New beef group spans border
By Don Stoneman
Frustration over the cattle countervail imposed by the U.S. Department of Commerce last summer has spawned a new beef producer organization that crosses borders and lobbies outside traditional channels of organization. Northwest Beef has members on both sides of the 49th Parallel. While most Canadian members are in the west, interest has grown in the east as well.A principal in Northwest Beef is feedlot operator Rick Pascal of Picture Butte, Alta. Pascal says Northwest Beef's goal is to open the Canadian border up to feeder cattle imports. Federal health regulations aimed at preventing the spread of bluetongue and anaplasmosis into Canada stop most feeder cattle from crossing the 49th Parallel. Montana ranchers' animosity towards Canada would ease if they could sell their feeder cattle north of the border, Pascal asserts.
Pascal visited the Canadian Food Inspection Agency in Ottawa this fall to present his case, but federal officials didn't budge.
Uneven north-south trade has been helping the Canadian beef industry for a long time, Pascal says. There are 1.3 million head of slaughter-ready cattle going south of the border yearly, but only 50,000 calves going north.
Pascal pays a mandatory checkoff to the Alberta Cattle Commission (ACC), which represents all producers in the province, as well as a voluntary checkoff to the Alberta Cattle Feeders Association. But he says neither mainstream organization is serious about breaking the trade barriers down.
Importing feeders isn't in the interests of the ACC, says Pascal, many of whose members are ranchers. "The cow-calf man doesn't want to change the rules," he maintains. Nor is the issue being pursued strongly enough by the feedlot association, Pascal thinks. He perceives its executive to be dominated by feedlot operators who custom-feed cattle for Alberta packing plants. There's even a packer buyer on the board, Pascal says.
The countervail, imposed in July, has been a boon to the packing industry, Pascal says, and has helped its vertical integration. Fed-cattle prices were forced down because of restricted exports to the U.S. Packers bought cattle as much as $60 to $70 a head cheaper, but boxed beef prices in the U.S. remained at the same level. "It's been a godsend" for the packers, Pascal says, and for now it seems to be good for ranchers who sell their calves in the fall.
Usually, lower fed-cattle prices make their way back into the feeder market, but not this year. Pascal charges that the major packers, Iowa Beef Packers and Cargill, are using the extra profit margins to buy more cattle to put into custom-feeding operations. "They are going to blow us out of the feeder market," he says.
Pascal owns one of the feedlots that was audited by the Commerce Department, and he was assessed a 4.49-per-cent duty.
Soon the beef industry will resemble the pork and chicken industry, he says. "Instead of thirty or forty buyers at a stockyard you will end up with two or three. They will dominate the market. What will that do to the cow-calf sector?"
Little will be lost by opening the border up, Pascal says. Canada already has bluetongue; it shows up periodically in the Okanagan Valley in British Columbia. Anaplasmosis can be handled with drugs. Free, fair trade between the two countries "won't cost anyone in Ottawa a cent," Pascal says. Unless things change, "in one or two years we'll be asking for a whole lot of money," he says.
Orton feedlot operator Doug Gear is just about as mad about the countervail as his Alberta counterpart. Gear, a director of the Ontario Cattle Feeders Association, helped organize a busload of beef producers and dealers who went to Lansing, Mich., for a Ranchers-Cattlemen Action Legal Foundation (R-CALF) meeting in early October. R-CALF is the organization whose lobby at the Department of Commerce led to the countervail.
Michigan producers are just as angry as the Ontario farmers are, says Gear. "Our price dropped fifty to sixty dollars. Better Beef said they can't take cattle at the old price. This hurt the Michigan producers as much as us." Gear doubts that R-CALF got a lot of support from Michigan cattlemen. He understands that R-CALF spent US$1.2 million on the case and is more than $500,000 in debt. But that figure can't be confirmed.
Canadian Cattlemen's Association expenditures on the case are estimated to be as high as $4 million, and this bothers Gear. "We are tired of spending piles of money and not getting our industry looked after that well."
Gear is looking for some relief on feeder-cattle prices, but he isn't finding it. Western cattle are over-priced, he says, and Ontario is short.
This fall the trend-setting Wiarton sale had only 1,200 head offered for sale, compared to a normal 2,000 run. Prices were very good, for the sellers. Gear delayed buying at the early sales, waiting for prices to come down. "It's not getting any better," he says.
"Everybody talks about cheap feed. It's not that cheap."
© copyright 1999 AgMedia Co-operative Inc..
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Fleeing High Costs
Ex-Huron County Dairy Farmer sees Better Chances in the StatesBy Don Stoneman
The phone keeps ringing at Andrew McBride's farm in Lewis County, south of Watertown, New York. Dairy farmers from Ontario are looking to do the same thing that McBride did last spring, set up shop south of the border. It's a sign that something's wrong up north, says McBride, who packed up his cows and left his Kippen area farm in Huron County on April 30th, a month to the day short of his tenth anniversary of farming in Canada."Your aggressive farmers are leaving to do what they do best somewhere else," says McBride. He finds that the callers have a typical profile. Most are European immigrants who have come to Canada within the last ten years. They are chafing under constraints in Canada, and see opportunities elsewhere.
McBride asserts that the industry must develop a long-term strategy to deal with the price of quota and how it is distributed. Quotas should to be phased out over ten years, he thinks. But quotas are only part of the difference.
Environmental concerns are 30 years behind the times in Ontario, McBride says. There are no environmental farm plans. Farmers spread manure year round. No one cares where fuel tanks are buried. And dairy operations come and go.
Moving south goes against the grain in Ontario dairy circles, but it's hard to label McBride as a mere malcontent. An active grassroots leader in Ontario before his disenchantment, he spent four years as a delegate to Gencor, Ontario DHI, and councillor for the Ontario Holstein branch. He served a term as president of the Huron County Holstein Club, chaired the Huron Ag Awareness Committee, and served on the executive of the Seaforth Agricultural Society.
A bitter separation from his wife in 1995 led to the fire sale of some quota, shortly before the milk board dropped its 15-per-cent assessment on quota sales. A dispute with Dairy Farmers of Ontario, when he was seeking to get the assessment on the quota sale returned to him on compassionate grounds, went to the Farm Products Appeal Tribunal and subsequently to the Farm Products Marketing Commission. McBride admits the sale of the quota and subsequent dispute were financially crippling, and helped lead to his decision to move south.
He now farms 50 minutes south of the Gananoque bridge, on N.Y. Route 12. A few miles away is Lowville, home to a sprawling Kraft facility touted as the largest soft-cheese plant in the world. Route 12 south of Watertown is a dairyman's paradise. The rolling hills are a medley of corn and forage fields, relieved by farmsteads and tower silos. Land in Lewis County costs between US$600 and $1,000 an acre, depending on drainage and location.
"There are loads of farms for sale here," McBride says. "Not all of them are viable. There's no middle ground. The guys who weren't making it when milk hit $10 are rearing heifers now."
Hand-lettered "For Sale" signs decorate the gates of farms wearing tattered stanchion barns. New owners will likely tear these barns down and build new freestalls, he says.
McBride was lucky. After looking at about 30 farms in New York (including one that was appealing until he realized it was in a high snowfall area, beside a ski hill), he bought 250 acres from a family who had owned it since 1859. The farm went on the market shortly after the owner's grandfather died. Along with stalls for 100 cows in the freestall came five tower silos, all the cows and a serviceable Deere line, including silo-filling equipment, a colonial-style house surrounded by mature trees, a sugar bush, and a hired man at US$6.50 an hour. McBride has hired an additional helper since.
McBride expects to expand soon to 150 cows. He doesn't want the price he paid for his farm published, but says he now carries "a small mortgage" after selling the Kippen farm and remaining quota. McBride got US$14.40 for his milk in September. He expects that the price will rise $2 per hundredweight by the end of November. New York is a good place to milk cows because it has a milk deficiency, he says. Prices are generally $1 to $1.50 higher per hundredweight than in Wisconsin, where there is a surplus. McBride isn't worried about where the price of milk goes this fall as the American government settles on a new pricing arrangement. He's more concerned about how much snow he has to contend with this winter.
McBride ships to Lowville Producers Co-Op, which maintains an austere office in town a few miles away and buys milk from 65 per cent of the dairy farms within a 25-mile radius. The co-op ships more than 275 million pounds of milk annually, most of it next door to Kraft, testing for antibiotics and bacteria before shipping. As a result of a recent alliance with the giant Dairylea Co-Op in Syracuse, N.Y., markets are expanding. Manager Ken Widrick points out that Lowville Co-Op's dues are cheaper than Dairylea's dues, at 10 cents per hundredweight. Promotion costs 15 cents per hundredweight.
Low marketing costs appeal to McBride, who points out that 15 milk pickups a month cost $1 each. "In Ontario it costs $30 every time the truck comes in the gate," he says. His narrow laneway would never meet Dairy Farmers of Ontario standards for turnaround space. McBride gets paid twice a month his milk, on the 20th for the milk he shipped in the past month and on the 1st an advance of $10 a hundredweight for his first 15 days of production. "It helps your cash flow immensely," he says, as he sits at a table writing cheques on a Friday morning for hired help who want to be paid before noon. The co-op will pay weekly "but that's a pain," he says. He can pick up dairy supplies in a small retail store at the co-op without cash. The purchase is deducted from his milk cheque.
The New York-New Jersey marketing-order blend price for 3.5- per-cent butterfat milk was forecast at an average of $14.26 for 1999, on the assumption that market reforms expected this fall didn't cause major pricing changes. The average price for milk sold in 1998 was $14.73. Returns averaged $12.76 in 1997, $14.41 in 1996 and $12.56 in 1995. McBride says that with costs in line, a good manager can make money on $10-a- hundredweight milk. Topping up returns are premiums for milk with low somatic cell counts, and also for farmers shipping large volumes.
But comparing the price of milk north and south of the border is meaningless, McBride says. "It's like apples and oranges. There are too many other variables. Taxes are three times as much in Canada. Inputs are variable." Interest on a loan is a percentage point and a half higher than in Canada, but feed cots and crop inputs are about the same.
The bottom line isn't a high or low price for milk, or even the nitty-gritty on inputs, he insists. More important is whether the investment is in line with the expected returns. The critical point is to look at the farm as an investment, and the milk cheque as a return on that investment. At US$800 an acre, 200 acres of farmland cost $160,000. Add 100 cows, another $100,000. Then add $50,000 worth of used machinery. The total is US$310,000.
At $12 a hundredweight, and good production, 100 cows will net $300,000 a year, nearly as much gross in one year as the original investment.
Compare that with Ontario, where land costs are several times higher and quota is a necessity, McBride says. The farm, 50 cows, and 50 kg of quota will cost in excess of $1 million. Milk sales for the year will total $200,000, barely one fifth of that.
In New York, a banker will lend US$3,000 per cow place in a dairy operation. But the cow herself costs only $1,200 at most, and there is no quota. The rest of the bank loan can be spent on land and machinery.
In Ontario, says McBride, a banker will lend a farmer enough money to carry a debt load of $8,000 a cow. The cow costs $2,000, but the quota to market her milk costs $17,000. The cost of increasing production by one cow is prohibitive.
When a New York farmer milks more cows, his debt per cow decreases "as long as you have housing and facilities. When the price of milk goes down he milks more cows to maintain income. When the price of milk goes up he milks more cows too."
Dairy operations "come and go all the time." The farmers that can't keep up drop off the back end. But, McBride stresses, "there is an incentive to work here. Hard work is rewarded." He doesn't mind that. McBride isn't a lonely Canadian in Lewis County. A group of expatriate dairy farmers living in the area gather for dinner most Thursday nights. The hills here remind him of his home in Scotland. He just wonders how much snow he will get this winter.
Marketing Opportunities in New York
While newly minted New York dairyman Andrew McBride isn't happy with the Canadian quota system, he still loves his Canadian cows, and so do his new neighbours.He says there is a market in his area for bull calves from Canadian-type cows with a pedigree to become herd sires. "They've stopped breeding AI here," McBride says. "Milk production isn't an issue. They want power and longevity."
Canadian Holsteins are simply superior to their American-bred counterparts, says McBride, who established a name for himself in Ontario as a breeder and a cattle judge.
"Their udders hang higher off the ground, so they stay cleaner. Their feet and legs stand up better. They are healthier. They have more strength in them. They are more profitable."
Breeding programs have lost touch with farmers, says McBride, who was an outspoken critic of the direction that artificial insemination units were taking in Canada. "There's too much emphasis on indexing" in current breeding programs on both sides of the border, he says.
© copyright 1999 AgMedia Co-operative Inc..
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Strikes may push Quebec to export
Hog flow change could hurt Ontario producersBy Robert Irwin
Strikes at Quality Meats and Maple Leaf Pork, though devastating for Ontario pork producers, pale by comparison with what is unfolding in Quebec. The Federation des Producteurs de Porc, the Quebec pork board, may soon be forced to find a home for 70,000 pigs a week. Many could go outside Quebec.Contracts for about 1,500 employees at three plants owned by Olymel, Quebec's largest processor, expired September 29. Workers are legally entitled to strike 90 days after giving notice.
Although Quebec's remaining plants are always hungry for extra pigs, Olymel hogs, which represent about 55 per cent of Quebec's production, would hit Ontario hard.
Ontario Pork chairman Will Nap is taking the situation in stride, noting "it was surprising how many hogs the Ontario industry absorbed during the Quality strike." Nap says his board "has been in touch with industry partners and has made some plans."
Bill Oakley, vice president of Maple Leaf Pork, this province's largest processor, estimates his Burlington plant, where lines move at 1,200 pigs an hour, could absorb 20,000 more animals by operating an extra 16 hours a week, "if I could get the labour to work."
Any hogs Ontario can't handle would go farther west or south. "It's a long bus ride to Brandon," Oakley replies when asked if the pigs could be a godsend for Maple Leaf's state-of-the-art plant in Manitoba.
When the Brandon plant opened late last summer, many predicted it would take years to gear up hog production to supply it. However, Oakley insists he isn't seeking any fire-sale Quebec hogs because the plant "is still ramping up". The plant currently handles about 3,500 hogs per day. Full capacity of 9,000 on a single shift is expected by March 2000.
Oakley says "the plant is already killing twice as many as our ramp-up plan" called for, but he stresses that "Brandon doesn't have the workers" now. Packing-plant work is physically demanding, Oakley notes, and those who are employed there aren't "work- hardened yet".
American plants could absorb the Quebec hogs. That would probably mean the least short-term impact on hog prices, which would almost inevitably be depressed by any change in hog flows.
If Quebec does ship live hogs south, the U.S. could levy painful countervailing duties against all Canadian hogs because of Quebec's Assurances Stabilisation des Revenues agricoles (ASRA). Considered the richest stabilization program in North America, ASRA assures producers that they receive cost of production for their pigs. Under current trading rules it is questionable. The Americans have ignored it so far because Quebec processes its pigs at home and doesn't send any live hogs to the U.S.
What would happen if Ontario boosted its U.S. hog shipments from current levels of around 3,000 a week, while receiving tens of thousands of unwanted Quebec hogs? "I imagine it wouldn't take too much to trigger countervail," Nap concedes.
About a year ago a strike at Quality Meats, Toronto, Ontario's other major packer, resulted in pigs being shipped to prairie provinces, Quebec and the western U.S. This situation created resentment among Quebec and U.S. producers. At the time Quebec processors and that province's pork board helped Ontario Pork get rid of Quality's 25,000 hogs a week. Now the tables may be turned with more than twice as many unwelcome pigs.
Pierre Baril, adviser to the Quebec pork board's general manager, says the board recently completed an inventory of resources "as part of a contingency plan". They discovered Quebec doesn't have enough trucks to haul the Olymel pigs out of the province.
Quebec pigs usually spend a short time on trucks because they are sent to abattoirs located closest to the farms where they are produced. Barril says they still don't know how many pigs would have to leave the province but he is counting on help from Ontario truckers.
Wildcat strikes are the biggest worry at the moment. Quebec processors buy about 15,000 hogs from Ontario each week. Olymel accounts for 7,000.
On holiday weekends, or any other times Quebec processors are overloaded, they decline Ontario hogs and pay any penalty stipulated in their contracts. It's part of their commitment to their provincial industry, which is said to employ 29,000 people.
So Ontario producers, still reeling from last fall's pork industry crisis, are likely to be the first victims of the Quebec situation. Ironically, Quebec producers will still be protected by ASRA, no matter how far prices crash.
At press time (Oct15) the company was responding to a one day wildcat strike by workers with a two day lock out. Real Gauthier, Olymel's vice president of corporate affairs, insists negotiations are just beginning. "At the moment the climate is good," he asserts.
A spokesperson for the Confederation of National Trade Unions (CNTU), which represents Olymel workers, says "the issues are salaries and pension plans." When asked if workers were willing to accept wage rollbacks similar to those accepted by Maple Leaf and Quality workers the spokesperson answered, "no, a big no."
Gauthier claims that because Quebec plants operate more efficiently than their Ontario counterparts, the company doesn't necessarily need the kind of wage concessions eventually made by Ontario workers who struck Maple Leaf and Quality. He says the fact that Olymel is owned by Co-operative Federee, which has deep ties to the agricultural community creates a good climate for negotiation.
In the late 1980s an Olymel pork plant was strikebound for 18 months when the company and the CNTU squared off. Last year, during a four-month strike by CNTU workers, Olymel permanently closed a poultry plant at Joliette, northeast of Montreal.
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