF complaint alleges that the U.S. Department of Agriculture's decision to open the border to bone-in and other meats from Canada is "arbitrary (and) capricious" and "increases the risk of importing contaminated beef products from cattle infected with bovine spongiform encephalopathy (BSE) into the United States," which will cause "irreparable harm" to cow or calf operators.

R-CALF was already successful in preventing the reopening of the U.S. border to live cattle from Canada under the age of 30 months that was to have occurred in early March.

"Whether R-CALF will be successful boils down to the USDA's defense of their rule and its opposition to the closure of the border to boxed beef as well as to R-CALF's arguments for blocking the rule and its arguments in favor of stopping the flow of boxed beef," said Ted Haney, president of the Canadian Beef Export Federation.

The Canadian cattle industry can do little at this stage, he said. "Right now the chances of Judge Cebull siding with R-CALF are pretty good given his past record," said Herb Lock, a livestock analyst with Farm Sense Marketing.

Lock said should Cebull issue the ban on boxed beef, Canada will simply have more beef to dispose of. "The danger here is that if we can't move boxed beef into the U.S. market, there are no other markets willing to take that much beef," Lock said. "We will then move back into a scenario much like when Canada's cattle market came to a complete standstill immediately following the discovery of the first BSE infected animal in Alberta in May of 2003."

Haney pointed out that should Judge Cebull decide to include boxed beef from Canada in the ban, the USDA quickly would move to challenge the ruling in the Appeals Court of San Francisco.At that point, the Appeals Court has the responsibility of including in its consideration the impact of the decision on the trading relationship between Canada and the U.S., Haney said.

The Canadian cattle industry already has put in motion plans to deal with the worst-case scenario, which would be the U.S. border also closing to boxed-beef shipments from Canada.

If the border closes to boxed beef, Haney said, the Canadian cattle industry will seriously look at four options:- disposal of surplus cattle or depopulation. "Basically what would happen is the downsizing of the Canadian cow herd to match slaughter capacity that is available at present," he said. - increase slaughter and beef processing capacity even further.

Haney noted that pre-BSE slaughter capacity in Canada totaled roughly 70,000 head be per week. At present, slaughter capacity in Canada is roughly 88,000 head a week and was expected to hit 98,000 head per week by the end of 2005, which would be roughly self-sufficient levels.- implement a larger set-aside program, in which cattle temporarily are taken out of the marketplace, than that already exists.

Haney said depopulation would only be considered as a last resort as it would be opposed by the industry. He said it would also be considered only if all markets to Canadian beef would be closed.- implementation of BSE testing for each animal slaughtered to the food market.

"The thinking is that by testing every Canadian animal for BSE, it would be much more palatable for countries such as Japan, other Asian countries along with Russia and would go along way to opening those markets up to Canadian beef," Haney said. He acknowledged that there would likely be resistance from the Canadian Meat Council and the major packers in Canada to testing every animal for BSE.

Haney said Japan imports roughly 800,000 metric tons of beef per year. South Korea imports about 400,000 tons of beef, Taiwan 150,000 tons and Russia 600,000 tons.

"By testing every animal for BSE, Canada would be able to gain access to those markets very easily," Haney said. "Canada would only need to capture less than a 10% share of each of those markets to accommodate a weekly slaughter kill of 98,000 head a week." Of the 98,000-head-a-week cattle kill, the Canadian domestic market can absorb 54,000," he said. "While it would take time, Canada will be able to replace the lost boxed beef sales to the U.S.," Haney predicted.

In calendar year 2004, Canada exported 365,000 metric tons of beef to the US. Of that, 162,000 tons was redirected by U.S. outlets to Asia, Mexico, and other small markets, Haney said.
Source: Dwayne Klassen, Dow Jones Newswires;

 

[rkaiser]

Good post Bill.

The point being missed by agman is his talk of blanket testing vs, our talk of testing for market access.

When talking about the reason for Tyson, and Cargil to kill every animal they possibly can, Agmans fact that they do it to help the backlog is not only impossible to prove, but sounds like a fairy tale compared to killing every animal they possibly can to reap the profits from this unchallenged, and dysfunctional market. Any talk of supply and demand, and feedlot numbers up, etc., makes no sense when Canada has never had enough capacity to kill the supply of fats for over two years.

 

[agman]

What position has Cargill and Tyson held towards BSE testing in North America and Canada in particular?

Read my statement carefully. I referenced opening the border for trade. Major packers have opposed blanket testing since the science did not support blanket test. The more that has been learned the less blanket testing has any merit. Even Japan has recognized that fact. There was also no assurance that testing would result in the immediate resumption of exports. More importantly, what would happen the next time some outbreak occurred. Would we rely on science or politics? Which precedent do you want to establish and follow?

Whoa wait a minute there Agman! Read the following statement carefully by Ted Haney, President of the Canadian Beef Export Federation. In another statement Mr. Haney said that the Japanese have said for some time they will take BSE tested beef. Are you saying that the Canadian who has dealt with foreign customers in re-opening markets does not know what he is doing?
The main reason Cargill and Tyson oppose testing is it will derail the gravy train they have going and I suggest the science is a convenient crutch.



6/2/2005 3:47:00 PM
Canada Cattle Industry Prepares For Possible US Boxed-Beef Ban

WINNIPEG (Dow Jones)--The Canadian cattle industry has plans in place should the U.S. border to Canadian boxed beef exports be closed, according to industry sources. The Ranchers-Cattlemen Action Legal Fund, or R-CALF, has been after U.S. District Judge Richard F. Cebull of Montana to halt boxed-beef imports from Canada.

One analyst said that should a ban on boxed beef be implemented, prices for live cattle in Canada would plummet and likely would prompt calls for drastic action such as the immediate depopulation of the Canadian cattle herd - which is among four industry plans in place.

The R-CALF complaint alleges that the U.S. Department of Agriculture's decision to open the border to bone-in and other meats from Canada is "arbitrary (and) capricious" and "increases the risk of importing contaminated beef products from cattle infected with bovine spongiform encephalopathy (BSE) into the United States," which will cause "irreparable harm" to cow or calf operators.

R-CALF was already successful in preventing the reopening of the U.S. border to live cattle from Canada under the age of 30 months that was to have occurred in early March.

"Whether R-CALF will be successful boils down to the USDA's defense of their rule and its opposition to the closure of the border to boxed beef as well as to R-CALF's arguments for blocking the rule and its arguments in favor of stopping the flow of boxed beef," said Ted Haney, president of the Canadian Beef Export Federation.

The Canadian cattle industry can do little at this stage, he said. "Right now the chances of Judge Cebull siding with R-CALF are pretty good given his past record," said Herb Lock, a livestock analyst with Farm Sense Marketing.

Lock said should Cebull issue the ban on boxed beef, Canada will simply have more beef to dispose of. "The danger here is that if we can't move boxed beef into the U.S. market, there are no other markets willing to take that much beef," Lock said. "We will then move back into a scenario much like when Canada's cattle market came to a complete standstill immediately following the discovery of the first BSE infected animal in Alberta in May of 2003."

Haney pointed out that should Judge Cebull decide to include boxed beef from Canada in the ban, the USDA quickly would move to challenge the ruling in the Appeals Court of San Francisco.At that point, the Appeals Court has the responsibility of including in its consideration the impact of the decision on the trading relationship between Canada and the U.S., Haney said.

The Canadian cattle industry already has put in motion plans to deal with the worst-case scenario, which would be the U.S. border also closing to boxed-beef shipments from Canada.

If the border closes to boxed beef, Haney said, the Canadian cattle industry will seriously look at four options:- disposal of surplus cattle or depopulation. "Basically what would happen is the downsizing of the Canadian cow herd to match slaughter capacity that is available at present," he said. - increase slaughter and beef processing capacity even further.

Haney noted that pre-BSE slaughter capacity in Canada totaled roughly 70,000 head be per week. At present, slaughter capacity in Canada is roughly 88,000 head a week and was expected to hit 98,000 head per week by the end of 2005, which would be roughly self-sufficient levels.- implement a larger set-aside program, in which cattle temporarily are taken out of the marketplace, than that already exists.

Haney said depopulation would only be considered as a last resort as it would be opposed by the industry. He said it would also be considered only if all markets to Canadian beef would be closed.- implementation of BSE testing for each animal slaughtered to the food market.

"The thinking is that by testing every Canadian animal for BSE, it would be much more palatable for countries such as Japan, other Asian countries along with Russia and would go along way to opening those markets up to Canadian beef," Haney said. He acknowledged that there would likely be resistance from the Canadian Meat Council and the major packers in Canada to testing every animal for BSE.

Haney said Japan imports roughly 800,000 metric tons of beef per year. South Korea imports about 400,000 tons of beef, Taiwan 150,000 tons and Russia 600,000 tons.

"By testing every animal for BSE, Canada would be able to gain access to those markets very easily," Haney said. "Canada would only need to capture less than a 10% share of each of those markets to accommodate a weekly slaughter kill of 98,000 head a week." Of the 98,000-head-a-week cattle kill, the Canadian domestic market can absorb 54,000," he said. "While it would take time, Canada will be able to replace the lost boxed beef sales to the U.S.," Haney predicted.

In calendar year 2004, Canada exported 365,000 metric tons of beef to the US. Of that, 162,000 tons was redirected by U.S. outlets to Asia, Mexico, and other small markets, Haney said.
Source: Dwayne Klassen, Dow Jones Newswires;

If you read the full context of the aforementioned post I gather he is not as cock sure about exports being resumed as he implies in his first statement. This does not sound like a sure thing to me - "The thinking is that by testing every Canadian animal for BSE, it would be much more palatable for countries such as Japan, other Asian countries along with Russia and would go along way to opening those markets up to Canadian beef," The key word is "the thinking is" . Have a great day.

 

[rkaiser]

You know agman, this cock sure little man has been selling beef for your precious Cargil and Tyson for years now. How come he turns into some kind of enemy of the State when he all of a sudden expresses an idea that may help the Producers of Canada, who by the way pay the majority of his wage while he sells Cargil and Tyson's beef.

 

[agman]

Good post Bill.

The point being missed by agman is his talk of blanket testing vs, our talk of testing for market access.

When talking about the reason for Tyson, and Cargil to kill every animal they possibly can, Agmans fact that they do it to help the backlog is not only impossible to prove, but sounds like a fairy tale compared to killing every animal they possibly can to reap the profits from this unchallenged, and dysfunctional market. Any talk of supply and demand, and feedlot numbers up, etc., makes no sense when Canada has never had enough capacity to kill the supply of fats for over two years.

Why did they not just kill at normal rates? The supply exceeded capacity to kill so just back them up. Slowing the kills would have allowed fed cattle price to sink even lower while beef cutout vaues would have been supported at higher prices due to reduced production. That would have increased their margin even further, blowing your phony theory completely out the water. They would have captured the same profit or higher levels, just for an extended period.

Only from the outside looking in, with no real knowledge of their objective, could one dream up that they are in business to put you, a producer, out of business.

 

[rkaiser]

Agman -

Why did they not just kill at normal rates? The supply exceeded capacity to kill so just back them up. Slowing the kills would have allowed fed cattle price to sink even lower while beef cutout vaues would have been supported at higher prices due to reduced production. That would have increased their margin even further, blowing your phony theory completely out the water. They would have captured the same profit or higher levels, just for an extended period.

Only from the outside looking in, with no real knowledge of their objective, could one dream up that they are in business to put you, a producer, out of business.

What the hell are you talking about agman. Slowing the kill would have allowed prices to sink lower? Lower than what? You have never told us how this price was established in the first place. Supplyand demand have had no place in Canada for two years. Our capacity has been, and is still well below kill ready cattle.

The fact is Canada has and had an OVERSUPPLY. This oversupply led to unchallenged pricing due to lack of competition.

It is your theory of packers helping out that is phoney and there is no way in hell you can back it up with anything factual. The packers saw an opportunity and took full advantage. If that statment makes me a packer blamer, so be it, it is fact.

But your arguement about helping out, or dropping price further by killing less cattle in what I call a salmon river overfilled with supply, is utterly ridiculous.

 

[agman]

You know agman, this cock sure little man has been selling beef for your precious Cargil and Tyson for years now. How come he turns into some kind of enemy of the State when he all of a sudden expresses an idea that may help the Producers of Canada, who by the way pay the majority of his wage while he sells Cargil and Tyson's beef.

I have no problem with him personally. I don't know him. I would assume he is a very good person. However, his statement was used as gospel truth that Japan would accept beef from tested animals. His followup comments were not quite as certain as I clearly pointed out. Why did you just dismiss the quote that I referenced? Why was that so difficult for you to understand? Assuming something again you know very little about.

 

[agman]

Agman -

Why did they not just kill at normal rates? The supply exceeded capacity to kill so just back them up. Slowing the kills would have allowed fed cattle price to sink even lower while beef cutout vaues would have been supported at higher prices due to reduced production. That would have increased their margin even further, blowing your phony theory completely out the water. They would have captured the same profit or higher levels, just for an extended period.

Only from the outside looking in, with no real knowledge of their objective, could one dream up that they are in business to put you, a producer, out of business.

What the hell are you talking about agman. Slowing the kill would have allowed prices to sink lower? Lower than what? You have never told us how this price was established in the first place. Supplyand demand have had no place in Canada for two years. Our capacity has been, and is still well below kill ready cattle.

The fact is Canada has and had an OVERSUPPLY. This oversupply led to unchallenged pricing due to lack of competition.

It is your theory of packers helping out that is phoney and there is no way in hell you can back it up with anything factual. The packers saw an opportunity and took full advantage. If that statment makes me a packer blamer, so be it, it is fact.

But your arguement about helping out, or dropping price further by killing less cattle in what I call a salmon river overfilled with supply, is utterly ridiculous.

If they did not run the plants at full capacity then explain to me what you think they actually did. Facts confirm they ran the plants at capacity to alleviate the potential for even a more disastrous situation for producers. Since you claim economics is so simple then explain why they did not slow the kills to extend their inventory while reducing production to raise wholesale value and enlarge their profits even more. If they did not care for produces why did they not do that? The economics of that is so simple you should even be able to understand that process. Simple economics would suggest a further backlog would have resulted in even lower prices than you recieved; simple isn't it.

 

[Mike]

Simple agman. At that time the margins were over $200.00 per head. Pack all you can as fast as you can, make all the money you can as fast as you can. Take all the guvment money you can, as fast as you can.

 

[Murgen]

And run as fast as you can! But I still wonder why they are putting all that "short-term" profit into Infrastructure?

They must be counting on the gravy to run for a little bit more so they can pay off those expansions.

 

[agman]

Simple agman. At that time the margins were over $200.00 per head. Pack all you can as fast as you can, make all the money you can as fast as you can. Take all the guvment money you can, as fast as you can.

No it it not that simple. Read my question. You have explained nothing.

 

[agman]

And run as fast as you can! But I still wonder why they are putting all that "short-term" profit into Infrastructure?

They must be counting on the gravy to run for a little bit more so they can pay off those expansions.

They continue to look at the longterm which translates into growth of the North American cattle herd despite near-term difficulties and near-term potential reduction in the Canadian cattle herd. The plant expansion will allow them to be even more competitive longterm once longterm inventory expansion occurs. Their view of longterm is not the next three to five years. For starters, you should begin to focus on the next ten to twenty years. Now you are entering into their mindset in terms of time. Have a great day.

 

[Cattleman]

To Quote Agman: If they did not run the plants at full capacity then explain to me what you think they actually did. Facts confirm they ran the plants at capacity to alleviate the potential for even a more disastrous situation for producers. Since you claim economics is so simple then explain why they did not slow the kills to extend their inventory while reducing production to raise wholesale value and enlarge their profits even more. If they did not care for produces why did they not do that? The economics of that is so simple you should even be able to understand that process. Simple economics would suggest a further backlog would have resulted in even lower prices than you recieved; simple isn't it.


I don't know Agman, I think your economics is a little off. I disagree with your supply and demand model, and you seem to be missing an important point on overhead costs in a packing plant! Packing plants are built for small margin high throughput, as soon as they cut slaughter rates they take it right in the teeth as a cost per carcass slaughtered, and their price increase for beef is not significany because they can't really short the Canadian market to increase prices, as Canada can still import beef, just like it did right after May 20th when slaughter rates were cut in half (by our saviour packers!) They wind up slaughter rates to reduce fixed costs, and can increase profits at this rate, because these two big packers in the "small" Canadian market face virtually a perfectly elastic demand curve in North AMerica, and thus they are maximizing profit.

Don't kid yourself Agman.

 

[rkaiser]

I was thinkin Agman. If I were the owner of Cargil (and I might be some day), and I had a consutant hired that suggested that I keep production levels low when a virtual unlimited supply of cattle waited for me with guaranteed profit. And my other consultants were smart enough to see the potential length of this salmon run. (These consultants actually knowledgeable of the American Judicial system and the potential for a bunch of protectionist to keep the gravy train going for a fair long while.)

That original consultant with ideas of helping the producers of Canada, would be flippin burgers at Mcdonalds, after I kicked his a%% out the door.

The packers are taking what was given to them Agman, why can't you admit it.

I hope your boss is seeing that you are simply trying to convince a bunch of (as you call us) uninformed farmers of the goodness of packers, because you might be scambling for a job if he thinks you really want him to let that kind of money pass him by.

This is Page six Agman, and you have yet to bury my a$$. What's the matter. When things get tight you resort to calling me a dumby, or uninformed or a blamer. Thank goodness you're only taking on one of BIG C's worker bees. Cam Ostercamp and others would have had you running for cover by now.

I will not say that you lack knowledge when talking about a functioning beef market, but Canada is far beyond functional. Profits for packers are excessive as you say FOR TWO YEARS. How long can the SHORT TERM that you talk about last before something needs to change.

Do you understand that that statement is not about blame. It is only about changing a situation where Ranchers are loosing billions, and packers are profitting profusely. I like profit. I want profit. But if I profitted in any industry that long, at a profuse level, I would expect those I am profitting from to try to make changes.

 

[Mike]

Facts confirm they ran the plants at capacity to alleviate the potential for even a more disastrous situation for producers.

Agman, do you really believe they ran plants at capacity just for the producer? :lol2: :lol2: :lol2:

You're a funny, funny man!

 

[agman]

Facts confirm they ran the plants at capacity to alleviate the potential for even a more disastrous situation for producers.

Agman, do you really believe they ran plants at capacity just for the producer? :lol2: :lol2: :lol2:

No, but if they were out to break the industry as is claimed they would have run the business as I suggested to counter RKaiser's ridiculous claim. You still have failed to show why they did not capitalize on even greater profit opportunity. You only explain what they did, not what they chose not to do which would have enhanced and extended their profits. The argument about my not knowing their costs is a joke. Why do you think the entire financial community has learned to track my packer margin data. Results and accuracy over time is the answer.