June 30, 2005
The U.S. ban caused beef prices on both sides of the border to plummet. Now some Canadian ranchers are trying to strengthen their country's livestock market.
Lake Manitoba, Manitoba — A group of Manitoba ranchers hope the loss of U.S. cattle markets will have an unintended consequence, a stronger Canadian livestock market. Ranchers north of the border are still struggling with low prices. But some say closing the U.S. market to Canadian beef, is an opportunity to expand Canada's meat processing industry.
Mark Emilson has a small cattle ranch in north central Manitoba. He drives through the pasture, dropping salt blocks for his herd.
For the past 20 years Emilson has raised calves, and each year he sells the animals to feedlots. The feedlots fatten the animals for slaughter. He says it's a good life. Emilson and his wife live on the ranch started by his father in 1959. But for the past two years, things have been rough.
"When the BSE hit and the price of cattle went way down, it caused a lot of anguish to a lot of people, and we really had to trim down loans," says Emilson. "We had to extend payments. It's really eroded the equity of a lot of the places that are around here."
Two years ago, Emilson was getting $700 for each calf. Today, his price is $100. Like ranchers in the United States, Emilson's expenses are on the rise. Fuel, feed and taxes have all increased in the past two years.
With the U.S. border closed to Canadian cattle, ranchers have lost a valuable market. They can no longer sell live cattle to feedlot owners in the United States or to U.S. packing plants. There are no packing plants in Manitoba, so ranchers who raise cattle for slaughter must ship their herds hundreds of miles.
Shipping fees cut into shrinking profit margins, and smaller margins mean less money to buy calves from ranchers like Daniel Warrener.
"I don't think cows are going to go across to the states for many years. We need a place to slaughter them, especially in Manitoba," says Warrener. "There's some (meatpacking plants) in Montreal and there's some in Alberta, so either our cows go east or they go west."
Warrener says ranchers need to find a market to replace U.S. feedlots and meatpacking plants. Preferably one close to home, to cut down on shipping costs.
Raising cattle has always been a risky business. With the U.S. border closed, Canadians are struggling to find buyers for their herds. Warrener says when the U.S. announced it would reopen the border in March, prices started to climb.
When a cattlemen's group in the U.S. got a court injunction to keep the U.S. market closed, prices dropped. Warrener says it's a situation that makes it hard to plan for the future.
"When you talk to the banks you can't tell them what you plan, because you don't know what's going to happen from day one to day two," says Warrener. "You can't say, I want to keep 100 yearlings, and you end up keeping 200 because you can't sell them for the price you want."
Canadian ranchers are frustrated. They don't understand why the U.S. ban is still in place. Some fear the discovery of a new case of BSE will keep the border closed to Canadian livestock permanently.
Warrener and his neighbors insist safeguards are in place to protect consumers from BSE or mad cow disease. Rock-bottom beef prices have some ranchers taking drastic actions.
Rancher Garth Lussier tells a story about a neighbor who wanted to sell a bull. On the way to the sale he got a flat tire. The repair bill cost him more than he'd get for the bull. So Lussier says, the neighbor went back home and shot the animal.
"The auction mart isn't next door. You have to load that animal up, take it 50 miles and come back home again. So there's an expense, a tank of fuel for sure," says Lussier. "That's a hundred bucks. And if you have tire trouble on the road that's another maybe $100 or $150 expense, so that bull is only going to get you $50. What's cheaper? The bullet or the expense?"
Lussier says other ranchers have done the same thing. But where some ranchers see nothing but frustration, others like Blair Olafson see opportunity.
"I might sound like a renegade here, but I think it's a good thing," says Olafson. "The reason for that is we will build and establish our own slaughter industry."
Blair Olafson is a busy man. He runs a resort, he's an outfitter and a commercial fisherman. He's also a rancher with 1,000 head of cattle. His latest business venture is building Manitoba's first modern meatpacking plant.
Olafson has organized a cooperative of businessmen and ranchers. Together, through loans and private investment, they've raised $14 million to build a packinghouse.
The idea is not new. Ranchers in the United States have toyed with the idea of processing their own herds, but it's an expensive proposition. To keep a plant running you need lots of cash to buy cattle. Independent plants must compete with established corporations which have deep pockets for those animals.
When ranchers try to build their own packing plants, their efforts rarely get beyond the planning stage. It's simply too expensive. But Olafson believes this venture will work, since it will focus on a part of the market big corporations have little interest in.
"Because we're not competing against -- we'll call them the big boys -- the Cargills and the IBPs," says Olafson. "They're a fat cattle market and we're just going to kill the culls -- the hamburger and baloney cows."
Cull cattle don't bring the highest prices, Olafson explains, but there's a steady demand for them since there's always a market for hamburger.
Corporate meatpackers are more interested in the other end of the industry -- the fat or slaughter cows. Those animals sell for higher prices and end up as steaks and roasts.
The problem is, with no U.S. market available, there are too many hamburger cows in Canada. Olafson estimates the herd at 1.5 million nationwide. With a new plant, Olafson and his partners say they'll create competition and boost the prices paid to ranchers. He's convinced there are enough cull animals in Manitoba to make the plant successful.
"There's probably 200,000 cattle. And that's not even talking about the cattle in northwestern Ontario or the cattle in Saskatchewan," Olafson says.
Two years ago when the U.S. border closed to Canadian beef, Olafson and his partners started raising money for their meatpacking plant. He expects construction to take place this summer, and meat processing to begin this fall.
Ranchers think if the business is successful, it will motivate other investors to build plants in Manitoba and create a stronger, more competitive cattle industry -- one that won't be so reliant on U.S. markets.