And this time, it’s a death by a thousand cuts, says a new study from the heart of Canada’s cattle country.

Government regulations. Global trade wars. Rising land prices and ever-higher costs. Drought. Feed shortages. Head taxes and exclusion zones.

There’s not one single thing hurting the cattle industry but a pile of things, according to the study commissioned by the Alberta Beef Producers and the Alberta Cattle Feeders’ Association.

“The industry is, and has been, competitive, and we’re capable of maintaining the competitiveness,” said ABP executive director Rich Smith. “But there are some factors and trends that are worrisome and could decrease competitiveness.”

Challenges such as weather or market fluctuations can’t be controlled and affect cattle producers everywhere. But others are made-at-home problems.

“We are seeing some concerning signs of some regulations here, and that’s really what we’re focusing on,” said Smith. “We need to make sure that we don’t end up with regulations and policies here that could affect our competitiveness.”

The Alberta Beef Industry Competitiveness Study, by Edmonton consultants Serecon, pinpoints several regulatory issues hitting the bottom lines of cattle producers and feeders. While some of them are particular to Alberta, most are applicable across the country, or can have a knock-on effect for producers elsewhere. These include the carbon tax, the head tax in Lethbridge County, new provincial farm safety requirements, a higher minimum wage, and upcoming transportation rule changes.

“All of these costs aren’t at the magnitude of feed costs, but in a tight-margin industry, they can certainly have an impact,” Smith said. “It tends to discourage expansion. People aren’t able to survive.”

Declining Canadian cattle numbers are a sign of that, he added. Between 2008 and 2018, the national herd shrunk by 25 per cent, and that decline is expected to continue.

“The returns over the past few years have been quite good in the cow-calf sector, and it still hasn’t convinced people to expand more,” said Smith. “The size of the cow herd affects the viability of both the feeding and the processing sectors. So we certainly don’t want to see further declines in our cow herd.”

Balancing act

Regulations are a double-edged sword — although they add costs, they also give Canadian producers a leg up over competitors, the study found.

“We recognize the importance of having regulations,” said Smith. “One of our advantages in our export markets is the fact that we have robust food safety regulations, our environmental performance is strong, we have traceability, and we have good sustainability initiatives. So those are strengths.

“But if the regulations and policies impose too many costs, then we’re not able to remain competitive.”

New policies will need to be looked at “a little more critically,” he added.

“The advantage of the competitiveness study is that it allows us to go to governments and say, ‘Make sure when you’re doing policies and regulations you take into account the potential impacts on the competitiveness of a pretty important industry,’” Smith said.

There needs to be a balance, said Janice Tranberg, president and CEO of the Alberta Cattle Feeders Association.

“Regulatory changes are difficult,” she said. “You continue to work with your regulatory partners and ensure that changes aren’t impeding industry, but it’s almost like we’re harder on our Canadian industries than we are on our competitors around the world.”

Regulators need to keep the big picture in mind, said Tranberg.

“You might say, ‘Oh, carbon tax is a little bit higher cost for fuel, the head tax is just a little bit higher tax on producers.’ But all these little things are going to add up and could potentially put us in a fairly tight position, so let’s make sure we don’t put things in place that will impede our growth.”

Land and labour

These added costs do “put us a step behind” our American and global competitors, said Brian Perillat, senior analyst at Canfax.

“The beef industry and the feeding industry are thin-margin businesses,” said Perillat. “Long-term profits aren’t very big, so even if it’s just a few dollars a head, that comes off the bottom line, and it can be a pretty big percentage of our profit margin being swallowed up by these costs. That’s definitely going to affect our competitiveness.”

The big jump in land prices is another big factor, added Smith.

“We’re competing with other land uses, but even within agriculture, we’re competing with the potential for the land to be used for cropping.”

As both crop productivity and the ability to farm more marginal lands increase, cattle production becomes a less attractive option.

“It always goes back to economics,” said Perillat. “Grain farmers have the ability to expand relatively easily, with bigger equipment and more automation, whereas cattle producers struggle on the labour side to expand their operations.”

While agricultural wages have increased by 3.5 per cent annually over the past decade (versus 2.6 per cent yearly in the U.S.), it’s getting workers that holds many operations back.

“Finding labour is one of the most significant challenges,” said Tranberg. “Whenever I talk to my members, probably the first thing that comes up is that they just can’t seem to get enough good labour to work there.”

Scaling up

Tight margins are something Sean McGrath wrestles with continually on his cow-calf operation near Vermilion, Alta.

“I think a lot of it is returns. In a lot of ways, it’s more difficult to scale up a cattle operation than it is a grain operation,” said McGrath. “If you add a quarter section, it’s a few hours on either end of the year, and that quarter section may generate $70,000. To accomplish that same thing in a beef operation, you’re talking about adding 100 cows.”

That’s not an option for most producers, particularly as improvements to forage yields trail behind grain yields.

“In a lot of ways, our pasture management hasn’t kept up from a yield perspective with the grain side,” said McGrath. “So that’s really put a cash flow crunch on land purchases.”

But he understands it’s hard to attract investment for developing new forage varieties.

“If the seed salesman is selling me canola, he’s showing up every spring and getting a sale. But for perennials, a lot of guys put in a stand for 10 years or more, so there’s less incentive for the infrastructure around the industry to build and grow that.”

Perillat agrees.

“Over the last few years, we’ve seen some droughts and some tough years, but we still get some pretty good crops of canola, wheat, and barley, whereas on the forage side, we’ve just taken a kicking,” he said.

“We haven’t seen the productivity gains in pasture and forage management. I think there’s opportunity there, but we just haven’t seen that.”

Bit by bit

Any improvements to the bottom line will likely come from incremental changes — little cost savings that add up over time, Perillat added.

“I see lots of opportunities for small improvements, maybe a few dollars a head here or there.”

That’s the direction McGrath sees the industry going in, too.

“To be perfectly honest, I don’t really see it turning around — I just see guys driving down costs and doing things differently,” he said.

“I think what we’re going to see is a lot more of a creative industry going forward. I think people are going to push the boundaries on how they manage cows even beyond what we’re doing today.”

Things such as lengthening the grazing season, exploring alternate value-added marketing avenues, or partnering with acreage owners for access to pasture are examples of that, said McGrath.

“I think there are huge opportunities out there, but I also think that less and less, they’re coming from a traditional approach,” he said. “I don’t see the industry looking the same 20 years from now. I don’t know what it’s going to look like, but I just don’t see it staying the same.”

And if the sector isn’t able to stay ahead of those changes and turn this trend around, producers will be the ones who stand to suffer most.

“When you’re in a tight-margin industry that isn’t competitive, businesses won’t stay here,” said Smith.

“Ultimately, if competitiveness gets hurt too much, businesses that operate in that environment will not operate here. That’s what concerns us.”

This article was originally published at the Alberta Farmer Express.

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The college and Alberta Cattle Feeders Association announced Wednesday they’ll jointly develop programming to be “offered in a variety of delivery modes — face-to-face, online or blended.”

The BRM initiative is expected to focus on areas such as financial literacy, communications, currency, market tools, cycles, risk and opportunity policies, self-management and awareness, government policy, marketing and equity in the market. It will also include an individual case study, the college said.

The curriculum will be available both to the college’s current students and “industry participants starting this fall as part of the Southern Alberta Cor Van Raay Agribusiness Program, the college said.

The college’s Cor Van Raay agribusiness program was announced in June as a partnership with the University of Lethbridge, backed with a $5 million gift from cattle producer Cor Van Raay, to teach “advanced agribusiness practices.”

“Developing this important curriculum with ACFA and other producer groups will ensure that we are developing what is needed, not only for current students, but for producers and other industry members who, as they grow and succeed, will need to also manage risk within their businesses,” Stuart Cullum, the college’s chief operating officer, said in a release.

“As cattle prices have increased, industry needs to manage their increased exposure to market volatility,” John Lawton, a member of ACFA’s board and cattle feeder at Niton Junction, said in the same release.

BRM programming, to be taught by both college and university faculty, “will provide skills for industry participants currently trying to manage their equity as well as prepare students with a skill set that is in demand in the cattle industry as well as other livestock and grain industries,” he said. — AGCanada.com Network

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Alberta’s two biggest cattle associations have negotiated a three-year agreement to bring back a national checkoff on live cattle sales in the province.

The deal will restore $1 of the previously mandatory $3-a-head levy which became refundable earlier this year. The remaining $2 fee will stay non-refundable.

The $1 levy, once restored, will go to the Beef Information Centre, the Canada Beef Export Federation and the Beef Cattle Research Council. Funding for the agencies became precarious when the Alberta government made the levy refundable earlier this year.

NEW DEAL

The deal hammered out by Alberta Beef Producers and the Alberta Cattle Feeders Association, aided by Alberta Agriculture Minister Jack Hayden, expires March 31, 2013 and is renewable upon review.

The agreement is still subject to approval by the Alberta provincial cabinet. It would have to reverse part of the bill which made the entire checkoff refundable. Hayden has recommended cabinet ratify the change.

A spokesperson for Hayden said cabinet was scheduled to discuss the matter at the Sept. 29 meeting but didn’t get around to it. There’s no word on when cabinet will meet again before the provincial legislature resumes Oct. 25.

The agreement to restore the $1 national levy is the latest development in the highly political debate over refundable versus non-refundable checkoffs in Alberta.

Previously, the $3 ABP levy was compulsory and non-refundable. A third of it was deemed a national checkoff which went to the Canadian Beef Cattle Research Market Development and Promotion Agency for distribution to the three national beef agencies.

Other provinces collect their own cattle checkoffs, of which $1 by law also goes to the agencies. Alberta is the biggest contributor because it is by far the largest cattle producer in the country.

Last year, former Alberta Agriculture Minister George Groeneveld stunned the industry by announcing the province’s cattle checkoff would be made refundable, effective April 1, 2010.

Since the $1 national checkoff was lumped together with the overall $3 levy, it became refundable, too.

CHECKOFF SWITCH

Because the checkoff suddenly switched from mandatory to refundable, the three beef agencies, two of which are connected to the Canadian Cattlemen’s Association, stood to lose funding.

CCA predicted national checkoff money from Alberta would drop by $2 million a year, starting July 1, 2010.

National checkoff receipts from cattle sales are already down by $1 million over the last 18 months because of declining herd numbers. The Alberta situation only makes things worse, said Rob McNabb, executive director of the national checkoff agency which administers the funding.

The agreement, when ratified, should take effect Jan. 1, 2011. McNabb said it won’t recapture all of the $2 million lost this year but it will help agencies develop budgets for next year.

“It’ll restore predictable funding based on what we know about the cattle inventory.”

Getting the Alberta levy back will also give the national checkoff agency authority to levy imported beef from the United States for promotional and research purposes.

The U. S. has had such a levy on Canadian beef since 1985. But Canada could never do the same to U. S. beef because it lacked a mandatory checkoff in every province to do so.

Over the years, provinces one by one adopted regulations to collect a $1 checkoff and remit the money to the national checkoff agency. Quebec and Prince Edward Island were the last to do so this June.

But when Alberta’s national checkoff went refundable, the ability to levy a mandatory import checkoff was lost.

BACK ON TRACK

Now, when Alberta’s $1 levy becomes mandatory again, Canada will be back on track to collect money on beef imports, McNabb said.

The decision to partially restore a non-refundable checkoff is not unanimous. The Western Stock Growers’ Association says the refundable checkoff should be given a chance to work before making any changes to it.

In a Sept. 29 open letter to Alberta MLAs, the Calgarybased WSGA said the agreement between ABP and the cattle feeders “has now driven a political wedge into the cattle industry, causing further discontent at a time when industry was starting to regain producer support.” ron@fbcpublishing.com

———

“It’ll restore predictable funding. “

– ROB MCNABB, NATIONAL CHECKOFF AGENCY

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The Beef Industry Alliance (BIA) Roundtable has come together to ask one simple question: Can we as a beef industry in Western Canada do better?

Clearly the answer to this question is yes! As an industry, we have marched down a single low-cost commodity track. Our pricing is determined by U. S. markets. We have very few processing and marketing options. Little product differentiation or product development is taking place. There are no distinctive Canadian beef brands available to consumers both within and outside of Canada. Meanwhile our costs of production are rising, including the regulatory burden which makes it increasingly difficult for us to compete as a pure commodity player.

The BIA Roundtable holds a fundamental conviction that the domestic and export markets offer more opportunities than what are being realized by the industry’s current commodity strategy. Quite simply, we must find ways to do better. Our future depends on it. To this purpose, the BIA is committed to addressing the fundamental challenge. For more information see A New Vision – A New Plan (www.bia.com).

Canada is a world leader as a beef-producing nation. We have some of the best genetics, leading producers; and most importantly – the best beef you can taste! It is an industry that we are proud to be part of.

Yet our industry is under great pressure. Financial returns are not sufficient to sustain let alone maintain the industry. Cattle numbers are on the decline. Producers are leaving the industry. If this situation does not improve soon, our industry will shrink and become a shadow of what it once was or what it could be, as the world demand for meat protein grows.

The BIA Roundtable is committed to creating new value and new opportunities for our industry. Many issues need to be addressed to build these strategies including: (1) understanding what consumers are looking for and what needs are not being met; (2) identifying new export markets that look for qualities and attributes not being supplied; (3) developing new marketing programs and long-term relationships with partners that are looking to differentiate; (4) facilitating processing solutions that deliver value to customers; (5) building business structures that share both benefits and risks in doing so, distribute value to producers; and (6) addressing the regulatory burden that imposes unnecessary costs to the industry.

Most importantly the BIA Roundtable is convinced that value and dollars are being left on the table. To change this situation, the BIA Roundtable is committed to working diligently to develop new approaches that address what consumers are looking for and to bring more value back to producers. This will require focus, highly skilled marketing efforts, dedicated processing and direct links back to producers.

The post The Fundamental Challenge For The Beef Industry appeared first on Manitoba Co-operator.

“The cow-calf producer wants to sell high, which I totally respect, but my job is to buy as low as I can. How can one entity represent both interests?”

– RICK PASKAL

Alberta Beef Producers as well as pork, lamb and potato groups in that province aren’t happy with their government’s plan to make commodity checkoffs refundable.

However others, including the Alberta Cattle Feeders Association, say they are pleased with the proposed change.

Late last month, Agriculture Minister George Groeneveld announced introduction of Bill 43, which eliminates non-refundable checkoffs for non-supply-managed commodity groups in Alberta.

“We’re quite concerned about this,” said Edzo Kok, executive director of the Potato Growers Association of Alberta (PGA). “It will have an impact on PGA and the amount of levies it collects. If any member asks for a refund, it will affect the finances we have for the organization.”

Members of the Potato Growers of Alberta have written letters to MLAs in potato-growing regions, and have met with members of the government. “Unfortunately, our concerns seem to be falling on deaf ears,” said Kok by phone from his office in Taber.

Kok said PGA membership did not ask for this change. “We weren’t consulted on this at all. We were advised two weeks ago by the deputy minister that it was in the pipeline. At that point, it was no longer up for debate. The decision had been made,” Kok said.

The Alberta Lamb Producers, which is also affected by the change, is disappointed. “We’re already looking at what strategies we can use to get on with business,” said Norine Moore, chair of the Alberta Lamb Producers, from her home in Stavely.

Moore said the change to the checkoffs only comes into effect at the end of the year, which is September 2010 for the lamb producers.

“Our regulations for how the checkoff will work will need to be in place by January 2010,” said Moore. She said that the organization has not had a lot of time to figure out how the changes will affect them. “We have no way of projecting what percentage of producers will ask for a refund,” she said.

“We’re disappointed in the way this was handled,” said Paul Hodgman, executive director of Alberta Pork. “Our position was that the membership should determine where this goes. This has been imposed on us so it will have implications on what we’re doing. We have to figure out how to source funds from outside organizations,” he said. “We’re going to work with the system as best as we can.”

FEEDERS ARE PLEASED

Rick Paskal of Picture Butte, chairman of the National Cattle Feeders Association and board member of the Alberta Cattle Feeders Association, says Bill 43 gives producers the flexibility to use their checkoffs to endorse or reject certain policies coming from Alberta Beef Producers (ABP).

The political structure of the ABP has been a long-standing concern for cattle feeders. Although the previous governance structure and mandatory checkoff were supported by most producers as a democratic system, it was to the contrary, said Paskal. There are 28,000 cow-calf producers in Alberta and 1,000 feedlot operators, both with different business agendas, he said.

“The cow-calf producer wants to sell high, which I totally respect, but my job is to buy as low as I can. How can one entity represent both interests?”

He says the feedlot operators contributed as much financially as the cow-calf producers, but their political representation was only 3.5 per cent on an individual basis. This means that many of the policies being generated did not represent the entire industry’s interests.

“We, through the Beef Industry Alliance, lobbied the government very hard to recognize this imbalance,” says Paskal. “The Alberta government responded with Bill 43.”

“If Alberta Beef Producers introduces good policies that are reflective of the entire industry, then yes, I will absolutely keep my dollars in there,” says Paskal. “But if the policies are not reflective, then myself and others will probably ask for a refund.”

He credits the Alberta Beef Producers and Canadian Cattlemen’s Association with having some of the best staff working within those organizations, but says the industry will not move forward until the policies and governance are reflective of the whole industry.

“There’s now an arena for debate,” says Paskal. “The structure before made people divisive, but now everyone is going to have to sit around the table and look at each other, and come up with policies that work for everyone.”

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