About
It was late in the winter of 2004 when Beef Connections was first envisioned at a presbytery meeting in Bruce County. We have long past the BSE crisis but the side effects are still lingering.
The Farm Crisis and the Cattle Sector
A Report by the National Farmers Union (Canada)
November 19, 2008
1.0 Executive Summary: Something happened
If you spend only one minute looking at this report, spend that minute contemplating the following graph.
Figure 1. Ontario fed (slaughter) steers (dollars per hundred-weight, adjusted for inflation)
January 1936 – August 2008
Sources: Government of Canada (Statistics Canada, CANSIM database; Agriculture Canada, Annual Livestock and Meat Report [aka Livestock Market Review]; Statistics Canada, Livestock Statistics, Cat. No. 23-603; Statistics Canada, Cattle Statistics, Cat. No. 23-012) and CanFax.
Figure 1 shows Ontario prices for fed (“finished”) steers—the prices beef packing companies pay for male (castrated) cattle, fattened and ready for slaughter and processing. (Graphs for other provinces and cattle types follow. All show similar patterns. For instance, the graph for Alberta fed steers is virtually identical to the one above.) The graph above covers the
72½-year period January 1936 to August 2008. It lists monthly prices, in dollars per hundred-weight, live-weight, adjusted for inflation. ($100 “per hundred-weight” = $100 per hundred pounds = $1 per pound.)
The graph reveals distinct periods. The far left shows the low prices of the Great Depression.
Then, in the early 1940s, slaughter-steer prices returned to a range we’ll call “normal.” The two horizontal grey lines mark the top and bottom of a horizontal channel that defines the price-range from 1942 to 1989. For those 47 years, prices oscillated between a low of $130 per hundred-weight and a high of $280 per hundred-weight, live-weight, adjusted for inflation. Fed steer prices went up and down, but remained within that horizontal channel— that is, prices varied, but trended neither higher nor lower.
The graph shows the 1952 peak, when prices topped $280 per hundred-weight, then the subsequent crash that followed the discovery of foot-and-mouth disease in a herd in Saskatchewan. Moving to the right, the graph shows prices in the latter 1950s and 1960s consistently in the range of $150 to $200. Next, it shows a spike in the early 1970s to nearly $280, a mid-’70s decline, a recovery in the late ’70s and early ’80s, and another decline
beginning in the early ’80s. Prices went up and down, but not once in the 47 years between 1942 and 1989 did the price of Ontario slaughter steers fall below $130 per hundred-weight. Never did prices breach the line that marked the bottom of the post-Depression normal.
Then, in 1989, prices did drop below that $130 per hundred-weight line. After ’89, cattle prices continued to oscillate, but they did so within a much lower range of values. Between 1989 and the May 2003 announcement of a case of BSE (Bovine Spongiform Encephalopathy), instead of rising and falling within that previous channel’s low of $130 and high of $280, prices moved up and down between a low of $98 and a high of $140. Consequently, the highs for the 14-year period between 1989 and 2003 were about equal to the lows in the pre-’89 range; i.e., the best prices after 1989 were not much higher than the worst prices before. The grey-shaded box on the graph highlights the 1989-to-2003 period.
Then, in May 2003, the announcement of a single case of BSE triggered a series of events that caused prices to fall still further. For two months, slaughter-steer prices plumbed the depths of $50 per hundred-weight. Then they recovered, but only modestly.
That brings us to the current period. The data points located at the graph’s far right show prices for the period after the discovery of BSE (September 2003 to August 2008), a phase wherein fed steer prices rose and fell between a low of about $75 per hundred-weight and a high of about $110. Again, we see that the best prices during this period were about equal to the
worst prices of the previous period (the 1989-to-2003 period). Note also: current-period peaks are far below the troughs of the ’42-to-’89 normal period. Moreover, current-period prices—$75 to $110 per hundred-weight—
duplicate those of the Great Depression.
Here’s the kicker: This past year, September 2007 to August 2008, prices for slaughter steers averaged $85 per hundred-weight, live-weight. But the average price for the 47-year period between 1942 and 1989 was $174 per hundredweight—double the recent average. How can this be? In the 1940s, ’50s, ’60s, ’70s, and ’80s, using packing plants that were comparatively
inefficient, paying workers 22% more,1 serving a smaller market, and selling to less-affluent consumers, the system was able to pass back to farmers twice as much per animal. Stated conversely, in the latter ’80s and throughout the ’90s, packers built super-efficient plants, cut wages, and ramped up production to serve export markets, and the result of all this
A note about inflation
To put current prices into context, to
understand how high or low they might
be, we must compare them to past
prices. And to properly understand past
prices, we must adjust those values for
inflation.
One dollar in 1975 had the purchasing
power of four dollars today. To buy a
basic pickup truck in 1975 required
approximately $5,500 dollars. Today, a
comparable truck costs four times as
much. Similarly, a house in Toronto or
Edmonton or Winnipeg costs at least
four times as much today as in 1975.
The Statistics Canada Consumer Price
Index (CPI) was 34.5 in 1975; it is 137
today (1992=100). Therefore, if you
have a price from 1975 and want to
know its equivalent value in today’s
dollars, multiply the 1975 price by four.
Ontario 800-to-900-pound feeder steers
sold for $50 per hundred-weight, liveweight,
in 1975. That’s equivalent to
about $200 today. Price comparisons for
Alberta and other provinces are similar.
expansion, efficiency, and cost-cutting is that farmers now receive half of what they did before that restructuring. Moreover, prices for all classes and types of commercial cattle (and most purebred and breeding stock) have followed the same trajectory. Graphs in this Executive Summary and in
the Main Report will show that prices for 800-to-900-pound feeder cattle have similarly fallen far below 1942-to-1989 normals, and that prices for these cattle today are half of average prices in the ’42-to-’89 period (Figure 15 to Figure 19 in the Main Report show prices for these cattle). Similarly, 500-to-600-pound calf prices took a dramatic downward turn in the early ’90s and are today just over half of their ’42-to-’89 averages (see Figure 9).
Cow-calf producers and independent feeders are suffering today because they have a problem that is real—packers are paying feedlot operators half of what packers paid those feeders’ parents and grandparents. In turn, cattle feeders are paying cow-calf producers half of what their parents and grandparents received. These half-price cattle are bankrupting family farmers across Canada and creating the most severe crisis in the sector since the Great Depression.
A complementary view
Another way to understand the preceding graph is this: The graph’s prices are adjusted for inflation. Thus, the relatively buoyant prices between 1942 and 1989 indicate that cattle prices during that period more-or-less kept pace with inflation. As other goods and services increased in price, cattle
prices increased at approximately the same rate. Over the past two decades, however, price increases for other goods have been twice as large as the price increases for live cattle. If fed cattle prices had kept pace with other prices, cattle today would sell for approximately double their current values. Instead of receiving approximately $1,100 per slaughter steer (1,250+ pounds X $85 per hundred-weight), farmers and feedlot operators would receive $2,200. Increases for calves would be almost as dramatic: Instead of receiving approximately $590 per feeder steer calf (550 pounds X $107 per hundred-weight), cow-calf producers would receive approximately $1,010 (550 pounds X $184 per hundred-weight). The positive difference such prices would make to farm families is impossible to overstate.
Solving the crisis is easy: We merely have to figure out how to restore cattle prices to normal levels. We just need to do what farmers, feeders, packers, markets, and governments managed to do consistently in the 1940s, ’50s, ’60s, ’70s, and ’80s: pay fair and adequate prices to independent feeders and cow-calf farmers.
A note about reading this document: Though the themes touched on in the Executive Summary are developed in the Main Report, the Main Report does not duplicate all the points of the Summary. The NFU recommends that all those interested in the issue first read the Executive Summary. Then, for additional evidence and more details, we recommend that those interested go on to read the Main Report.
Superscript numbers (small numbers raised above the line of the text) in this Executive Summary refer to endnotes located on the final pages of the Main Report; please download that Report in order to access a wealth of endnote references. This Executive Summary and the Main Report are both available as downloadable files at www.nfu.ca or by mail by calling (306) 652-9465 or by e-mailing nfu@nfu.ca .