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Disaster looms for cow/calf producers
by Paul Beingessner
(Tuesday, July 8, 2003 -- CropChoice guest commentary) -- The Canadian government's response to the economic damage caused by the
discovery of Bovine Spongiform Encephalopathy in an Alberta cow has been
typical for Agriculture Minister Lyle Vanclief.
Various estimates place the cost to Canada from the closure of export
markets, particularly to the U.S., at $11 million per day. As of this
writing, we are at day 47 and counting. Impacts throughout the industry
are growing steadily. Prices for cattle are so low that virtually none
are going to market. Feedlots remain burdened with unsalable cattle that
are daily getting bigger, older, and hence less desirable. Workers in
all sectors, from packers to feedlots to trucking companies have been
laid off.
The packing companies are the least likely to suffer since they are
mostly gargantuan multinationals. Feedlot operators, on the other hand,
are generally low margin, high turnover small businesses that are now
taking the brunt of the economic hit. At this point, they are supposed
to be the targeted recipients of government largesse. And given the
scope of that largesse, these folks foresee a bleak future.
For now, the Vanclief ultimatum said there will be $460 million to
repair the damage to the industry. That money is targeted at feedlot
operators and those selling cattle, as well as a $30 million dollar fund
aimed at reducing freezer stocks of less marketable cuts. The main
program has the unusual feature that as cattle prices fall, so does the
compensation. A few cheques have gone out to this point, but industry
players like the Canadian Cattlemen's Association say the program is
inadequate and poorly designed. The program to reduce freezer stocks
does not appear to have begun yet. The fed government also says it will
end all compensation the moment the border opens even a crack. Welcome
to the world of Vanclief.
Perhaps the biggest uncertainty is for the bedrock of the industry, the
cow/calf operator. To date these farmers and ranchers have only watched
in increasing fear as the American government shows no interest in
opening the border and Korea and Japan give it an added excuse not to do
so. But in just over two months, the fall calf run would normally start,
with something like 4.5 million calves going to markets across the
country. The most optimistic scenarios do not predict a return to last
year's price levels, even if the border opens tomorrow.
If the border remains closed, or opens only partially, those feedlots
that survive will be exceedingly cautious in their purchases. Farmers
will have to choose between selling into a faltering market or
backgrounding their calves over the winter and hoping for better next
spring. If calf prices fall only 20 cents a pound (there couild be a
much greater drop) losses to farmers will total over $500 million. Loan
payments and bills that come due in the fall will go unpaid. It is also
worth noting that for the third year in a row, large parts of the
prairies remain very dry and potential crop yields are falling. The
potential for disaster is staggering.
Once the industry struggles back to a semblance of normal, many things
will have changed. Disposal of wastes from slaughter houses will be more
costly and farmers will absorb that cost in lower prices for cattle and
calves. Older cull cows may not find much of a market anywhere - another
loss in revenue.
And what can cow/calf producers expect from the federal government to
deal with all this? Vanclief made it clear that the cow/calf guys will
not need any special aid. They will be fine because they will be able to
collect from their NISA accounts.
Would that it were so. But two or more years of drought, including last
year's extreme, have drained many NISA accounts. The small amounts that
remain in others will be completely inadequate to compensate farmers for
their losses.
If he remains true to form, Vanclief will ignore and then minimize this
ticking time bomb. Farmers already know there will be losses to the
primary producer. They must immediately pressure Ottawa to come up with
a plan for compensation.
Just to help the Minister along, I can think of a simple one. Determine
the average difference between last year's prices and this year's, and
top up the value of each calf sold so it is no less that what was
received last year. Farmers are not to blame for mad cow disease and
should not be driven from the business because of it.
(c) Paul Beingessner (306) 868-4734 phone 868-2009 fax | |
