Editor’s Comment: Profiting in the Face of Catastrophe
September 1, 2004
A report from Alberta's Auditor General that meat packers in the province have tripled their profits since last May's Mad Cow case has left a bitter taste in the mouths of many producers - and for good reason.
A report from Alberta’s Auditor General that meat packers in the province have tripled their profits since last May’s Mad Cow case has left a bitter taste in the mouths of many producers – and for good reason.
While the report shows accusations that meat packers had received aid funding intended for producers were untrue, it did confirm the system is somewhat flawed. While the price paid for cattle by the meat packers plummeted as the U.S. closed its border to Canadian beef, the price of meat on supermarket shelves remained relatively stable.
The result – packing plants were able to purchase cattle at bargain basement prices while selling the meat to retailers at near pre-BSE prices. To put it in perspective, cull cattle that used to fetch a producer $600 are now being sold to packing plants for $250 or less. Still, retailers haven’t exactly slashed their prices by more than 50 per cent.
It’s difficult to criticize the packing plants for capitalizing on this and taking advantage of an opportunity to boost their profits in an unprecedented manner. But perhaps passing the savings they were realizing from producers onto the consumer would result in increased sales and help alleviate the cattle surplus the industry is now facing.
It has been reported that Canada has a backlog of more than 500,000 cows that may have to be slaughtered in order to restore some sense of balance to the industry. The half million cows raised were destined to be processed in the U.S. Canada simply doesn’t have the capacity to process the excess cattle.
As a result, if a mass cull is carried out the animals would end up as dog food or compost. What a terrible waste.
It would be nice to see some of the packing plants re-invest their record profits into expanding their operations to accommodate increased capacity so the Canadian cattle industry isn’t so dependent on U.S. slaughterhouses. That, coupled with lower beef prices at the counter could reduce the need for such a massive cull.
It’s worth pointing out that politicians are optimistic a cull (a four-letter word among politicians if ever there was one) may not be necessary. They say if the U.S. opens its borders to live cattle by the end of the year, then the surplus cattle can still be shipped south as was originally intended.
But how are those animals going to get there? None of the politicos seem concerned or aware that the cattle hauling industry has lost the majority of its drivers and if the U.S. border should re-open overnight, it will be some time before there are enough skilled livestock truckers available to move these cattle.
Then, and only then, the folks in Ottawa and Edmonton may realize providing aid funding to livestock trucking companies wasn’t such a bad idea after all.