Part One
The Saskatchewan Stock Growers Association (SSGA) has a beef with the markets and how much they are receiving for their calves. Amounts they claim mean ranchers and farmers are not even breaking even. Let alone earning a profit.
The SSGA recently set off a media storm in a news release where they claimed the producer side in the beef market was not receiving enough to be profitable.
“What we are asking for is an investigation into the pricing of beef. It is something that has been going on for quite some time as in a few years,” Garner Deobald president of the SSGA said in a telephone interview while he was busy baling feed.
Deobald, who farms in the short grass prairie Shamrock-Hodgeville area which is about one hour drive southwest of Moose Jaw, said it is difficult for farmers'/ranchers to make a profit, let alone a reasonable profit in the beef cattle business.
“We know what the retail price of beef is. We see what consumers are paying in the grocery store and we know what we get for our calves when we sell them…there seems to be a huge discrepancy there. The consumer is paying an all time high for beef right now. With runaway inflation, it seems there are record prices on the consumer side but yet on the ranchers’ side of it, it hasn’t gone up in (cattle prices) in the last half a dozen years; it has actually gone down in price,” he said.
Deobald said the big bucks for beef is not coming back into the pockets of producers and feedlots.
“We know there is money in the supply chain. We are really thankful for consumers supporting beef producers by buying beef and we recognize they are paying big dollars at the counter. But that again isn’t coming back to trickling down to the rancher to the grassroot farmer.”
He said a government investigation is needed to get to the reasons why.
“A reasonable start is to have an investigation as to where that money is going. I think right now we know retailers are profitable. The packers are probably profitable. The feedlot operators are probably running at a loss right now and we know for sure the cow-calf producer is losing money.”
“Operating costs for producers is going up. We know the cost of fuel and fertilizer is going up. We usually sit back and don’t really say too much but we are more price takers. But there comes a time when we have to stand up and ask for some accountability.”
“A reasonable point is to do an investigation and find out where that buck is stopping in the supply chain.”
Deobald said the SSGA is not asking for any investigation to focus on the effects of COVID - 19 pandemic on cattle and beef prices but to look at a trend going on for years.
“This is something that has been going on for longer than the pandemic. The pandemic has just amplified that. I guess it was an opportunity to increase pricing on a lot of things and beef is one of them…but again it has been going on before pandemic times. It isn’t something that isn’t recent; it has just gotten way worse.”
Asked if it had not been a perfect storm for cattle producers with the pandemic causing supply chain bottlenecks at a time of drought and cattle producers trying to reduce herd sizes, Deobald said the combination has impacted producers hard.
“The drought on top of it has really created a great hardship for a lot of producers. Their input costs, their overhead has gone through the roof yet the return hasn’t stayed the same or we are even lower than that. It’s a perfect storm…The cost of production has gone way up and the return on it has gone way down. But again the consumer is paying record prices for beef.”
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“There is money in the system; it just doesn’t get back to the grassroot producer,” said Garner Deobald president of the Saskatchewan Stock Growers Association (SSGA).
Asked about the numerous studies, including a 1975 Commission of Inquiry that looked extensively into the beef pricing system, he said there has been concerns raised at numerous times.
“This isn’t anything new we are asking for. It is something that has happened in the past and again at that point in time they pointed out a number of things in that report that have come to fruition. And they were very thorough at that point in time so there is no reason why they can’t do it again.”
Asked how much of an impact what has happened in the United States with the Biden Administration coming down hard on meat (beef) packers for allegedly using their market power to control the marketplace, they responded, “They are in the same situation (as us). You are right our industry is integrated with the US and what goes on there goes on here as well. Right here there hasn’t been as much said (as in the US.)”
He pointed to Alberta Beef Producers, the Alberta Cattle Feeders’ Association, and the Canadian Cattle Association who are presently undertaking “an Alberta beef competitiveness study” as also looking into expanding packing capacity. The results of the comprehensive study are expected out later this year.
“It isn’t as all encompassing as what we are asking for. What the US has done has definitely spurred us on going down this road and we definitely watch what is going on down there and the outcome of what happens there will need to happen here also,” Deobald said.
Consumers, who have heard about the SSGA campaign for an investigation and hopefully more money in producers’ pockets, are supportive as well, he said.
He pointed to the litigation on-going in the United States has shown there has been things which have shown market control by packers.
The United States meat (including beef) processing plants have undergone consolidation to a few players with megaplants developing to help create economies of scale with lower per unit (animal) processing costs. The same consolidation process has also occurred in Canada with two companies at three plants processing the majority of Canadian beef.
In the US the Biden Administration has said this has lead to a lack of competitiveness and lower prices for slaughter cattle.
“With the same players (in the United States) there is a good chance the same things may be going on here but until we have some hard facts and data collected we don’t know that.”
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Asked about the privately held Cargill reporting a record profit across its entire corporate holding in 2021 and JBS earning a large profit in the same year, Garner Deobald, president of SSGA said it was understandable given commodity prices with a proviso.
“There comes a point in time if you have two corporations operate like that and control the processing sector and we are held in a position where we can’t control what happens on the processing side they can easily take excessive profits. And that is my impression into what is happening,” he said.
JBS was contacted for their side of the story in this series of stories but they did not respond.
Cargill Inc was contacted and referred us to the Canadian Meat Council - CMC - (the association that represents the meat processing industry in Canada). After contacting the CMC, we were told they would attempt to respond to our questions once their president returned from holidays but never did in the end.
“We know they (beef processors) have been profitable. They have been hugely profitable. Again during the pandemic it gave them every opportunity to squeeze every nickel out of the consumer side and not pass along any of that along either to (producers),” Deobald said.
“My concern is it is not the packing capacity or anything like that but the competition for cattle I guess when they are buying there really isn’t any. Between the two of them it isn’t really fair and competitive (for producers),” he said, adding “they can easily control what they have to pay for cattle.”
Deobald said, “We end up paying on both ends. The consumer pays excessive on their end and we are not realizing any of that back into the farmgate here.”
Asked about comments made by the Retail Council of Canada (who represents retailers such as Sobeys and Loblaws) to other media saying the packers (processors) are making the profits, Deobald said he thought they were earning a profit. It is something he said an investigation would prove.
“They are not losing money. I know that but again that is something that we need to figure out in this investigation. I am assuming they are profitable but that is again why we need to have an investigation to see where that is ending up.”
“I have heard that before. They claim they are no more profitable now than before the pandemic or going back four or five years…I am speculating they are accurate and again that leaves one other segment of the supply chain that is reaping great rewards,” Deobald said.
In their recently released 2022 second quarter report, Loblaws (which owns the Real Canadian Superstore and Shoppers Drug Mart amongst others) reported profits of $387 million.
Their Shoppers Drug Mart holdings saw increased sales of 5.6 percent while their grocery stores saw a 0.9 percent increase in sales.
Empire, which owns Sobeys, Canada Safeway and others, reported 2021 quarter four profit of $178.5 million up from $171.9 million from the fourth quarter in 2020.
According to Statistics Canada food prices purchased in stores rose 9.3 percent in Saskatchewan from April 2021 to April 2022.
The same statistics show an increase in meat prices of 11.3 percent. While beef prices at grocery stores rose 17 percent year over year.
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Inflation and the impact is discussed.
Claims from Cargill Protein that feed costs are responsible for the price increases Deobald said that was “irrelevant for their business. That would be an excuse or trying to deflect or manufacture some type of a reason that givens them the reason to raise the price on it.”
“Feed costs are small for packers such as Cargill Limited.”
Asked if it was not producers and feedlots who are absorbing the increasing feed costs for cattle due to drought shortages he replied “the lion’s share definitely.”
“It (feed) is a volatile market and never reached those levels before and so for feedlot operators when they were buying calves and the price of grain if they did not have that locked in they were paying an exorbitant amount of money. For sure they were in red ink.”
Asked about the calls to create regional coop (or other smaller) beef packing and processing plants Deobald said he was in favour of but said the numbers of cattle out there (close to one million cows in Saskatchewan) made it a daunting task.
“I think any packing capacity we can add (is good). Again it is not the packing capacity we are lacking it is the competition for cattle. It actually boils down to the number of packers that are processing in the marketplace and buying cattle.”
Deobald said he was not looking for government control or intervention in supply but would welcome governments encouraging and helping out new players in the processing market to increase competition for cattle.
An agriculture economist Professor Jared G Carlberg from the University of Manitoba sees regional meat processing coops as a means to increase competition and ultimately put more money in producers’ pockets.
“That helps when you can add some more players on that side of it,” Deobald said.
He pointed out how Harmony Beef in Rocky View County in Alberta with its 750 head per day processing capacity as helping out.
“I am encouraged about more of them coming in to the marketplace. But again it is so competitive. It is so difficult for new players to come in here and to be competitive…it is definitely encouraging to see that and I would like to see more coop types or other investment coming into the industry on the packing side of it,” he said.
The option of selling beef through the 70 local abattoirs in Saskatchewan is limited due to demand and lack of capacity. The abattoir and local meat cutting industry in Saskatchewan has been shrinking over the years.
“Around here they are all booked up for months. Some of them are booked out seven, eight, nine or ten months out. In some cases it is pretty hard how you can access those in a timely way,” he said, adding “it is an opportunity but again due to the limited numbers of abattoirs that is a limited opportunity I think.”
Buying direct from producers still remains popular for many consumers in Moose Jaw but things such as not owning large deep freezers as in the past also reduce the potential market.
Despite the limitations he said any income from more direct sales by producers “is sure welcome.”
During the pandemic the SSGA had a registry of producers wanting to sell direct to consumers to help find customers.
Local selling efforts offer a welcome opportunity but he said that despite such efforts 90 percent of the slaughter cattle end up in the three main beef packing plants.
At the present time cattle prices might be rising but at the same time the amount producers are receiving is not sufficient to cover increased costs.
But he said that may change in two to three years as the US cattle herd is presently being reduced due to the major drought in the US Midwest and the lack of affordable feed.
Deobald said the potential “saving grace” for Canadian producers was the “unfortunate situation in the US” and what producers there are facing due to drought.
He predicted that in a year cattle producers would be profitable but it would “be on the back of the US and the drought conditions there.”
Comment from the Province – Department of Agriculture were requested about the SSGA efforts to have beef pricing investigated but no response was given.
The Province did however tell larger media they also shared the industry’s pricing concerns but said the matter was a Federal issue and better dealt with Competition Bureau Canada.
https://www.mjindependent.com/new-blog/2022/7/22/wheres-the-beef-what-farmers-and-ranchers-claim
