Outlook Feedlot: Responding to Economic Arguments

I’ve received several comments on my posting about the feedlot proposed for Outlook, but one in particular got my attention. A local farmer, Murray Kasper, took some time to compose a dissenting comment (shown at the end of this post), arguing for the feedlot on economic grounds. His arguments were made with thought and care and deserve a careful and thoughtful response.

I agree, of course, that the beef industry is “market sensitive” and “affected by economics of scale.” Murray mentions a former program that at one time allowed him to finish his own calves with grain, sending them to Intercontinental Packers in Saskatoon for slaughter. Those days are gone, as we all know, because of radical consolidation in the industry. Intercon is gone and two companies, Cargill and XL Foods, now do 80 per cent of the beef processing in Canada. Farmers like Murray who want to process their livestock through the mainstream markets have no choice but to sell their animals to large feedlots, primarily in Alberta, serving this duopoly.

Who benefits from this system? Well, the feedlot owners do okay, and the biggest ones with deep pockets do best, riding out any fluctuations in the cost of feed grain and fuel. Farmers growing the barley at prices cheap enough to feed livestock can do well for a while if they too stick with the “economics of scale” program and get really big.

The meat packers, though, are the primary beneficiaries. They control everything from the price of feed grain to the animals sold at the farm gate to the supermarket. And here is how they do it: companies like Cargill and XL buy their own feeder cattle and have them “custom-fed” in feedlots. This means that they do not have to buy directly from independent sellers if they don’t want to. When livestock prices rise, the big packers can just step out of the market for a while and instead of paying the current price use their own supply of cattle purchased at lower prices. Because of their size, when the packers stop buying for a spell they cause a backlog in the market among independent sellers and ranchers, leading to an artificial oversupply that drives down prices. When the price falls enough they buy more cattle. This 2009 article in Alberta Views said that, adjusting for inflation, the average price farmers received for a steer in 2009 was half what they got in 1969.

However, as Murray astutely points out, consumers are the ones who want their meat cheap--which means the meat-packing corporations can always blame consumers for everything from predatory market practices to environmental damage, saying “Well, you don’t want to pay higher prices for beef do you?” As long as that is true, the beef-buying public remains the ultimate beneficiary of an unfair and unsustainable system, complicit with the greed of the big corporate meat packers.

Who are the losers, though, the ones who are paying the ecological and social costs of this system? With farm gate prices for steers so low, producers end up grazing their pastures harder than they might want to, which decreases biodiversity on their land, degrading habitat for some of the most endangered species in North America. Squeezed between rising costs and falling prices for their animals, they often cannot afford to take measures to protect the quality of their grazing land and riparian areas.


riparian zone damaged by cattle

The only way to keep their income at a reasonable level is to play the economies of scale game and get as big as possible. The traditional small cow-calf ranchers, once the backbone of our beef industry, are replaced over time by the big operations that buy young animals cheap, let them graze until they reach feedlot size and then sell them into the meat-factory system. Our once proud cattlemen and women are being replaced by functionaries working at one end of a conveyor belt that terminates in the supermarket meat department. In between, a lot of destruction is happening, in both ecological and human communities. Take a drive through Saskatchewan’s southwest or Alberta’s rangeland and talk to the ranch families that remain. Ask them what this system is doing to their families, their neighbours, and the future of ranching. Then ask the men and women who sell cattle that end up in feedlots where they get their meat from. Most will say that every year they “finish” a couple of steers themselves for friends and family and many will admit off record that they wouldn’t eat feedlot beef themselves because of the hormones and drugs that get into the meat, not to mention the risk of e Coli.

Given this dysfunctional and wholly unsustainable system, should it be reassuring to the people of Outlook and the RM of Rudy to hear that local feed grains and calves will be bought by Namaka corporation to process through the feedlot? Perhaps it is good news, if everyone can close their eyes to the social, human health, and environmental costs of encouraging cheap, industrialized meat production instead of working to support the alternative: local livestock rearing on ranches where producers are paid a fair price for their animals, which are either finished on grass (the best alternative for ecological and human health) or else finished on grain in small local operations.

All of this, of course, implies consumers willing to pay for healthier meat. That is not going to happen tomorrow, but the writing is on the wall. At some point, enough consumers are going to be demanding healthier meat with a smaller ecological footprint that feedlots will be closed down. A relatively small one farther away from the meat packers will be first to go. Do the people of Outlook and the RM of Rudy want to roll the dice and see how far this ride takes them, regardless of risks to the local environment or the water quality of the South Saskatchewan River? Or do they want to be part of the solution and find better ways to support local livestock producers?

People of Outlook and the RM of Rudy, do not be seduced by “ends-justify-the-means” thinking. Cargill and XL don’t need your help, but all of us, from consumers to producers, need communities to draw a line in the sand and say “no, this is not good for any of us in the long run.”


Click here for Westbridgeford Meats Website

[Here is Murray's comment]

Dear Trevor, I am a livestock and grain producer in the RM of Rudy. Our farm is 12 miles straight north of the proposed Namaka Farms site. I am disappointed that you have chosen to advocate the inaccurate and misleading information put forward by the Rudy Ratepayers Group.

The Rudy Ratepayers Group does not represent the majority of residents in the RM of Rudy and I believe it is headed up by a land speculator from BC who only resides here for a short time during the growing season.

The beef industry is very market sensitive and thus is very much affected by economics of scale. I know this personally, as we finished our own calves for market back in the 80's when the Provincial Beef Stabilization Program was operating. When that program was discontinued, so was our finishing operation and at about that time, Intercon Packers in Saskatoon stopped slaughtering cattle. That is the kind of economic activity we don't want to see. If you can convince the consumers of this great country, and the world for that matter, to pay considerably more for poorer quality beef, then you will see a change in the beef industry.

As far as M1 Canal is concerned, water leaks out of that thing, not into it.

The 36 full-time permanent jobs expected to be created, while being very welcome, are a small part of the economic activity that will spin off of this development. Nothing has been said in regards to the construction or the feed and calves that will be sourced locally. Anyone who thinks that Namaka Farms won't source it's calves and feed locally as much as possible, is out of touch with reality and knows nothing about the beef cattle business.

Of the four residents in close proximity to the site, that are opposed to the development, two are acreages which are not agricultural producers and contribute very little to the tax base of the RM. I was told all of the residents in the immediate area of the site have been visited personally by members of the Thiessen family, to address their concerns.

I hope these comments bring to light some of the reasons why most of the grain and livestock producers in the RM of Rudy are not opposed to this development.

Sincerely, Murray Kasper, Outlook