The cattle industry needs to stop patting itself on the back and face an uncomfortable truth — its grand plan to create a bright new future isn’t yielding results.
That’s the view of Charlie Gracey, one of Canada’s most renowned experts on the beef industry. And all you have to do is look at the shrinking number of cattle and ranchers, said the former manager of Canadian Cattlemen’s Association and Ontario Beef Producers.
Since 2009, the Canadian beef herd (total cows and calves) has declined by more than a million animals. It has also lost about 20 per cent of its producers in recent years.
“There’s been an amazing cutback, and there’s been very little comment about it,” said Gracey.
Every industry needs new blood and if the cattle sector wants to attract and retain young producers, it “has to create the conditions to make the industry profitable,” he said.
“That is back to mundane things — like changing the grading system. Let’s do some things about the pricing system,” he said. “It’s not about being a missionary and getting people back into the industry. They’re not going to do it unless it seems to be profitable.”
The National Beef Strategy — unveiled with considerable fanfare two years ago — is supposed to do just that. It set specific targets to boost the bottom line and laid out a series of steps, such as positioning Canadian beef as a top brand in foreign markets and lowering production costs through R&D.
But “things aren’t happening fast enough,” said Gracey.
“We want to expand and diversify our export and still we’re sending about 95 per cent of all our exports to the States. I don’t think the strategy is working. I don’t even know what it is.”
Even Dave Solverson, co-chair of the National Beef Strategy, admits the ambitious plan has stalled somewhat.
But the problem has been a lack of funds to move ahead with the strategy’s “four pillars,” said the Camrose-area cow-calf producer and feedlot operator.
Each of those items — such as improving productivity efficiency by 15 per cent by 2020 — came with a detailed series of steps, he noted. And each step costs money to enact.
“The groups that worked on the four pillars estimated the cost to execute it and that’s where the recommended (national checkoff) increase to $2.50 a head (came from),” said Solverson, who is also past president of the Canadian Cattlemen’s Association.
“I do feel, and the groups that have worked on it feel, that with the increased funding, the strategy could move forward.”
The sudden and sharp downturn in cattle prices has also hurt, he added.
“It sort of emphasizes the reason for a good strategy going forward, diversifying the markets, and things like that,” said Solverson. “My point is that until all the provincial organizations agree — which they are very close to doing — then we can’t move ahead with the national checkoff increase and I believe that will make the strategy attainable.”
And growing the herd is vital, he added, pointing to the risk of losing a major packing plant if numbers fall too low.
“I would like to encourage producers to maintain and even expand their herds because I believe that there is a long-term positive situation ahead of us,” he said. “If we shrink much from our current 3.9 million cows nationally, we stand to lose infrastructure.”
Pay for quality
Gracey would also like to see the herd grow, but says the “bloody reality” is that Canada will never be a major player in the commodity beef world. The alternative is to be known for quality but the current system discourages that by rewarding quantity, he said.
“People are overfinishing the cattle to maximize the dollars,” said Gracey. “It makes sense (because feed grain is cheap). I blame industry leadership for this. There is an answer to this, and the answer would involve a pricing system that pays equal weight to quality and quantity.”
For this to happen, the grading system needs to be revamped and prices for cattle that yield superior-quality beef need to increase, he said.
“We now have capability to measure the yield of a carcass, not just 1, 2, or 3, but as a percentage figure,” he said. “If we can do that, we can pay for it on that basis, the way dairymen are paid for milk (butterfat).”
Producers could do better but there’s no financial incentive.
“It’s not the individual producer’s fault because they have to produce to the reality of the current price of grain, current grading system, and current pricing system.”
Solverson thinks the overfinishing problem will sort itself out.
“If plants sent a strong market signal that they would discount heavily finished animals, then the industry would respond very quickly,” he said. “Up until now, I think part of the problem — and it happened in the U.S. as well as here with the market being so strong in 2014 and 2015 — (that) people just kept adding on the pounds and the carcass weight went up.”
However, carcass weights are already coming down and will improve further, he said.
And although well off their recent peak, cattle prices are strong, he added. The biggest barrier to young producers is the cost of land and livestock, but Solverson said that can be overcome with some innovative thinking.
“We have a lot of producers who are at the age where they want to exit the industry,” he said. “A lot of times they want to hang on to their land instead of just renting it out to be turned into a grain farm.
“We could encourage partnerships with young people who are interested in starting out. It’s really prohibitive to invest in land and livestock needed to have a viable operation. There’s opportunity to partner with producers who are thinking of retiring.”