Column # 712 23/03/09
Canadian farmers pay out a lot of money in checkoffs. There are
checkoffs on beef cattle, hogs and sheep, on grains ranging from wheat
to peas to canola. Most of these checkoffs are designed to provide
funding for research or to promote the commodity. Some provinces have
checkoffs requiring farmers to support farm organizations. The
checkoff is mandatory, but the farmer gets to choose where the money
goes.
Some checkoffs are refundable, if the farmer requests it. One of these
is the wheat and barley checkoff administered by the Canadian Wheat
Board. The money collected here is used mainly for varietal and
agronomic research. There are only a few farmers who request a refund
of their deductions, but, oddly enough, these are usually very large
farmers. Obviously they pay the most, but they also stand to benefit
the most.
Some checkoffs annoy me. The wheat and barley checkoff is one. While
the premise behind it is good - we need all the research of this sort
we can get - the outcomes are less than they could be. When new
varieties are developed with farmers' money, the licensing system
employed by the Western Grains Research Foundation allows licensees to
place many restrictions on how farmers can use the crops they paid to
develop.
The Saskatchewan Pulse Growers also have a checkoff, and it is largely
used for similar purposes. But the Pulse Growers have the wisdom to
keep their varieties freely available to farmers by not allowing Plant
Breeders Rights for the varieties their breeding program develops. I
have never been able to understand how this can work so well for pulse
crops while the Western Grains Research Foundation can't see the logic
of it for wheat and barley.
Cattle producers pay a $2 checkoff in most provinces, and $3 in
Alberta. In Saskatchewan, one dollar is mandated provincially and one
federally. The federal portion goes to the Canadian Cattlemens
Association (CCA) to fund its activities. It is not refundable. In
Saskatchewan, the provincial portion is refundable on request. The
federal dollar is what enables the CCA to claim, as it frequently
does, that it represents 90,000 cattle producers across Canada.
Recent statements by the CCA have angered some cattle folk. The CCA
did not oppose further consolidation in the meat packing industry when
Tyson Foods sold its Brooks, Alberta plant and feedlot to XL Beef. It
also has no problem with packers owning beef cattle, known as captive
supply. The U.S. Department of Agriculture has found that captive
supply has the effect of reducing prices paid for cattle. The CCA says
captive supply helps the packers to be efficient. This led one farmer
to comment that the CCA represents farmers in the same way that
Revenue Canada represents taxpayers - by using the force of law to
collect money from them.
The trouble for farmers who don't agree with the CCA positions is that
it really does represent them when talking to governments re
legislation and policy. At least, it does in the eyes of government.
It doesn't help much when governments are on the same page as the CCA
regarding competition. If you believe the CCA, competition is working
well in the beef industry. In responding to the National Farmers Union
paper regarding competition in the beef sector, the CCA says "Cattle
prices will only increase when consumer demand increases and consumers
are willing to consume more beef at a higher price."
That statement presupposes that packers and retailers will pass back
increased revenues to producers as an inducement to produce more. And
that is what would happen in a competitive environment. The trouble
is, nobody really believes that two packers creates a competitive
environment. At least, no reputable economist would support that idea.
The CCA logic on captive supply is worth examining. John Gillespie,
CCA Board member from Ontario, told the House of Commons Agriculture
Committee that packer ownership of cattle makes the industry run more
smoothly. He argues that having access to captive supply allows
packers to "smooth out the ups and downs as far as capacity is
concerned".
The flaw in this logic is that, if packers were not allowed to own
cattle, the same number of cattle would still be available, but the
packers would have to get them from the market. In those "down" times,
they would have to pay more to get the cattle to keep their kill lines
full. Captive cattle "smooth" things out alright. They prevent the
price spikes that would benefit farmers.
The CCA's statements would make sense if they represented the
interests of the beef packers. The CCA fails to acknowledge that, in a
market economy, the interests of buyers and sellers do not always
converge. In that failure, it doesn't represent this cattle producer,
no matter what it claims.
© Paul Beingessner beingessner@sasktel.net
Monday, March 23, 2009
Monday, March 16, 2009
What is Capitalism Without Competiton?
Column # 711 16/03/09
When farmers worry about their industry, pretty much a full time job
in the last decade, they tend to look for solutions in the areas of
production and marketing. In production, they look at using the latest
technologies and maximizing the value they get from the inputs they
use. They do the latter by trying to use inputs efficiently and by
trying to purchase them at as cheaply as possible. In marketing, they
obviously try to achieve the best price they can with the options
available.
They have a couple problems in both areas. In production, most new
technologies come at a cost. That cost sometimes erases the value of
the gain in production. An example would be the cost of growing
genetically modified crops. In this case, there often is no cost
reduction and no yield gain over conventional varieties. The ability
to use cheaper herbicides, for example, is offset by the cost of
having to buy new seed each year. But at some point, all new varieties
contain the GM traits, so if you want the advantages that might come
from new varieties - increased yield or better agronomic properties -
you have to accept the inability to use your own seed.
When buying inputs, farmers again face the fact that while there might
still be a fair number of retailers, they all sell products from the
same few manufacturers. This is true for machinery and parts,
fertilizers, fuels and chemicals.
Marketing runs into problems as well. On the prairies, we have a grain
industry that has consolidated into just a few firms. Delivery points
have been sharply reduced. Farmers' choices are sometimes limited by
proximity to handling facilities. Livestock producers are even worse
off. All auction barns in Saskatchewan, for example, are controlled by
a single firm, which has raised fees and added new charges since
consolidating its grip on the auction market. The number of feedlots
for cattle is declining. The packing industry in all of Canada is
overwhelmingly dominated by two firms. Cattle prices reflect the lack
of competition.
When farm organizations look at the problems with agriculture, they
tend to have two solutions. The first is the notion that we will be
better off if we can just expand market access. We try to convince
countries to take our GM crops. We look for trade agreements that will
give us market access in other countries. We fight to gain an
advantage in global trade agreements like the WTO. Sometimes these
efforts are successful for a while. After the NAFTA was signed, cattle
numbers soared in Canada because of better access to U.S. markets.
When market access doesn't happen, or doesn't solve the problem, farm
groups have one last solution. They turn to government to fill the
gap. Governments in Canada have done precious little in this area for
some time.
Governments themselves, when faced with the agriculture crisis, seem
to pin all their hopes on the market access side of things. Financial
aid to farmers is always given late and begrudgingly.
But there's something I don't get. We live in a capitalist economy.
Capitalism says the marketplace works when it consists of a reasonable
number of buyers and sellers. A reasonable number of buyers insures
sellers will get a fair price. A reasonable number of sellers means
buyers are not held hostage. In this ideal situation, the system works
pretty good.
The trouble is we don't have that in agriculture. Oh, we have lots of
sellers - eighty or ninety thousand farmers on the prairies. But we
have an ever-decreasing number of buyers. While bad in many
industries, it is likely worst in the cattle industry. When it comes
to inputs, we have lots of buyers, those same farmers, and only a few
sellers. Farmers are on the wrong end of the stick in both cases.
So, here's the part I can't figure out. Why do so many farm
organizations, steeped as they are in the free market, worry so little
about this lack of competition? Without competition, all other
solutions simply don't work. You can expand market access, but if
there are only three companies buying from the farmer and selling to
those markets, they will simply absorb the increased revenues.
The Canadian Cattlemen's Association is an example of this problem. As
I said before, there is no industry as consolidated as meat packing.
Yet, the CCA never seems to worry about this. It had nary a concern
about the recent reduction in meat packers from three to two in
Canada. Nope. If you can believe the Competition Bureau, farm groups
were only concerned about market access. And when confronted with the
anti-competitive aspect of captive supply, the CCA defended the
packers! It said they needed this to ensure they could operate
efficiently. Yet if you search the literature, you can find lots of
studies by economists who document the decrease in cattle prices as a
result of captive supply. Why doesn't the CCA get this?
I don't know an easy way to increase competition in these areas. But I
do know we should at least fight further consolidation. And unless we
recognize the value of competition, make it a top priority, and
pressure governments to recognize this as well, any other gains will
simply be taken from us.
© Paul Beingessner beingessner@sasktel.net
When farmers worry about their industry, pretty much a full time job
in the last decade, they tend to look for solutions in the areas of
production and marketing. In production, they look at using the latest
technologies and maximizing the value they get from the inputs they
use. They do the latter by trying to use inputs efficiently and by
trying to purchase them at as cheaply as possible. In marketing, they
obviously try to achieve the best price they can with the options
available.
They have a couple problems in both areas. In production, most new
technologies come at a cost. That cost sometimes erases the value of
the gain in production. An example would be the cost of growing
genetically modified crops. In this case, there often is no cost
reduction and no yield gain over conventional varieties. The ability
to use cheaper herbicides, for example, is offset by the cost of
having to buy new seed each year. But at some point, all new varieties
contain the GM traits, so if you want the advantages that might come
from new varieties - increased yield or better agronomic properties -
you have to accept the inability to use your own seed.
When buying inputs, farmers again face the fact that while there might
still be a fair number of retailers, they all sell products from the
same few manufacturers. This is true for machinery and parts,
fertilizers, fuels and chemicals.
Marketing runs into problems as well. On the prairies, we have a grain
industry that has consolidated into just a few firms. Delivery points
have been sharply reduced. Farmers' choices are sometimes limited by
proximity to handling facilities. Livestock producers are even worse
off. All auction barns in Saskatchewan, for example, are controlled by
a single firm, which has raised fees and added new charges since
consolidating its grip on the auction market. The number of feedlots
for cattle is declining. The packing industry in all of Canada is
overwhelmingly dominated by two firms. Cattle prices reflect the lack
of competition.
When farm organizations look at the problems with agriculture, they
tend to have two solutions. The first is the notion that we will be
better off if we can just expand market access. We try to convince
countries to take our GM crops. We look for trade agreements that will
give us market access in other countries. We fight to gain an
advantage in global trade agreements like the WTO. Sometimes these
efforts are successful for a while. After the NAFTA was signed, cattle
numbers soared in Canada because of better access to U.S. markets.
When market access doesn't happen, or doesn't solve the problem, farm
groups have one last solution. They turn to government to fill the
gap. Governments in Canada have done precious little in this area for
some time.
Governments themselves, when faced with the agriculture crisis, seem
to pin all their hopes on the market access side of things. Financial
aid to farmers is always given late and begrudgingly.
But there's something I don't get. We live in a capitalist economy.
Capitalism says the marketplace works when it consists of a reasonable
number of buyers and sellers. A reasonable number of buyers insures
sellers will get a fair price. A reasonable number of sellers means
buyers are not held hostage. In this ideal situation, the system works
pretty good.
The trouble is we don't have that in agriculture. Oh, we have lots of
sellers - eighty or ninety thousand farmers on the prairies. But we
have an ever-decreasing number of buyers. While bad in many
industries, it is likely worst in the cattle industry. When it comes
to inputs, we have lots of buyers, those same farmers, and only a few
sellers. Farmers are on the wrong end of the stick in both cases.
So, here's the part I can't figure out. Why do so many farm
organizations, steeped as they are in the free market, worry so little
about this lack of competition? Without competition, all other
solutions simply don't work. You can expand market access, but if
there are only three companies buying from the farmer and selling to
those markets, they will simply absorb the increased revenues.
The Canadian Cattlemen's Association is an example of this problem. As
I said before, there is no industry as consolidated as meat packing.
Yet, the CCA never seems to worry about this. It had nary a concern
about the recent reduction in meat packers from three to two in
Canada. Nope. If you can believe the Competition Bureau, farm groups
were only concerned about market access. And when confronted with the
anti-competitive aspect of captive supply, the CCA defended the
packers! It said they needed this to ensure they could operate
efficiently. Yet if you search the literature, you can find lots of
studies by economists who document the decrease in cattle prices as a
result of captive supply. Why doesn't the CCA get this?
I don't know an easy way to increase competition in these areas. But I
do know we should at least fight further consolidation. And unless we
recognize the value of competition, make it a top priority, and
pressure governments to recognize this as well, any other gains will
simply be taken from us.
© Paul Beingessner beingessner@sasktel.net
Tuesday, March 10, 2009
Grain Commission Changes Motivated by Misinformation
Column # 710 09/03/09
Writing a newspaper column is all about words, obviously. If you write regularly, you learn something about the power words can have to influence people. Politicians know this very well, as does anyone who uses the media to get out a message. When politicians communicate with the public, it is often disrespectfully called "spin". This means taking a situation or event and twisting the message so it communicates what you want it to communicate. We used to call it propaganda, but we only seem to use that word now to refer to things done in other countries. Tin-pot dictators use propaganda. Leaders of upstanding democratic countries use spin.
Some politicians are better at this than others. Some are smooth, some are clumsy. Some mix their spin with half-truths and outright fabrications. Gerry Ritz would fall into this category. He doesn't seem to let the facts get in the way of the issues.
His attempts to defend the changes he is proposing to the Canada Grain Act and hence the Canadian Grain Commission show once again that Gerry went to the Goebbels School of Communication.
Changes to the Canadian Grain Commission have been on the agenda of the Harper government for some time. Bill C-39 was introduced in December, 2007, but died on the order paper when Parliament ended with the election call. Bill C-13, introduced in late February, appears identical to C-39. It calls for an end to mandatory inward weighing and inspection at port, changes the CGC mandate away from its focus on protecting producers and eliminates the need for grain companies to post security with the CGC to cover potential defaults on payments.
These proposals have come under scrutiny from many quarters. Removing the bonding requirement for grain companies has raised red flags with producers, especially in the current unstable economic environment. In defending his legislation, Ritz has played fast and easy with the truth. In an interview with a reporter from Golden West Radio in Altona, Manitoba, Ritz declared that the best that has ever been paid out through the Payment Security Program was 30 cents on the dollar. Because of this, he can easily declare the program is not working.
The only trouble is, he's wrong. The Payment Security Program has actually been quite successful. Over the last ten years, the CGC has issued payments to producers in nine cases of default by grain companies. In six of these, the payment was 100 % of claims. In one, it was 99.8 %. In one, the bankruptcy of Naber Seeds in 2002, payout reached 51.4 % of claims and in the case of Venture Seeds Ltd in 2004, payment was just 28 % of claims. Total payments from the bonding required by the CGC were $4,503,000 to 343 producers, for an average of $13,127 per claimant. The total payouts were actually 77.15 % of claims, not 30 % as Ritz claimed.
In the interview with the Golden West reporter, Ritz also claimed that this protection would only be removed when something better was in place. Again, this is not true. Bill C-13 removes the bonding requirement. Full stop. It does not propose any alternatives and no viable alternatives are on the table.
Ritz went on to claim that the CGC has been under a moratorium for more than a decade (he was likely referring to a moratorium on fee increases) and as a result it is not offering the services it could be. When I consulted an official at the CGC he told me he was not aware of any new services that would be facilitated by C-13. In fact, the recent decision by the CGC to end optional inspection at inland terminals for grain bound for the U.S. came about because the Minister has ordered the CGC to focus on its mandate, and not to perform optional services. The mandate is found in the act and C-13 diminishes, not expands the mandate. The services the Minister is referring to appear to exist only in the Minister's head.
I want to be charitable to Minister of Agriculture Gerry Ritz. He has a reputation for saying things to reporters that, to put it kindly, are creative. I don't think he lies intentionally, as in his claim that payouts through the CGC Payment Security Program have never reached 30 %. But if the Minister doesn't know the facts of the situation, if he hasn't figured out that passing C-13 ends payment security, that there is no alternative waiting in the wings, where does he get his information? If the aides responsible for briefing him are that ignorant of the facts, he should find some new ones. If the Minister himself follows the industry so little that he doesn't remember any of the bankruptcy cases but one, what is he doing in the position?
So, where does Gerry get his information? The Grain Growers of Canada might be one source. In a February 1, 2008 letter to Ritz, the group claimed that "The termination of bonding system, although controversial, will ultimately be a step in the right direction as the bonds to date have not provided proper coverage anyway." Perhaps Ritz took this vague bit of misinformation and simply applied his creative juices. He should try to hang with a better informed class of people.
© Paul Beingessner beingessner@sasktel.net
Writing a newspaper column is all about words, obviously. If you write regularly, you learn something about the power words can have to influence people. Politicians know this very well, as does anyone who uses the media to get out a message. When politicians communicate with the public, it is often disrespectfully called "spin". This means taking a situation or event and twisting the message so it communicates what you want it to communicate. We used to call it propaganda, but we only seem to use that word now to refer to things done in other countries. Tin-pot dictators use propaganda. Leaders of upstanding democratic countries use spin.
Some politicians are better at this than others. Some are smooth, some are clumsy. Some mix their spin with half-truths and outright fabrications. Gerry Ritz would fall into this category. He doesn't seem to let the facts get in the way of the issues.
His attempts to defend the changes he is proposing to the Canada Grain Act and hence the Canadian Grain Commission show once again that Gerry went to the Goebbels School of Communication.
Changes to the Canadian Grain Commission have been on the agenda of the Harper government for some time. Bill C-39 was introduced in December, 2007, but died on the order paper when Parliament ended with the election call. Bill C-13, introduced in late February, appears identical to C-39. It calls for an end to mandatory inward weighing and inspection at port, changes the CGC mandate away from its focus on protecting producers and eliminates the need for grain companies to post security with the CGC to cover potential defaults on payments.
These proposals have come under scrutiny from many quarters. Removing the bonding requirement for grain companies has raised red flags with producers, especially in the current unstable economic environment. In defending his legislation, Ritz has played fast and easy with the truth. In an interview with a reporter from Golden West Radio in Altona, Manitoba, Ritz declared that the best that has ever been paid out through the Payment Security Program was 30 cents on the dollar. Because of this, he can easily declare the program is not working.
The only trouble is, he's wrong. The Payment Security Program has actually been quite successful. Over the last ten years, the CGC has issued payments to producers in nine cases of default by grain companies. In six of these, the payment was 100 % of claims. In one, it was 99.8 %. In one, the bankruptcy of Naber Seeds in 2002, payout reached 51.4 % of claims and in the case of Venture Seeds Ltd in 2004, payment was just 28 % of claims. Total payments from the bonding required by the CGC were $4,503,000 to 343 producers, for an average of $13,127 per claimant. The total payouts were actually 77.15 % of claims, not 30 % as Ritz claimed.
In the interview with the Golden West reporter, Ritz also claimed that this protection would only be removed when something better was in place. Again, this is not true. Bill C-13 removes the bonding requirement. Full stop. It does not propose any alternatives and no viable alternatives are on the table.
Ritz went on to claim that the CGC has been under a moratorium for more than a decade (he was likely referring to a moratorium on fee increases) and as a result it is not offering the services it could be. When I consulted an official at the CGC he told me he was not aware of any new services that would be facilitated by C-13. In fact, the recent decision by the CGC to end optional inspection at inland terminals for grain bound for the U.S. came about because the Minister has ordered the CGC to focus on its mandate, and not to perform optional services. The mandate is found in the act and C-13 diminishes, not expands the mandate. The services the Minister is referring to appear to exist only in the Minister's head.
I want to be charitable to Minister of Agriculture Gerry Ritz. He has a reputation for saying things to reporters that, to put it kindly, are creative. I don't think he lies intentionally, as in his claim that payouts through the CGC Payment Security Program have never reached 30 %. But if the Minister doesn't know the facts of the situation, if he hasn't figured out that passing C-13 ends payment security, that there is no alternative waiting in the wings, where does he get his information? If the aides responsible for briefing him are that ignorant of the facts, he should find some new ones. If the Minister himself follows the industry so little that he doesn't remember any of the bankruptcy cases but one, what is he doing in the position?
So, where does Gerry get his information? The Grain Growers of Canada might be one source. In a February 1, 2008 letter to Ritz, the group claimed that "The termination of bonding system, although controversial, will ultimately be a step in the right direction as the bonds to date have not provided proper coverage anyway." Perhaps Ritz took this vague bit of misinformation and simply applied his creative juices. He should try to hang with a better informed class of people.
© Paul Beingessner beingessner@sasktel.net
Monday, March 09, 2009
Waiting for a Miracle
Column # 709 02/03/09
"All things come to those who wait." I think that saying was meant to
produce patience. Wait long enough, and you'll get what you want. But
it doesn't actually say that. It says all things come, so it could as
easily mean the bad as the good.
Farmers, though, generally take the usual meaning of that expression
to heart. That's why they never tire of referring to their place,
wherever it may be, as "next year country". It implies an eternal
waiting for the bumper crop that evaded them yet another year.
But lest you think that next year country refers to an environmental
or economic condition, I will let you in on a little secret: the
eternal waiting that farmers are fixated on actually arises from their
dealings with government. Farmers are waiting, patiently, for
governments to hear them.
And farmers' patience is admirable. Take cattle farmers for instance.
They've been waiting for the government, any government, to notice
their plight and take action. Some, in fact, have waited themselves to
death, finally leaving an industry they embraced their entire lives
when it became apparent that government also was waiting.
Now, what government is waiting for is anyone's guess. Here's mine:
the province of Saskatchewan was waiting for the problem to go away on
its own, or for the federal government to take the lead. The feds were
waiting for the clock to miraculously wind back to the time before
COOL and Mad Cow, or perhaps for the cattle organizations to come, cap
in hand, begging for help. Both appeared to be waiting for enough
farmers to fall off the bandwagon, that governments built in the first
place, to reduce the number of cattlefolk to a quantity that could no
longer be heard.
Well, the waiting is over. Sort of, anyway. This past weekend, farmers
received two things they were waiting for. One was the Saskatchewan
government's response to the livestock crisis, which came in the form
of a payment of $40 per head for breeding cows and heifers and $20
apiece for market hogs. The second was a ruling from the federal
government's competition watchdog concerning the proposed takeover of
Lakeside Packers by XL Foods.
While the provincial contribution was a feeble imitation of Alberta's
assistance to cattle farmers, it was welcome. Forty bucks doesn't go
very far toward covering the losses cattle farmers are enduring, but
it has to be better than a kick in the head from a cranky cow that you
can't afford to feed. The Competition Bureau ruling, on the other
hand, was a kick in the head from a cow we really can't afford to feed
any longer, since it hasn't produced a calf in years.
The Bureau, you see, decided to allow XL Foods to purchase Tyson-owned
Lakeside Packers. The Bureau's press release provided little detail,
but then, what can you say when you allow a consolidation that sees
two companies controlling virtually the entire beef packing industry
in Canada? As when it allowed Cargill to buy Better Beef in Ontario in
2005, the Bureau seems to believe that access to packers in the U.S.
means competition in Canada is not an issue. The Bureau appeared not
to notice that Cargill is the second largest packer in the U.S. and
unlikely to compete vigorously with itself.
Contrast the ruling by the Competition Bureau with a story from the
U.S. that appeared almost the same day. The Antitrust Division of the
Department of Justice was opposing a merger between two of the four
largest beef packers in the U.S. because it felt that allowing only
three companies to control more than 80% of cattle slaughter would
reduce competition in the industry to unacceptable levels. The
Antitrust division had a lawsuit in progress to stop the merger. The
merger was called off by the companies involved, in the face of
opposition from the Department of Justice and the Attorneys General of
sixteen cattle-producing states.
So how does the competition watchdog in Canada not feel concern about
two packers controlling 95% of beef slaughter here while its American
counterpart has a cow over the notion that three companies would
control 80%?
While you are pondering that, you might ask yourself why both state
and federal governments in the U.S. fought the idea, when provincial
governments in Canada have been absolutely silent. Or why did
organizations like the Canadian Cattlemen's Association and the
Saskatchewan Stock Growers and Alberta Beef Producers appear
unconcerned (silence means acquiescence) when American farm groups
were up in arms?
While you grow old waiting for answers to these questions, consider
one more thing. In a free market economy, you rely on one of two
things to make the economy work. You either must have competition,
real competition, or, where this isn't possible (think railways or
utility companies, for example) you must have regulation to control
anti-competitive behavior. The federal government, and its provincial
counterparts, appears to have abandoned both notions. In the packing
industry, like so many others, we will have neither competition nor
regulation. What we have instead is promises. The Competition Bureau
promises to watch the marketplace and if there is a "substantial
lessening of competition" it says it will take remedial action. It
will, presumably, try at some point in the future to put Humpty-Dumpty
back together again.
Meanwhile, farmers can go back to waiting. It's what they do best.
© Paul Beingessner beingessner@sasktel.net
"All things come to those who wait." I think that saying was meant to
produce patience. Wait long enough, and you'll get what you want. But
it doesn't actually say that. It says all things come, so it could as
easily mean the bad as the good.
Farmers, though, generally take the usual meaning of that expression
to heart. That's why they never tire of referring to their place,
wherever it may be, as "next year country". It implies an eternal
waiting for the bumper crop that evaded them yet another year.
But lest you think that next year country refers to an environmental
or economic condition, I will let you in on a little secret: the
eternal waiting that farmers are fixated on actually arises from their
dealings with government. Farmers are waiting, patiently, for
governments to hear them.
And farmers' patience is admirable. Take cattle farmers for instance.
They've been waiting for the government, any government, to notice
their plight and take action. Some, in fact, have waited themselves to
death, finally leaving an industry they embraced their entire lives
when it became apparent that government also was waiting.
Now, what government is waiting for is anyone's guess. Here's mine:
the province of Saskatchewan was waiting for the problem to go away on
its own, or for the federal government to take the lead. The feds were
waiting for the clock to miraculously wind back to the time before
COOL and Mad Cow, or perhaps for the cattle organizations to come, cap
in hand, begging for help. Both appeared to be waiting for enough
farmers to fall off the bandwagon, that governments built in the first
place, to reduce the number of cattlefolk to a quantity that could no
longer be heard.
Well, the waiting is over. Sort of, anyway. This past weekend, farmers
received two things they were waiting for. One was the Saskatchewan
government's response to the livestock crisis, which came in the form
of a payment of $40 per head for breeding cows and heifers and $20
apiece for market hogs. The second was a ruling from the federal
government's competition watchdog concerning the proposed takeover of
Lakeside Packers by XL Foods.
While the provincial contribution was a feeble imitation of Alberta's
assistance to cattle farmers, it was welcome. Forty bucks doesn't go
very far toward covering the losses cattle farmers are enduring, but
it has to be better than a kick in the head from a cranky cow that you
can't afford to feed. The Competition Bureau ruling, on the other
hand, was a kick in the head from a cow we really can't afford to feed
any longer, since it hasn't produced a calf in years.
The Bureau, you see, decided to allow XL Foods to purchase Tyson-owned
Lakeside Packers. The Bureau's press release provided little detail,
but then, what can you say when you allow a consolidation that sees
two companies controlling virtually the entire beef packing industry
in Canada? As when it allowed Cargill to buy Better Beef in Ontario in
2005, the Bureau seems to believe that access to packers in the U.S.
means competition in Canada is not an issue. The Bureau appeared not
to notice that Cargill is the second largest packer in the U.S. and
unlikely to compete vigorously with itself.
Contrast the ruling by the Competition Bureau with a story from the
U.S. that appeared almost the same day. The Antitrust Division of the
Department of Justice was opposing a merger between two of the four
largest beef packers in the U.S. because it felt that allowing only
three companies to control more than 80% of cattle slaughter would
reduce competition in the industry to unacceptable levels. The
Antitrust division had a lawsuit in progress to stop the merger. The
merger was called off by the companies involved, in the face of
opposition from the Department of Justice and the Attorneys General of
sixteen cattle-producing states.
So how does the competition watchdog in Canada not feel concern about
two packers controlling 95% of beef slaughter here while its American
counterpart has a cow over the notion that three companies would
control 80%?
While you are pondering that, you might ask yourself why both state
and federal governments in the U.S. fought the idea, when provincial
governments in Canada have been absolutely silent. Or why did
organizations like the Canadian Cattlemen's Association and the
Saskatchewan Stock Growers and Alberta Beef Producers appear
unconcerned (silence means acquiescence) when American farm groups
were up in arms?
While you grow old waiting for answers to these questions, consider
one more thing. In a free market economy, you rely on one of two
things to make the economy work. You either must have competition,
real competition, or, where this isn't possible (think railways or
utility companies, for example) you must have regulation to control
anti-competitive behavior. The federal government, and its provincial
counterparts, appears to have abandoned both notions. In the packing
industry, like so many others, we will have neither competition nor
regulation. What we have instead is promises. The Competition Bureau
promises to watch the marketplace and if there is a "substantial
lessening of competition" it says it will take remedial action. It
will, presumably, try at some point in the future to put Humpty-Dumpty
back together again.
Meanwhile, farmers can go back to waiting. It's what they do best.
© Paul Beingessner beingessner@sasktel.net
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