Hi folks,
I won't be sending out a column next week as we are going on a short
vacation. Hope summer is treating all of you well. Regards, Paul
Column # 680 Deny, Deny, Deny 28/07/08
In Freudian psychology, denial is an ego defense mechanism. Defense
mechanisms are used by our subconscious minds to help us deal with
realities we find too difficult to face. They aren't a sign of mental
illness; rather, everyone uses them to some extent. They only become a
problem when their use leads a person to do things that are harmful in
the end. Freud had a whole list of defense mechanisms, ranging from
repression to projection to denial. The key thing to remember about
defense mechanisms is that they operate in the subconscious. We don't
realize we are indulging in them. So, denial is not really a form of
lying to ourselves. We actually believe what we are saying.
Now Freud is kind of old hat these days. Many psychologists today
figure he was too influenced by the repressed upper-middle class women
he saw in his therapy sessions, so they dismiss most of his theories
as unscientific. In the case of denial, however, current human
behaviour is making a pretty good case for Freud's idea.
Now, how does all this psychological mumbo-jumbo relate to
agriculture? Agriculture in developed countries, and increasingly in
all countries, is rooted in the consumption of fossil fuels. Fossil
fuels are the basis of planting, weeding and harvesting operations.
They produce our fertilizers and pesticides and transport our crops to
processors and markets. And they are running out.
Yes, you can trot out all the figures you want about oil sands, shale
oil, coalbed methane and the like. But a friend recently put it all in
perspective for me when he gave me the following figures: Currently
the world uses 87 million barrels of oil per day. This is increasing
rapidly and will reach 116 million barrels by 2030. At that time, we
will be using a trillion barrels every 23 years. In all of history up
until now, we've used a trillion barrels. By 2030, we'll be using this
much every 23 years. It doesn't take a rocket scientist to figure out
that our bingeing on fossil fuels will come to an end a lot sooner
than we think.
Whenever this argument is made, the usual response by those in the
throes of Freudian denial is to point to the reserves of oil sands in
Alberta and parts of Saskatchewan. Total reserves in the Athabasca
formation are estimated at around two trillion barrels, but only about
170 billion are recoverable with current techology. Even if the total
amount were recoverable, which it won't be, and notwithstanding the
massive amount of natural gas or some other form of energy required to
extract the oil from the oil sands, it is plain that we will indeed
run out of oil.
Of course, before that happens, the price will skyrocket and $1.40 a
litre diesel fuel will be a distant cherished memory.
The figures I gave you came from the International Energy Agency. The
IEA grew out of the Organization for Economic Co-operation and
Development (OECD) and is controlled by 27 developed countries
including Canada, the U.S., Japan and the U.K. The IEA's figures are
accepted by and available to these countries. So why do most of them
still act as if the petroleum age will go on forever?
The end of low cost oil will mean changes to our world as dramatic as
those brought on by the advent of low cost oil. We will continue to
need large amounts of energy, but we will have to get them somewhere
else. Some folks point to nuclear power as a solution to some of our
impending shortages. But, guess what! There are only 60 years of known
uranium reserves for the reactors currently operating in the world.
The simple fact, almost completely neglected by politicians and the
public in general, is that we need to cut energy consumption,
dramatically and rapidly. Doing so will stretch out existing petroleum
reserves and allow us more time to change the way we do just about
everything., including producing food.
And here is where denial really comes into its own. Reducing energy
consumption will mean fewer and smaller vehicles, less miles driven,
fewer airplane trips, fewer exotic vacations, fewer leaf blowers, less
food imported by air from Taiwan and Chile, smaller houses, and no
more electric toothbrushes. It will mean a whole lot more than that as
well. But these are precisely the things we don't seem prepared to
give up. In fact, we, 1.3 billion Chinese, and 1.1 billion Indians
seem to think these things are measures of the good life. Believing
this, we find all kinds of ways to tell ourselves that the impending
end of oil won't happen, or that there will be a technological
solution that will allow the orgy of energy use to continue.
I said earlier that the failure to acknowledge and act on these
realities is a form of denial by our politicians and ourselves. In
fact, that statement is denial in itself. The truth is that
politicians, at least those in real positions of power, know all this.
What they are about is protecting the interests of those reaping
massive profits from energy production in the current system.
Our denial, as citizens, is real though. In Freud's world, denial was
only pathological if it caused you to act in self-destructive ways.
Seems to me we passed that point some time ago.
(c) Paul Beingessner
Tuesday, July 29, 2008
Tuesday, July 22, 2008
Bureaucrats and Politicians Watch Rail Lines Vanish
Column # 679
21/0708
The spring of 2008 brought good news to farmers in northeast
Saskatchewan in the form of a new short line railway, Torch River Rail.
While farmers in that part of the prairies were rejoicing at the
victory, following a long struggle, farmers in southern Manitoba were
gnashing their teeth as a last ditch effort to set up a short line on
portions of CP's La Riviere and Napinka subdivisions failed.
Saskatchewan's Torch River Rail, a farmer-owned short line, became the
seventh such railway in the province, which also is home to OmniTrax's
Carlton Trail Railway. Saskatchewan is unique among the prairie
provinces in that the seven locally owned short lines are found on grain
dependent branch lines which move little traffic other than grain and
are home mostly to producer car loading facilities and small elevators.
Nor is the province maxed out in this type of railway. To my knowledge,
there are at least four more farmer-based groups that are negotiating
with either CN or CP to set up new short lines.
In contrast, Manitoba and Alberta have no short lines owned by farmers
or community-based groups. Both have seen huge amounts of branch line
abandonment. In Alberta, few groups have even attempted to set up short
lines, though Alberta was home to the original short line, Central
Western Railway. The exception to this is a group of farmers on the
Alliance subdivision in Alberta, who have been jousting with CN, which
announced its intention to abandon the line several years ago.
The failure of the Boundary Trail Railway Company in southern Manitoba
illustrates why Manitoba and Alberta have been so unable to save branch
lines while Saskatchewan has a track record that is nothing short of
remarkable. Most of the blame for Manitoba and Alberta's failures can be
laid at the feet of their provincial governments. Most of Saskatchewan's
success stems from the same source.
The government of Saskatchewan was intimately involved in the quest to
save branch lines long before the first short line in the province began
operation in late 1989. Southern Rails Co-operative was the culmination
of a vision long held among civil servants in the Department of
Highways. While Southern Rails was the first farmer-owned short line, it
would be a decade before resistance from the major railways broke down
enough to see a second. During that time, however, Saskatchewan saw
limited branch line abandonment as the fight was on over each and every
line. The province had an active unit within the Department of Highways
and Transportation that worked pro-actively with farm groups around the
province each time the railways threatened abandonment. Besides offering
valuable technical support and advice, the province but up some cash,
offering interest-free loans to would-be shortlines to purchase track
and giving grants for feasibility studies.
The situation could not have been more different for farmers in Manitoba
and Alberta. The transportation departments there offered only
indifference or active hostility to the idea of short lines on grain
dependent branch lines. I remember a call I received about 15 years ago
from the major of High River, Alberta when the branch line through that
town was slated for abandonment. After explaining his options under the
law, I suggested he contact his provincial transportation department and
demand some support and assistance in exploring those options. His
gloomy response was that he had done that. Bureaucrats in that
department told him that, rather than supporting his efforts, they were
in agreement with the railways that branch lines should be abandoned.
Ironically, the trouble in Alberta and Manitoba can be laid partly at
the feet of the entrepreneurial spirit. Tom Payne, Alberta's iconic
railroader, was the impetus behind Central Western Railway. He firmly
believed that short lines should be profitable entities that survived by
acting as service providers to the big railways. In Manitoba, Brandon's
Cando Contracting built a small railway empire by becoming dominant in
the railway salvage business. Only later did Cando get into short lines.
The Peters' family enterprise was careful not to get involved in grain
dependent branch lines, preferring instead lines with a diversity of
traffic.
The government of Manitoba seemed more than happy to have Cando
scrutinizing its branch lines for viability. If Cando wasn't interested,
the government wasn't either. Manitoba's other abortive short line
venture came in the form of the Southern Manitoba Railway. These CN
branch lines were sold to an American company with a dubious reputation
as a railroad salvager. That short line lasted about eight years before
ceasing operation altogether.
Saskatchewan's farmer-owned short lines have developed with a different
mentality. The goal has seldom been to create highly profitable
railways. Rather, the short lines have been seen as a means to an end,
that end being the retention of viable rail service to maintain grain
delivery and community development options. Southern Rails Co-op has
logged eighteen years with this approach.
Such an attitude might have served Alberta and Manitoba well. Instead,
indifferent bureaucrats and myopic politicians have thinned their rail
networks to the point of no return. While it is largely too late now,
farmers in these provinces should have been kicking some government
derriere years ago.
And Saskatchewan? Recently the government came up with a half-million
dollars in grant money for short line rehab projects.
(c) Paul Beingessner
beingessner@sasktel.net
21/0708
The spring of 2008 brought good news to farmers in northeast
Saskatchewan in the form of a new short line railway, Torch River Rail.
While farmers in that part of the prairies were rejoicing at the
victory, following a long struggle, farmers in southern Manitoba were
gnashing their teeth as a last ditch effort to set up a short line on
portions of CP's La Riviere and Napinka subdivisions failed.
Saskatchewan's Torch River Rail, a farmer-owned short line, became the
seventh such railway in the province, which also is home to OmniTrax's
Carlton Trail Railway. Saskatchewan is unique among the prairie
provinces in that the seven locally owned short lines are found on grain
dependent branch lines which move little traffic other than grain and
are home mostly to producer car loading facilities and small elevators.
Nor is the province maxed out in this type of railway. To my knowledge,
there are at least four more farmer-based groups that are negotiating
with either CN or CP to set up new short lines.
In contrast, Manitoba and Alberta have no short lines owned by farmers
or community-based groups. Both have seen huge amounts of branch line
abandonment. In Alberta, few groups have even attempted to set up short
lines, though Alberta was home to the original short line, Central
Western Railway. The exception to this is a group of farmers on the
Alliance subdivision in Alberta, who have been jousting with CN, which
announced its intention to abandon the line several years ago.
The failure of the Boundary Trail Railway Company in southern Manitoba
illustrates why Manitoba and Alberta have been so unable to save branch
lines while Saskatchewan has a track record that is nothing short of
remarkable. Most of the blame for Manitoba and Alberta's failures can be
laid at the feet of their provincial governments. Most of Saskatchewan's
success stems from the same source.
The government of Saskatchewan was intimately involved in the quest to
save branch lines long before the first short line in the province began
operation in late 1989. Southern Rails Co-operative was the culmination
of a vision long held among civil servants in the Department of
Highways. While Southern Rails was the first farmer-owned short line, it
would be a decade before resistance from the major railways broke down
enough to see a second. During that time, however, Saskatchewan saw
limited branch line abandonment as the fight was on over each and every
line. The province had an active unit within the Department of Highways
and Transportation that worked pro-actively with farm groups around the
province each time the railways threatened abandonment. Besides offering
valuable technical support and advice, the province but up some cash,
offering interest-free loans to would-be shortlines to purchase track
and giving grants for feasibility studies.
The situation could not have been more different for farmers in Manitoba
and Alberta. The transportation departments there offered only
indifference or active hostility to the idea of short lines on grain
dependent branch lines. I remember a call I received about 15 years ago
from the major of High River, Alberta when the branch line through that
town was slated for abandonment. After explaining his options under the
law, I suggested he contact his provincial transportation department and
demand some support and assistance in exploring those options. His
gloomy response was that he had done that. Bureaucrats in that
department told him that, rather than supporting his efforts, they were
in agreement with the railways that branch lines should be abandoned.
Ironically, the trouble in Alberta and Manitoba can be laid partly at
the feet of the entrepreneurial spirit. Tom Payne, Alberta's iconic
railroader, was the impetus behind Central Western Railway. He firmly
believed that short lines should be profitable entities that survived by
acting as service providers to the big railways. In Manitoba, Brandon's
Cando Contracting built a small railway empire by becoming dominant in
the railway salvage business. Only later did Cando get into short lines.
The Peters' family enterprise was careful not to get involved in grain
dependent branch lines, preferring instead lines with a diversity of
traffic.
The government of Manitoba seemed more than happy to have Cando
scrutinizing its branch lines for viability. If Cando wasn't interested,
the government wasn't either. Manitoba's other abortive short line
venture came in the form of the Southern Manitoba Railway. These CN
branch lines were sold to an American company with a dubious reputation
as a railroad salvager. That short line lasted about eight years before
ceasing operation altogether.
Saskatchewan's farmer-owned short lines have developed with a different
mentality. The goal has seldom been to create highly profitable
railways. Rather, the short lines have been seen as a means to an end,
that end being the retention of viable rail service to maintain grain
delivery and community development options. Southern Rails Co-op has
logged eighteen years with this approach.
Such an attitude might have served Alberta and Manitoba well. Instead,
indifferent bureaucrats and myopic politicians have thinned their rail
networks to the point of no return. While it is largely too late now,
farmers in these provinces should have been kicking some government
derriere years ago.
And Saskatchewan? Recently the government came up with a half-million
dollars in grant money for short line rehab projects.
(c) Paul Beingessner
beingessner@sasktel.net
Monday, July 14, 2008
High Food Prices Not the Problem
Column # 678 14/07/08
A recent Reuters news story on the high cost of food was itself food for
thought. The story concerned the U.S. Commodity Futures Trading
Commission (CFTC), an "independent" government agency with a mandate to
regulate commodity futures and option markets in the United States. The
CFTC announced it had formed a taskforce with other government agencies
to study recent activities in commodity markets. The concern that
prompted this was the meteoric rise in commodity prices over the last
year or so. Some suggest this has been fuelled by speculators looking
for a quick buck, rather than by any fundamentals of supply and demand.
The CFTC didn't single out food prices as the major area of concern,
citing instead rising oil prices and "other commodities". The Reuters
story, however, complained that high prices for farm commodities, along
with oil, have "roiled U.S. and world markets in recent months". It went
on to quote the U.S. Department of Agriculture, which it said is
"forecasting sharp increases this year in U.S. food prices, expected to
rise by five per cent in the largest increase since 1990".
The Reuters reporter, it seems, saw the focus of this story as the high
price of food. Indeed, this has become a major pre-occupation for
reporters and for lobby groups of all types. Food prices are too high if
you judge by the cacophony of voices shouting this mantra. Yet the
number Reuters used is startling for how low it is. Given the beating
farmers have taken since 1990, a five percent increase in their incomes
would be paltry. Yet a five percent increase in food prices can be
trumpeted as a major crisis. Note that Reuters did not mention the
percent increase in the price of gasoline or heating fuels or (here in
western Canada) house prices.
A story in a similar vein surfaced a couple weeks ago. It came from the
United Nations Food and Agriculture Organization. It seems the FAO had
commissioned but not released a study on the increase in grain prices
caused by the demand for grain for ethanol and bio-fuels. Contrary to
numbers put forth by the American government, which claims grain for
bio-fuels only contributed to three percent of the price increase, the
FAO study said it was actually 75 percent. This is an important issue,
but again, the focus of reporting on it often revolves around concern
about food prices.
Stories like this are commonplace today. The Canadian Chamber of
Commerce recently wrote a letter to the Prime Minister asking that
Canada give up its support for supply management in the interest of
getting a new trade deal at the WTO. The Chamber justified its stance by
claiming supply management cost the average Canadian family of four $300
more per year than it otherwise would have had to spend on dairy and
poultry products.
The common theme in these various stories is that food price increases
are universally a bad thing. This simply isn't so. Yes, they are bad for
those folks in poor countries existing on one or two dollars a day.
Since most of this meager amount is spent on food, any increase is
disastrous. For a relatively wealthy European, Asian or North American,
a few percentage points increase in the cost of food is a minor
inconvenience at most. Since a third to a half of all North American
meals are now eaten in restaurants, one less trip per week to the golden
arches would save enough to offset the "sharp" five percent increase the
USDA is fretting about.
The increasing cost of food is a good thing if the extra money accrues
to the world's farmers. That is a controversial item in itself, and not
really the subject for this column, but farmers are indeed achieving
somewhat better returns due to higher grain prices. This will spur extra
production, which is needed, since world grain stocks have fallen
precipitously in recent years. So that is a good thing on many fronts.
It doesn't change, however, the negative consequences for the world's
poor. But, and this is the crux of this long diatribe, we are defining
the problem incorrectly. The problem is not the high cost of food for
the poor, since many of the poor are small farmers, and might in fact
benefit when they go to sell any surplus crops. The problem is the low
levels of income and wrong-headed government policies that fail to
protect the vulnerable from food price increases. Much of this bad
government policy is entrenched in trade deals that attempt to force
open the markets of developing countries, under the guise of allowing
their farmers to compete on world markets. What they do is destroy the
ability of a country to enact policies to achieve food sovereignty.
All this underscores the fact that food policies have failed the two
classes that are most affected by the cost of food - farmers and the
poor. In a rational world, we would separate food out from other trade
and government policies, and examine it with a different lens. The CFTC
might be right to suspect that speculators are inappropriately affecting
the price of food, but it will come to the wrong conclusions in seeking
a solution if it thinks the problem is the high cost of food. The
problem is our failure to see the right to adequate food as the most
basic of human rights.
(c) Paul Beingessner
beingessner@sasktel.net
A recent Reuters news story on the high cost of food was itself food for
thought. The story concerned the U.S. Commodity Futures Trading
Commission (CFTC), an "independent" government agency with a mandate to
regulate commodity futures and option markets in the United States. The
CFTC announced it had formed a taskforce with other government agencies
to study recent activities in commodity markets. The concern that
prompted this was the meteoric rise in commodity prices over the last
year or so. Some suggest this has been fuelled by speculators looking
for a quick buck, rather than by any fundamentals of supply and demand.
The CFTC didn't single out food prices as the major area of concern,
citing instead rising oil prices and "other commodities". The Reuters
story, however, complained that high prices for farm commodities, along
with oil, have "roiled U.S. and world markets in recent months". It went
on to quote the U.S. Department of Agriculture, which it said is
"forecasting sharp increases this year in U.S. food prices, expected to
rise by five per cent in the largest increase since 1990".
The Reuters reporter, it seems, saw the focus of this story as the high
price of food. Indeed, this has become a major pre-occupation for
reporters and for lobby groups of all types. Food prices are too high if
you judge by the cacophony of voices shouting this mantra. Yet the
number Reuters used is startling for how low it is. Given the beating
farmers have taken since 1990, a five percent increase in their incomes
would be paltry. Yet a five percent increase in food prices can be
trumpeted as a major crisis. Note that Reuters did not mention the
percent increase in the price of gasoline or heating fuels or (here in
western Canada) house prices.
A story in a similar vein surfaced a couple weeks ago. It came from the
United Nations Food and Agriculture Organization. It seems the FAO had
commissioned but not released a study on the increase in grain prices
caused by the demand for grain for ethanol and bio-fuels. Contrary to
numbers put forth by the American government, which claims grain for
bio-fuels only contributed to three percent of the price increase, the
FAO study said it was actually 75 percent. This is an important issue,
but again, the focus of reporting on it often revolves around concern
about food prices.
Stories like this are commonplace today. The Canadian Chamber of
Commerce recently wrote a letter to the Prime Minister asking that
Canada give up its support for supply management in the interest of
getting a new trade deal at the WTO. The Chamber justified its stance by
claiming supply management cost the average Canadian family of four $300
more per year than it otherwise would have had to spend on dairy and
poultry products.
The common theme in these various stories is that food price increases
are universally a bad thing. This simply isn't so. Yes, they are bad for
those folks in poor countries existing on one or two dollars a day.
Since most of this meager amount is spent on food, any increase is
disastrous. For a relatively wealthy European, Asian or North American,
a few percentage points increase in the cost of food is a minor
inconvenience at most. Since a third to a half of all North American
meals are now eaten in restaurants, one less trip per week to the golden
arches would save enough to offset the "sharp" five percent increase the
USDA is fretting about.
The increasing cost of food is a good thing if the extra money accrues
to the world's farmers. That is a controversial item in itself, and not
really the subject for this column, but farmers are indeed achieving
somewhat better returns due to higher grain prices. This will spur extra
production, which is needed, since world grain stocks have fallen
precipitously in recent years. So that is a good thing on many fronts.
It doesn't change, however, the negative consequences for the world's
poor. But, and this is the crux of this long diatribe, we are defining
the problem incorrectly. The problem is not the high cost of food for
the poor, since many of the poor are small farmers, and might in fact
benefit when they go to sell any surplus crops. The problem is the low
levels of income and wrong-headed government policies that fail to
protect the vulnerable from food price increases. Much of this bad
government policy is entrenched in trade deals that attempt to force
open the markets of developing countries, under the guise of allowing
their farmers to compete on world markets. What they do is destroy the
ability of a country to enact policies to achieve food sovereignty.
All this underscores the fact that food policies have failed the two
classes that are most affected by the cost of food - farmers and the
poor. In a rational world, we would separate food out from other trade
and government policies, and examine it with a different lens. The CFTC
might be right to suspect that speculators are inappropriately affecting
the price of food, but it will come to the wrong conclusions in seeking
a solution if it thinks the problem is the high cost of food. The
problem is our failure to see the right to adequate food as the most
basic of human rights.
(c) Paul Beingessner
beingessner@sasktel.net
Monday, July 07, 2008
Proposed Sale Further Increases Packer Concentration
Column # 677 07/07/08
Nilsson Bros. recent offer to buy the Lakeside Packers beef slaughter
plant in Brooks has pleased some folks in the cattle industry in
Alberta. Feedlot operators seem the happiest. They were worried that
Tyson Foods, the mega-corporation that owns Lakeside, would close the
plant in response to what Tyson has described as an excess of slaughter
capacity in North America. Had Lakeside closed, only one major packer
would have been left in western Canada - Cargill.
While there appears to be joy over the offer-to-purchase, it must be the
ultimate in making the best of a bad situation. Who but a farmer could
find happiness in a reduction in the number of buyers for his products?
Answer: feedlots owners, apparently.
Nilsson Bros., the purchaser-in-waiting is no stranger to cattle
producers on the prairies. In my part of southern Saskatchewan, they
made their presence felt a few years back when they purchased all of the
auction marts around here - Regina, Moose Jaw, Weyburn and Assiniboia.
Their first act on cornering the market on auction barns was to
introduce a new fee for feeding cattle held overnight for pre-sort
sales. Next was a reduction in the number of days when cattle were sold.
Most farmers around here weren't too happy about Nilsson Bros. monopoly
since it raised their costs and reduced their options.
Nilsson Bros. is also involved in cattle feeding and cow-calf
production. The Lakeside sale includes a 75,000 head feedlot owned by
Lakeside. Under the name XL Foods, Nilsson Bros. currently operates a
smaller slaughter plant in Moose Jaw and in several other Canadian and
American locations. It is now poised to become a major player in Canada.
While cattle feeders here are praising the proposed sale, cattle feeders
in the U.S. have long been concerned about the very situation evolving
here - packer concentration and captive supply, where packers own cattle
on feed. The trouble with this scenario is that owning cattle on feed
gives packers the ability to manipulate the market. When prices are
high, they draw on their own cattle for slaughter. This reduces demand
for cattle on auction and drives prices down. When prices are low, the
packer buys cattle on the market.
Some will argue that the livestock market is a North American market,
and the farmer will see his calves move all over the continent, just as
the feedlot owner sends his fat cattle to slaughter plants across North
America, wherever the price is best. There is a degree of truth in that,
at least when BSE or some trade irritant isn't closing the border. But
even in the North American market, there are only a handful of major
players. In the event of a border closure, such as may occur in a de
facto way with implementation of Country of Origin Labelling in the
U.S., the Canadian packers will be reduced in number and will be more in
the driver's seat than ever.
The difficult truth is that the packing industry catches farmers between
a rock and a hard place. Extremely large packing plants offer economies
of scale and economic power that make it difficult, if not impossible
for small plants to compete. These same economies can make our beef
competitive in world markets. Extremely large plants mean, however, that
there are only a few of them. This concentration usually means packers
don't need to pass the benefits of monopoly and economies of scale back
to feeders and hence to farmers.
It seems then, that we are stuck. We have too many cattle for domestic
demand and too few buyers to ensure competitive bids. But we are not
going back to the days of many small packers any time soon. Indeed, if
Tyson is right, we may see fewer packers still, as cattle herds shrink
to fit the new economic realities.
The Tyson deal will still have to clear the Competitions Bureau but
don't expect this toothless tiger to stand in the way. It would be best
for all concerned if the Lakeside plant went to a third party. In the
highly concentrated beef packing industry, that is not likely to happen.
The game is still very much afoot for cattle producers. With declining
cattle numbers, continuing high grain prices and COOL rearing its head
this fall, they have much to be concerned about.
(c) Paul Beingessner
Nilsson Bros. recent offer to buy the Lakeside Packers beef slaughter
plant in Brooks has pleased some folks in the cattle industry in
Alberta. Feedlot operators seem the happiest. They were worried that
Tyson Foods, the mega-corporation that owns Lakeside, would close the
plant in response to what Tyson has described as an excess of slaughter
capacity in North America. Had Lakeside closed, only one major packer
would have been left in western Canada - Cargill.
While there appears to be joy over the offer-to-purchase, it must be the
ultimate in making the best of a bad situation. Who but a farmer could
find happiness in a reduction in the number of buyers for his products?
Answer: feedlots owners, apparently.
Nilsson Bros., the purchaser-in-waiting is no stranger to cattle
producers on the prairies. In my part of southern Saskatchewan, they
made their presence felt a few years back when they purchased all of the
auction marts around here - Regina, Moose Jaw, Weyburn and Assiniboia.
Their first act on cornering the market on auction barns was to
introduce a new fee for feeding cattle held overnight for pre-sort
sales. Next was a reduction in the number of days when cattle were sold.
Most farmers around here weren't too happy about Nilsson Bros. monopoly
since it raised their costs and reduced their options.
Nilsson Bros. is also involved in cattle feeding and cow-calf
production. The Lakeside sale includes a 75,000 head feedlot owned by
Lakeside. Under the name XL Foods, Nilsson Bros. currently operates a
smaller slaughter plant in Moose Jaw and in several other Canadian and
American locations. It is now poised to become a major player in Canada.
While cattle feeders here are praising the proposed sale, cattle feeders
in the U.S. have long been concerned about the very situation evolving
here - packer concentration and captive supply, where packers own cattle
on feed. The trouble with this scenario is that owning cattle on feed
gives packers the ability to manipulate the market. When prices are
high, they draw on their own cattle for slaughter. This reduces demand
for cattle on auction and drives prices down. When prices are low, the
packer buys cattle on the market.
Some will argue that the livestock market is a North American market,
and the farmer will see his calves move all over the continent, just as
the feedlot owner sends his fat cattle to slaughter plants across North
America, wherever the price is best. There is a degree of truth in that,
at least when BSE or some trade irritant isn't closing the border. But
even in the North American market, there are only a handful of major
players. In the event of a border closure, such as may occur in a de
facto way with implementation of Country of Origin Labelling in the
U.S., the Canadian packers will be reduced in number and will be more in
the driver's seat than ever.
The difficult truth is that the packing industry catches farmers between
a rock and a hard place. Extremely large packing plants offer economies
of scale and economic power that make it difficult, if not impossible
for small plants to compete. These same economies can make our beef
competitive in world markets. Extremely large plants mean, however, that
there are only a few of them. This concentration usually means packers
don't need to pass the benefits of monopoly and economies of scale back
to feeders and hence to farmers.
It seems then, that we are stuck. We have too many cattle for domestic
demand and too few buyers to ensure competitive bids. But we are not
going back to the days of many small packers any time soon. Indeed, if
Tyson is right, we may see fewer packers still, as cattle herds shrink
to fit the new economic realities.
The Tyson deal will still have to clear the Competitions Bureau but
don't expect this toothless tiger to stand in the way. It would be best
for all concerned if the Lakeside plant went to a third party. In the
highly concentrated beef packing industry, that is not likely to happen.
The game is still very much afoot for cattle producers. With declining
cattle numbers, continuing high grain prices and COOL rearing its head
this fall, they have much to be concerned about.
(c) Paul Beingessner
Tuesday, July 01, 2008
Global Forces Will Challenge Agriculture
Column # 676 Global Forces Will Challenge Agriculture 30/06/08
There are a couple things that will dramatically affect farming in the
future - forever. Well, at least as far as anyone can see. One of those
is the shrinking supply of cheap fossil fuels. The other is climate
change brought on by world-wide use of those dwindling fossil fuels.
Increasing fuel costs will impact agriculture in ways we have only begun
to imagine. They will be especially large in a country like Canada, a
country with small population and a large export agriculture industry.
Our small population means we have to export a lot of our production if
we are going to stick with large-scale export-oriented agriculture. The
trouble is, most of our customers are a long way off, and the increasing
cost of ocean freight, driven by fuel costs, is already impacting our
competitiveness. Countries like the Ukraine and Kazakhstan will have a
big advantage over us in Europe, while Australia is much closer to Asian
markets than we are.
Even the population centres in eastern Canada are far enough away that
they might look to the U.S. before they consider western Canada as a
supplier.
Rising fuel costs also mean an increase in just about every farm input
you could imagine. Fertilizer and diesel fuel are the most obvious and
frightening. Already sky-high fertilizer prices are now predicted to
skip their end-of-season drop and continue climbing throughout the fall,
winter and next spring. Note that farmers in many other parts of the
world pay much lower prices for nitrogen fertilizer. Don't expect us to
benefit from this, though, because the cost of importing fertilizer will
continue to increase as a result of, you guessed it, rising ocean
freight.
It is also tough to imagine industrial agriculture cutting its
consumption of diesel fuel much. Farmers have largely adopted minimum
tillage, so there are not a lot of gains to be made on that front. About
the only significant savings that could be made here would come if
farmers quit buying those tanks disguised as farm trucks and went to
something smaller. Of course, that would imply the automakers would have
to build something smaller and more fuel-efficient.
Global warming is the other horseman of the Twenty-first Century
Apocalypse. Yes, I know there are still some who say global warming is
not the result of human activity. I am also aware that more than 500
years after Columbus sailed the ocean blue, there is still a flat earth
society. So don't expect the Fraser Institute to go away anytime soon.
Whether you believe global warming is human-caused or not, it is
happening. Polar ice is melting, glaciers are receding, increasing
temperatures on the Canadian prairies are a reality, and rainfall
patterns are becoming erratic all over the world. Unlike the myopic
folks who ask what's not to like about a longer summer, I don't like it
one bit. Anyone who makes a living off growing plants should take a look
at British Columbia's forests if they think warmer weather will be a
boon to the ecosystem. BC has been denuded because the Mountain Pine
Beetle is no longer kept in check by cold winters.
A warmer prairie climate will bring with it a host of new insect
plagues, along with a migration of such lovely diseases as elephantiasis
and dengue fever, which normally could not survive our climate.
Farmers may have a longer growing season on average, but how will that
help if there is no extra moisture to take advantage of it? Rather,
production will be an increasing challenge with hotter, longer summers.
New crop varieties will be needed to cope with these changes. All types
of fall seeded crops might be one answer to the heat problem, but this
will take a lot of research. At the moment, Canada shows no sign that it
understands the vast increase in research that will be necessary to
sustain agriculture and feed the urban masses in their condos.
The point about research is most disturbing. All governments in Canada
appear oblivious to the challenges agricultural production will face. If
you thing that's too strong a statement, take a look at the budgets of
ag departments the country over. It is commonly understood that we are
close to, or have already passed the peak of oil production. Global
warming, if polar ice is any indication, is not going to occur over
centuries. It will be decades and years. Increased scientific research
will be absolutely necessary if we are to deal with the inevitable
outcomes of these earth-shaking events. Unfortunately, there is little
evidence the current federal government even believes these are serious
issues. Better, I guess, to piddle away the next couple years scheming
about the Canadian Wheat Board.
(c) Paul Beingessner
There are a couple things that will dramatically affect farming in the
future - forever. Well, at least as far as anyone can see. One of those
is the shrinking supply of cheap fossil fuels. The other is climate
change brought on by world-wide use of those dwindling fossil fuels.
Increasing fuel costs will impact agriculture in ways we have only begun
to imagine. They will be especially large in a country like Canada, a
country with small population and a large export agriculture industry.
Our small population means we have to export a lot of our production if
we are going to stick with large-scale export-oriented agriculture. The
trouble is, most of our customers are a long way off, and the increasing
cost of ocean freight, driven by fuel costs, is already impacting our
competitiveness. Countries like the Ukraine and Kazakhstan will have a
big advantage over us in Europe, while Australia is much closer to Asian
markets than we are.
Even the population centres in eastern Canada are far enough away that
they might look to the U.S. before they consider western Canada as a
supplier.
Rising fuel costs also mean an increase in just about every farm input
you could imagine. Fertilizer and diesel fuel are the most obvious and
frightening. Already sky-high fertilizer prices are now predicted to
skip their end-of-season drop and continue climbing throughout the fall,
winter and next spring. Note that farmers in many other parts of the
world pay much lower prices for nitrogen fertilizer. Don't expect us to
benefit from this, though, because the cost of importing fertilizer will
continue to increase as a result of, you guessed it, rising ocean
freight.
It is also tough to imagine industrial agriculture cutting its
consumption of diesel fuel much. Farmers have largely adopted minimum
tillage, so there are not a lot of gains to be made on that front. About
the only significant savings that could be made here would come if
farmers quit buying those tanks disguised as farm trucks and went to
something smaller. Of course, that would imply the automakers would have
to build something smaller and more fuel-efficient.
Global warming is the other horseman of the Twenty-first Century
Apocalypse. Yes, I know there are still some who say global warming is
not the result of human activity. I am also aware that more than 500
years after Columbus sailed the ocean blue, there is still a flat earth
society. So don't expect the Fraser Institute to go away anytime soon.
Whether you believe global warming is human-caused or not, it is
happening. Polar ice is melting, glaciers are receding, increasing
temperatures on the Canadian prairies are a reality, and rainfall
patterns are becoming erratic all over the world. Unlike the myopic
folks who ask what's not to like about a longer summer, I don't like it
one bit. Anyone who makes a living off growing plants should take a look
at British Columbia's forests if they think warmer weather will be a
boon to the ecosystem. BC has been denuded because the Mountain Pine
Beetle is no longer kept in check by cold winters.
A warmer prairie climate will bring with it a host of new insect
plagues, along with a migration of such lovely diseases as elephantiasis
and dengue fever, which normally could not survive our climate.
Farmers may have a longer growing season on average, but how will that
help if there is no extra moisture to take advantage of it? Rather,
production will be an increasing challenge with hotter, longer summers.
New crop varieties will be needed to cope with these changes. All types
of fall seeded crops might be one answer to the heat problem, but this
will take a lot of research. At the moment, Canada shows no sign that it
understands the vast increase in research that will be necessary to
sustain agriculture and feed the urban masses in their condos.
The point about research is most disturbing. All governments in Canada
appear oblivious to the challenges agricultural production will face. If
you thing that's too strong a statement, take a look at the budgets of
ag departments the country over. It is commonly understood that we are
close to, or have already passed the peak of oil production. Global
warming, if polar ice is any indication, is not going to occur over
centuries. It will be decades and years. Increased scientific research
will be absolutely necessary if we are to deal with the inevitable
outcomes of these earth-shaking events. Unfortunately, there is little
evidence the current federal government even believes these are serious
issues. Better, I guess, to piddle away the next couple years scheming
about the Canadian Wheat Board.
(c) Paul Beingessner
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