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Cattle producers explore single desk selling to counter packer power

by Paul Beingessner
Canadian farmer, writer

(Thursday, March 11, 2004 -- CropChoice guest commentary) -- Desperate times require desperate measures, or so the saying goes. And it darn well must be true. How else can you account for the statements coming from cattle producers across Canada as the mad cow crisis washes them away like a rogue tsunami?

The first of these statements found its defining moment when the Alberta Cattle Feeders Association passed a resolution at its annual meeting calling for a limit on packer ownership of cattle. By a wide majority, association members demanded that packers be forced to purchase 90 percent of their cattle on the open market. Currently, packers get much of their supply from cattle they own or cattle they have locked in with contracts.

Since the advent of BSE, many cattle feeders have expressed concerns about their industry. The obvious problems were exacerbated when government programs to subsidize the industry were captured by packers and a small number of feedlots that the packers seemed to favor. Feedlot owners have recently been expressing concern over the power held by the very small number of companies that kill the vast majority of the cattle in Canada.

What is amazing is not that feedlot owners should lash out at packer concentration, but rather that it has taken them so long to do so. Packer concentration has not previously been much of an an issue in Canada, but it has in the U.S. for about a century!

In 1921, in fact, the U.S. government passed the Packers and Stockyards Act to deal with concentration in the beef packing industry. At that time, the industry was far more decentralized than it is today.

Almost since that Act was passed, American farmers and cattlemen have been asking for it to be properly enforced. The latest court battle dealing with the issue passed its first level a couple weeks ago when a court in Alabama found in favor of a group of cattlemen and independent feedlot operators in a class action suit against meat-packing giant Tyson Foods. The lawsuit, like several others still underway, was launched in frustration at the government's refusal to enforce the Act as some cattlemen desired.

Canadian law does not have an equivalent of the Packers and Stockyards Act. It does, however, have some incredibly weak competition legislation and a competition bureau that wants no part of an inquiry into the power of the packing industry. Canadian ranchers and packers could take a few lessons from their American counterparts on this issue.

Canadian cattlemen are, however, going where American farmers fear to tread in at least one instance. The president of the Ontario Cattlemen's Association, Ron Wooddisse, took the startling and unprecedented step for a cattle organization of suggesting that Canadian ranchers should consider single desk selling as a means of countering the market power of the meat packers. In doing so, he sounded more like a Canadian Wheat Board promoter than the proverbial redneck cowboy. (Don't expect much support in Alberta for this suggestion, as Alberta's government despises the CWB.)

Wooddisse commented on the lack of ranchers' power in the current situation, which sees 90,000 producers competing to sell their product to four meat packers. In doing so, he was acknowledging an obvious economic reality: farmers' market power has dwindled as their suppliers and customers have consolidated and gained near monopoly control over the industry.

Wooddisse shied away from the other controversial option that could be examined - that of supply management. In a market where cattle cannot be exported, shrinking the supply to meet the domestic demand is inevitable. Some form of supply management could see that a smaller beef herd at least generated decent returns.

While Canadian cattlemen are shaking up their laissez-faire roots with talk of single desk selling, they are not yet prepared to talk about supply management. Instead, they are still clinging to the hope that American and world markets will soon reopen and governments will keep coughing up cash until that happens. A bold few are even still predicting that we can prosper when (if) that happens.

Whatever the future might bring, Canadian ranchers need to keep thinking outside the box. Packer concentration and captive supplies are critical issues. Now that we appear to have recognized it, we should take steps to deal with it. And we should look at all options.

(c) Paul Beingessner (306) 868-4734 phone 868-2009 fax