Canadian cow-calf and feeder operators are receiving only half as much for their cattle as their parents and grandparents did, according to a new study.
And it’s mainly because of powerful packers and an over-dependence on the U. S. export market, the study by the National Farmers Union concludes.
The report, released on the eve of the NFU’s national convention in Saskatoon, looks at cattle price trends between 1936 and 2008. It finds that between 1942 and 1989, cattle prices remained within a range from $280/cwt, at peak, to a low of $130. After 1989, however, prices oscillated between a new range of $140/ cwt and $98/cwt, crashing even further after the discovery of BSE in Alberta in 2003. (Prices are adjusted for inflation.)
The bottom line is that producers received twice as much
for their cattle in the 47 years between 1942 and 1989 as they have done since, the study concludes.
The NFU draws a straight line between the price collapse and two watershed events in 1989: the implementation of the Canada-U. S. free trade agreement and the opening of the large Cargill cattle plant at High River.
The events kicked off “a process of continental integration” in the beef industry, the study says. Canada began ramping up cattle and beef exports, mainly to the U. S, becoming overdependent on that market. Meanwhile, companies that previously dominated Canada’s beef packing industry – Canada Packers, Burns, Swift Canadian, et al – vanished. The loss of numerous plants was critical because fewer buyers meant less aggressive bidding and, as a result, lower returns for producers.
The country ended up with a highly concentrated beef industry and packers able to push down prices because they owned their own cattle, says the study.
“There is a very strong correlation between increasing packer concentration and falling prices,” it says. “Prices today are half their pre-’89 levels and packer concentration
levels today are two and a half times their pre-’89 levels.”
The report calls it the “C-5 syndrome:” Cargill, CUSTA, continental integration, captive supply and corporate consolidation. The report said the downward slide in prices was masked a period of lower grain prices, which allowed many beef operations to remain profitable, even though their gross returns were lower.
The NFU, in its report, recommends sweeping changes to the system, which would include:
Banning packer ownership and control of cattle. All cattle should go through independent auctions or be sold by fixed-price contracts.
Reversing packer concentration.
Creating farmer-owned packing plants.
Better balancing Canadian beef production with domestic consumption.