Wednesday, June 29, 2005

The invisible giant

(I received this letter from the NFU list. I'm posting this on my blog because it is evidence of Cargill's further expansion.)

Dear Editor,

The total cattle population in Canada is currently 2.3 million animals higher than two years ago. Growth in a certain sector normally happens when higher demand leads to better market expectations. Not in this case. Since the US border closure for livestock in May 2003, beef production in Canada is expanding because producers are simply locked in to produce more as a consequence of a backlog of older animals not finding enough slaughter capacity within Canada. A captive supply of older animals allows the processors to obtain cows and bulls for extreme low prices. Producers are torn between letting older animals go for a fraction of their book value or continue letting the herd size proliferate in the hope of a better way out tomorrow. Low cow prices are here to stay unless Governments and the federal Competition Bureau get their acts together. Despite a 10% price rise for ground beef in Canadian grocery stores in 2004, farmers continue to receive less than half of what they got three years ago for cows and bulls. Instead of increased testing like they do everywhere else in the world, Canadian authorities adopted USDA protocol of designating slaughter lines for either young mature animals (<30>30 months), thus effectively minimizing and monopolizing cow slaughter capacity. In Alberta, 90% of the cull cows are currently slaughtered by XL Foods, a company owned by Nilsson Brothers. There are currently a number of initiatives in the works for improving the independent slaughter capacity of cull cows. Cull cow meat is an attractive ingredient for processed meat products because it allows for value adding of fat trim from young mature animals. One of the major players involved in value-adding to lean cull cow meat is Caravelle Foods, with plants in Alberta and Ontario. Caravelle was acquired by Cargill in 2004. When Cargill announced its intention to purchase Better Beef earlier this spring, financiers became much more reluctant to risk putting up capital to independent kill plants because of Cargill's ability to supply its own Caravelle plants. The farmer-owned projects will still go ahead regardless, but it shows the hurdles farmers are up against. The National Farmers Union objected to the acquisition with the Competition Bureau. We met with them in Alberta, Saskatchewan and Ontario, illustrating with clear examples that this concentration of market power over farmers is unacceptable. The Ottawa officials took serious note of the facts but the Competition Act itself lost its teeth when the Mulroney government watered it down substantially, in the 1980s. When Cargill bought Caravelle Foods in 2004, the National Farmers Union communicated with then-agriculture minister Shirley McClellan, pointing out that the acquisition, as well as Cargill's expansion plans in High River (from 3000 head per day up to 5000 head), should be prevented for competition purposes. These two developments would allow Cargill even more control over a market they already dominated. McClellan dismissed the concern, stating that; "companies like Cargill and Tyson are the only ones that can take the risk of expansion". Cargill must have all along been willingly selected by the Alberta government to become a winner. The High River plant was built with a generous subsidy from the Alberta government in the early 1990s. The $402 million Mature Animal Program offered to beef producers by the Alberta government in the fall of 2003 (to help overcome the market crash after the case of BSE triggered US border closure), paid besides $9 million directly, many millions of dollars indirectly to Cargill. In their position of power, Cargill and Tyson lowered the price for finished animals by the exact amount the seller had received in program subsidy. This was confirmed in the summer of 2004 by the Alberta Auditor General's report on the government's BSE related assistance programs. It is clear that provincial and federal governments would rather spend billions of dollars in bailout programs that are not creating solutions, than show the courage to prevent large agribusinesses and food retailers from cornering the market. Only that intervention will make the plans for new processing capacity in Canada come to fruition. It would also be helpful if farmers in the rest of Canada organized themselves as Quebec farmers do. After a bold and successful rally last winter, the Quebec farmers union UPA with 95% of Quebec's farmers organized under its wings, owns and controls now 80 % of Colbex-Levinoff slaughter plants in the province with 5000 head per day slaughter capacity.

Jan Slomp
Alberta Coordinator for NFU

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