There is a strong possibility Canada’s beef packing industry has been “unduly profiting” from the BSE situation of closed export markets and excess cattle supplies, the House of Commons agriculture committee has concluded.
In a hard-hitting report tabled in Parliament April 1, the committee criticized the design of government BSE recovery aid packages because they did not ensure most money went to producers. The programs actually helped drive down prices by forcing sales before a specific date, the committee stated.
As well, the committee suggested that added post-BSE costs in the packing industry may drive smaller existing plants out of the business, making concentration issues even worse.
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However, much of the report from the all-party committee was devoted to the performance of the packers and inequities in the marketplace after the May 20, 2003, announcement of a case of BSE in Alberta.
The committee showed itself suspicious of packer claims that undue profits have not been made. It reiterated a demand that industry minister Lucienne Robillard order the Competition Bureau to investigate the gap between low slaughter prices and wholesale pricing.
It said the Competition Bureau should monitor farmgate, wholesale and retail beef prices and report findings to the agriculture committee.
Three days earlier, the Liberal-dominated committee had unanimously demanded that the major packers reveal their financial records on a confidential basis to the committee by April 21 to support their claims that profits have not been extraordinary since BSE.
The committee report noted that after the American border opened in September 2003 for boneless cuts from animals under 30 months, the value of exports increased to pre-BSE levels despite a higher Canadian dollar value and continued low prices at the farm level.
It suggested that corporate concentration at the packing level, including American ownership of the biggest plants, was a problem.
“The committee is concerned that beyond the possibility that the packing segment of the industry may be unduly profiting from the oversupply of cattle in Canada, the packers may in fact be exploiting their market buying power at the expense of Canadian cattlemen,” said the report.
Committee staff concluded that while the cow-calf and feeder sectors have been consolidating, they remain weak when facing the largely American-owned packing industry. Cargill Foods, Lakeside Packers and XL Beef dominate.
“These three companies control 95 percent of western Canada’s beef packing industry,” said the report. “They are also vertically integrated into feedlot operations with packer-owned cattle procurement averaging 16 percent of Alberta cattle marketings in the past six years.”
The report said government help should have been delivered directly to livestock producers or owners.
