According to Canfax numbers, Canadian livestock farmers received about 24 per cent of the retail value of beef in the mid 1990s; that percentage has gone down to about 16 per cent nowadays.
That drop represents about $550/animal.
If consumers are paying enough for it and farmers are receiving that much less, where is the beef and how does it get there?
Captive supply is a technique wherein beef packing companies use cattle they own, or cattle they control through contracts that do not contain fixed prices, to push down prices to independent sellers. Captive supplies allow packers to stop bidding in cash markets whenever prices rise above packers’ preferred level.
Nearly every study on the issue has concluded that packers’ use of captive supplies leads to lower prices for ranchers and farmers.
In Canada the level of captive supply is much higher than in the U.S. It peaks at 67 per cent of weekly slaughter numbers.
When President Barack Obama took office, his second point about agriculture policy was that he would end the suffering of primary livestock producers by banning the use of captive supply by large meat packers.
On May 20, the Livestock Marketing Fairness Act was introduced in the U.S. Senate. The bill, if passed, would outlaw captive supply contracts.
The introduction of this bill follows another US government intervention.
Earlier this year, the largest beef processor in the world, Brazil based JBS, was not allowed to increase its market share in the US. Authorities disallowed JBS the ownership of National Beef, the fourth largest beef processor in the U.S.
The Canadian government, on the other hand, has a terrible track record in terms of making the beef market function proper for primary producers.
The introduction of the Livestock Marketing Fairness Act in the US, is a perfect opportunity for the Canadian government to move forward with similar legislation in Canada. Not only would it bring prosperity back in the beef sector, it would also safe Canadian taxpayers billions of dollars in bureaucratic programs that are intended to help farmers, but that are ending up in the same coffers that already benefit from an unfair market advantage.
Fixing the problems in agriculture, after years of deregulation, does not require bailouts doled out to farmers, it only takes good policy in order to have the market pay the farmer a fair share.
National Farmers Union