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Canadian Packers Under Pressure!

Mike

Well-known member
Canadian beef packers under pressure: Cargill CEO
Reuters
September 04, 2007
WINNIPEG, Manitoba (Reuters) - Canadian beef processors are grappling with the strong Canadian dollar, a labor shortage and other costs not faced by U.S. competitors, the chief executive of Cargill Inc's <CARG.UL> Canadian subsidiary said on Tuesday.
"The beef industry is in a relatively fragile position," said Len Penner of Cargill Ltd, Canada's top beef processor, in an interview. "The returns are not healthy at this point in time," he said.
Canada's export-dependent beef sector has struggled since the country uncovered its first case of mad cow disease in 2003, which shut down trade.
After a few months, the United States, Canada's main market for beef, began to allow imports of beef from cattle under the age of 30 months, which are too young to develop bovine spongiform encephalopathy (BSE) or mad cow disease.
Packers, including Cargill, boosted capacity to handle the glut of cattle that had nowhere to go. But after the U.S. border opened to young live cattle two years ago, much of that new capacity was idled.
Cargill is handling about 3,800 head per day at its High River, Alberta, plant that it had expanded to handle 5,000 a day, a company spokesman said.
In July, it laid off workers at a plant it acquired in Guelph, Ontario, to go to a single shift, processing 1,300 head per day, the spokesman said.
The strong Canadian economy is partly to blame for pushing Canadian packers' costs above U.S. competitors, Penner said.
The Canadian dollar has climbed 30 percent during the past four years of beef sector turmoil to the 95 U.S.-cent level. That has decreased returns in Canadian dollars for exported commodities that are sold in U.S. dollars, he said.
Red-hot energy and manufacturing sectors have caused a labor shortage, particularly in Alberta, a key beef producing province.
"We have a booming economy in a big chunk of where our beef is," Penner said, noting Cargill is bringing in workers from Mexico and the Philippines to help staff the High River plant.
"It's not easy, when you're constantly starting the day, every shift, short," Penner said, adding the company is using new technology to cut labor costs and boost productivity.
HIGHER COSTS
In July, new Canadian regulations came into effect that boosted slaughter costs by C$8 to C$10 a head for cattle under 30 months and C$15 to C$20 for older cattle, Penner said.
The rules, designed to eliminate all traces of BSE from Canada's herd in 10 years, force processors to carefully dispose of brains, spines and "risk materials" from cattle, rather than rendering them to use in pig and poultry feed.
Canadian beef exports dropped to 368,000 metric tons in 2006, down almost 20 percent from year-earlier levels. The value of those exports fell to C$1.3 billion ($1.24 billion), the lowest level in nine years, according to industry statistics.

But live cattle exports were up 84 percent from 2005, topping 1 million head. As of late August, the yearly export pace was up 17 percent from 2006 levels.
The next hurdle could come when a proposed U.S. rule takes effect that would allow imports of Canadian cattle born after March 1, 1999. U.S. Agriculture Secretary Mike Johanns has said the department could issue the rule as early as this month, but did not say when it would go into effect
"There is a risk that when the border opens to the (older cattle), that if we cannot remain competitive relative to the U.S. processor, that you will see more cattle go directly to the U.S.," Penner said.
(c) Reuters 2007
 

Jason

Well-known member
Pretty accurate article.

What's the problem?

The foreign workers are being brought in according to the law, and our beef industry has always been an export industry.

I am pretty sure the lower margins and things discussed are part of why Rancher's Beef closed.
 

rkaiser

Well-known member
Close the plants down and move if things are so bad.

Or hey - maybe these so called Canadian plants could pull a business move and supply BSE tested Canadian Product to the lucrative Asian market. Canadian Beef Packers my ass. Just strategy of a couple of mutinational companies playing every card in their deck to manipulate cattle markets.

BSE testing - another reason that Ranchers meats was pushed out. That is if you read any media except that published by CCA or ABP.
 

rkaiser

Well-known member
Just wondering this morning Jason.... What is it that Canadian producers gain from having the Cargill and Tyson plants here in our province? There are a hell of a lot of fat and feeder cattle moving across the line at prices that compare and obviously are outbid by our saviours at Brooks and High River. I guess it is good to have a place to have our cull cows killed while the border is closed, but what else do you see as the advantage?
 

PORKER

Well-known member
The Canadian currency rose to 95.29 U.S. cents at 4:11 p.m. in Toronto, from 94.98 cents yesterday. One U.S. dollar buys C$1.0493. Canada's dollar increased 0.6 percent to 110.77 yen as the rally in stocks led investors to purchase higher-yielding assets funded by loans in Japan.
 

PORKER

Well-known member
The only reason Cargill went to Canada was to get cheaper beef but with the Canadian dollar going higher than the US. dollar ,the incentive of cheap beef is gone. The Canadian dollar is on the move. Now Cargill is not sure they can stay in Canada as some press reports they have put out. Labor is high priced and COOL is coming to the US. etc..
 

PORKER

Well-known member
Canuck beef industry going loonie

BY REUTERS
Sept 05/07
WINNIPEG


Canadian beef processors are grappling with the strong Canadian dollar, a labour shortage and other costs not faced by U.S. competitors, the CEO of Cargill Inc's Canadian subsidiary said yesterday.

"The beef industry is in a relatively fragile position," said Len Penner of Cargill Ltd, Canada's top beef processor.

"The returns are not healthy at this point in time," he said.

Canada's export-dependent beef sector has struggled since the country uncovered its first case of mad cow disease in 2003, which shut down trade.

After a few months, the U.S., Canada's main market for beef, began to allow imports of beef from cattle under the age of 30 months, which are too young to develop bovine spongiform encephalopathy (BSE) also known as mad cow disease.

Packers, including Cargill, boosted capacity to handle the glut of cattle that had nowhere to go.

But after the U.S. border opened to young live cattle two years ago, much of that new capacity was idled.

Cargill is handling about 3,800 head per day at its High River plant that it had expanded to handle 5,000 a day, a company spokesman said.

September 5, 2007
 

rkaiser

Well-known member
Still not gettting it Porker. Our cattle and beef prices have always been relative to American prices. What differnec would it have made if the plants were in Montana or Alberta. The major difference would have been the gifts given by our lost governemnt officials to bring in these two multinational comapnies in hopes of creating work and somehow adding value to the Alberta economy. Obviously not a problem right now in Oil rich Alberta. Won't argue the labor factor, but still trying to understand how the lower Canadian dollar had anything to do with cheap cattle in Canada. Prior to BSE for instance - if your fat cattle prices were 80 cents, ours were a buck, or relative to our dollar difference less the infamous basis.
 
A

Anonymous

Guest
After a few months, the U.S., Canada's main market for beef, began to allow imports of beef from cattle under the age of 30 months, which are too young to develop bovine spongiform encephalopathy (BSE) also known as mad cow disease.

Packers, including Cargill, boosted capacity to handle the glut of cattle that had nowhere to go.

But after the U.S. border opened to young live cattle two years ago, much of that new capacity was idled.

Cargill is handling about 3,800 head per day at its High River plant that it had expanded to handle 5,000 a day, a company spokesman said.

Simple--Close the Border....... :wink: :lol:
 

PORKER

Well-known member
In July, new Canadian regulations came into effect that boosted slaughter costs by C$8 to C$10 a head for cattle under 30 months and C$15 to C$20 for older cattle, Penner said.
The rules, designed to eliminate all traces of BSE from Canada's herd in 10 years, force processors to carefully dispose of brains, spines and "risk materials" from cattle, rather than rendering them to use in pig and poultry feed.

Is this the REASON? rkaiser
 

rkaiser

Well-known member
Yes Porker, another part, along with the labor thing and likely a few more. So I still say - leave if things are so bad. They are obviously not helping the average producer anyway by staying. I still believe thy are simply whining to counter packer blamers like old Kaiser. Hard to imagine loosing money killing cows these days when our trim prices have come back to almost pre BSE days and they can buy these captive cows for 20 cents less that they did in 2001.

Yes the new rules for SRM removal put the plants in Canada at a disadvantage and will be even more so when the border opens to live cows. Exactly the reason that the border has not opened yet. Something will have to happen before the USDA allows these two plants to be at more of a disadvantage. Cow meat but not cows may be the best, but that might be too obvious. However obvious advantage for Cargill and Tyson has not stopped the USDA or our puppet feds from decisions regarding the border in the past.
 

Sandhusker

Well-known member
Kaiser, "Yes the new rules for SRM removal put the plants in Canada at a disadvantage and will be even more so when the border opens to live cows. Exactly the reason that the border has not opened yet."

Actually, that is just another reason why the USDA is doing the packer's bidding by reversing policy and throwing common sense out the window to get the border opened. Now we'll get all the cows and their diseased SRMs down here, those SRMs and the prions they carry will be rendered into chicken and hog feed and then recycled back to cows when they are in turn rendered. The USDA has some interesting priorities. :mad:
 

Jason

Well-known member
rkaiser said:
Just wondering this morning Jason.... What is it that Canadian producers gain from having the Cargill and Tyson plants here in our province? There are a hell of a lot of fat and feeder cattle moving across the line at prices that compare and obviously are outbid by our saviours at Brooks and High River. I guess it is good to have a place to have our cull cows killed while the border is closed, but what else do you see as the advantage?

Maybe you haven't been fully involved in the beef business here to remember the "good old days" when we barely had a packing industry and what was here was strangled by Canada Packers?

Cows were worth 200 bucks, we usually sold steers for 25 to 50 cents a pound. There was no feedlot alley that would pay top dollar for calves. I remember dad buying some of the fanciest baldie cows for $180 and nearly losing his shirt on them because it was a hard winter and the feed costs were too high.

Feeders were sent to Nebraska by rail and the hard trip made them worth less to the buyers. Value added in the locale of the source has always been a benefit.

What would packers from the US be able to get away with if there wasn't 2 major plants here? The 9 cent difference in fats we see today would be 50 cents.

The packers here have obviosly made money during their operation... but right now they are taking a hit again. If things don't improve they will pull out and our industry will suffer. I don't see them starting to shut down the plants, I think they are planning for the future, but it doesn't mean that a prolonged turn in the red is fun for them.

Alberta's cattle industry grew after the Lakeside plant was built. The fact that consolodation has happened again is nothing new. It is happening everyday in herds across the province. The industry might shrink then rebuild, who knows. There is some big players eyeing more land and bigger operations all the time.
 

rkaiser

Well-known member
Your history lesson has little or no merit Jason, when you consider the fact that the two plants in question are not stepping up and paying for cattle to supply their capacity. I won't argue that times have changed, but you seem to be ignoring change when you make statements like you are. Fat cattle and feeder cattle are moving across the line every day, at the same or "hay" maybe even better prices than Cargill and Tyson in Canada are willing to pay. Are you still going to argue that we need these plants in Canada or our producers will suffer?

I would like to say that I am all for a vibrant economy, value adding and all those goodies, but who are we supporting when we talk like that? People and companies other than the primary cattle producer that's who.
Farm gate profits have decreased ever since the multinationals took control Jason, and you are simply trying to deny that fact.

Yes I also like the idea of proximity. It should economic sense, however when you are dealing with global players who use each and every opportunity to expand or contract on a global scale in an effort to drive supply price down, the idea quickly loses credibility. The only way a proximity market works is if the consumer shows dedication of some sort. Thus our need for Canadian COOL which global players will always fight. Very few differentiation ideas ever fly in the boardrooms of multinationals. They want similarity. Similarity is a lot easier to control.

Do you honestly think that concentrated control by multinationals is good for the producer? Talk about you history lesson. Take a look at our industry since Cargill and Tyson set up shop in 1989. And then tell me again how we were all so much worse off before they came to Canada. Maybe a few more ups and downs, but at least when there were ups, we stood a chance to make a healthy profit.
 

Jason

Well-known member
Do you really believe that prices for southbound fats would be the same as it is now if we had no packers here?

The fact that they are not bidding more to run at full capacity proves the article quoted about tough margins is true. Why pay more to lose money on more cattle? They are killing enough to match their contracts and keep what labor force they have in place for when margins improve.

Farmgate profits are declining? For some, but I sure as heck get more for cattle even now than dad did. My income is better than it used to be. Sure it isn't all gravy but no one ever promised me a guaranteed standard of living when I signed on. That's the attitude that comes across when you start complaining how bad things are.
 

Kato

Well-known member
Cargill is fishing for government money to pay for SRM removal. :roll: If this fails, then we will pay for it. Not Cargill. :roll: :roll: :roll:
 

Sandhusker

Well-known member
Jason, "Do you really believe that prices for southbound fats would be the same as it is now if we had no packers here? "

Why sell your souls for the South Market? What do you think would happen to Canadian fats prices if you could ship BSE tested beef West? What about hormone-free Canadian beef East? Do you realize the people running the "Southern Trail" are the ones holding you back on the others?
 

Jason

Well-known member
We ship beef West, we ship beef East. we ship where ever the best price is.

The USA is the worlds number one consuming economy, it also happens to be the closest market to Canada, get over it.
 

rkaiser

Well-known member
Jason, "Do you really believe that prices for southbound fats would be the same as it is now if we had no packers here? "

Yes I do Jason. Beef is a global commodity. If the plants were not here there would be more in neighboring states. The ones that are there now are paying the same price as Cargill and Tyson in Canada are they not?

The rest of your opinion about "them" losing money right now is simply your opinion and doesn't even deserve a response.

As far as complaining about how bad things are - it's all about your own personal reality I guess. I am also enjoying a pretty good run Jason, even though my old pop has been dead and gone for 26 years and over half of my life time. He left me a little bit too Jason, but not too much as he died before he had much of a chance to realise his full potential at 48 years.

Yes complaining is detrimental. But reality is hardly complaining. The hardest thing about trying to support change in any industry is the multitude of personal situations. Insulated third and forth generation ranches, welfare lease situations, oil rich surface and mineral zones. The list goes on. Seems like the ones running the BIG show and having time for things like CCA and NCBA more often than not belong to one of these groups and the rest of us are simply complainers.
 
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