Where's The Beef??? The 1975 Federal Commission
“Any marketing system that does not protect its primary supply sources is a marketing system that eventually will be destroyed,” dissenting opinion in the Report Of The Commission Of Inquiry Into The Marketing Of Beef And Veal
By Robert Thomas
Part Four Of A Series
The call to examine cattle and beef pricing in Canada has been made more than once in the past. Out of those calls came a major report in 1976 while the beef and cattle industry was in a price and marketing crisis on the cusp of change in the industry.
Released on April 13, 1976 the Report Of The Commission Of Inquiry Into The Marketing Of Beef And Veal was an extensive report looked at the marketing of beef from the producer right up to the dinner plate.
The Commission held Canada-wide public hearings over three months in 1975 gathering input from all three players - ranchers/farmers, processors and retailers - on the industry and how producers were often better off financially just disposing of their livestock.
The Commission had been triggered by farmers who went in front of the television cameras.
With dairy producers destroying calves in front of the television cameras - due to low prices - causing outrage and massive public pressure from consumers against the beef processing industry.
“The public felt that the prices paid for beef and veal were high in relation to low producer returns and did not properly reflect price variations at the producer level,” the Commission stated as to their reason for holding the Public Inquiry.
What the Commission found, through both public hearings as well as studies, was that “serious price inequities exist at both the producer and consumer levels.”
Chaired by Maxwell W Mackenzie with Hu Harries and Lydia Patrie-Cullen the Commission made three recommendations:
we reject the principle of regulated domestic production for beef and veal but emphasize the need for substantial changes in the marketing system to protect the position of the livestock producer against inequities; .
retailers should be required to label the grade of beef on the packaged beef cuts sold at their retail counter and clearly state that grade of beef in any form of advertising they use;
the central processing of beef cuts should take place at the point of slaughter, and early action should be taken by government to reverse the current trend to growth in central processing by retailers.
The Inquiry made several other recommendations to improve the beef marketing system and amongst them was to allow direct selling from producers to the processing facility and eliminate many of livestock auction markets.
At one time Moose Jaw boasted the largest stockyards in Saskatchewan. Notice the ramps to train cars
The Commission’s report stated that the move to centralized processing at the slaughter facilities would add to the wholesomeness of the product but also added the caveat about what it could lead to due to producers selling directly to packers and not through the auction mart system.
“…the degree of market power and concentration in the beef industry by those controlling the processing, and whether an acceleration of the development would lead to a more invisible price setting mechanism for beef than the more open method used in the past,” the report warned could develop.
The report highlighted the price discrepancy of what producers received based upon their actual costs.
“In few other industries in Canada can the price of a product fluctuate drastically from day to day or region to region, significantly cutting into revenue with no change in costs,” the Commissioners wrote.
The report mentions how there were in 1974 a total of 57 packing plants responsible for 88 percent of the federal plant kill. In 2020 three (3) plants were responsible for 85 percent of the beef processed in Canada.
“In 1974 beef producers and feedlot operators chose to sell their slaughter animals direct to Packers (55% of their sales) either on a liveweight or a railgrade basis', through terminal markets (30%) or through country auctions ( 15%). Producers of calves and feeder cattle normally use the auction system to market their animals.”
The Commission also found direct ties between the Canadian price for cattle and beef highly reliant on prices paid in the United States.
“Because of the size of Canada's market, its openness to world markets, and its proximity to the U.S.A., the major constraint on our live cattle and carcass price setting mechanisms is U.S.A. prices plus transport and any tariff that is applied.”
The Commission found the little discussed byproduct market played a major role in what producers were offered.
“A rule of thumb in the packing industry is that the value of the by-products will cover the processing costs of the carcass so that the live value and the carcass value should be (on a carcass equivalent basis) approximately equal and follow one another. When by-product values exceed processing costs, credits can be allocated to increase buying prices for live cattle or lower carcass selling prices. The reverse is also true,”
The public input tour took the Commission across Canada.
During these submissions the Commission heard Canada's cattle market was actually a North American market.
“The industry in Canada is operating in a North American and not a Canadian market . . .There is a duty.. .There are transportation factors .. .but with the exception of those factors we are essentially operating on a North American market ...” Canada Packers said in their submission.
Canada Packers pointed out how stabilization of beef producers’ incomes would impact the North American market.
“Stablization is bound to seriously disrupt any trade outside of Canada in beef . .If you start to stabilize income in the beef industry, you are going to have to devise a system for regulating output because at the moment it is price that regulates output ...”
There were calls from processors to move away from the system of the day where retailers bought sides of beef and then did their own meat cutting.
The now defunct Saskatoon-based Intercontinental Packers was a leader in calls for packers to move from supplying sides but providing the final cut retail product. By reducing costs the savings could be passed on to consumers, they told the Commission.
Beef Hung Up For Processing
“Boxed beef holds a great deal of promise as a way of reducing costs between packer and consumer. . .We strongly urge this Commission to recommend acceleration of a change to this more modern and efficient method of beef marketing,” Intercontinental Packers said in their submission.
Canada Safeway who operated a beef cutting plant under its Lucerne brand echoed Intercontinental Packers call to consolidate meat cutting from the grocer to large plants as being more economical.
“There is increased efficiency resulting from centralized prefabrication…Centralized cutting is a clear economy over the system where the whole side moves out and into the store where it is cut up, it is more economical,” Canada Safeway said in their submission.
The National Farmer's Union (NFU) asked the Commission to look at a system based upon a quota system similar to eggs and milk to help ensure producers were paid a guaranteed higher price.
Despite the NFUs calls for a quota system the argument for a free enterprise system with processing conducted at the slaughter facility won out.
Government intervention in the industry was outright rejected by the Brooks, Alberta based Lakeside Packers (now part of JBS Foods through acquisitions) claiming the government was the problem.
"The number one problem in the beef industry as a whole is government involvement.. .We must work in a North American or world beef market.. .We have the potential to produce more than our own requirements and at competitive prices. . .Government should not be involved in our industry in any way that will distort the signals from the market place . ..” Lakeside Packers said in their submission.
In the end the Commission agreed with consolidation of cutting beef to the slaughter facility away from retailers as a cost reduction strategy.
“The Commission is convinced savings could be realized at the retail level if beef were fully processed before it reaches individual retail food stores. The investment in equipment required to break and trim carcasses at each retail outlet is considerably higher, generally speaking, than that at a central location where the utilization rate of labour and equipment can be much better,” the Commission wrote in their final report.
The former Canada Packers building in Moose Jaw in 1955 - photo credit Moose Jaw Public Library archives
Retailers continuing to cut meat was seen as detriment to the entire cattle to beef system.
“In the Commission's view, if the processing continues to be done at the retail level, it will inhibit important gains that can be made in the marketing system for the future.”
Why packers comply with retailers
The Commission saw the manner which retailers purchased beef from processors in 1975 - carcas - as a major drawback to the Canadian beef processing system.
“But the major reason why most beef is shipped in carcass form by packers is that retailers are reluctant to relinquish any element of control over the quality of the product they sell. They want to continue their preferences for certain classifications and sex of carcasses, which appear to the Commission to be based on prejudice rather than valid evidence. The packers comply with this because they are able to pass the burden of any discrimination by retailers back to the producer”
The stage was set in the future where retail meat markets would disappear and large retailers would no longer cut up their own beef.
The butcher shop moved to the slaughterhouse.
Rail grade buying versus average
A major recommendation made by the Commission was that cattle should be bought Rail Grade and not an Average Estimate system.
Rail Grade means sellers (usually feedlots today) are paid by how the animal breaks down after slaughter. An Average Estimate is where processors buy cattle based on their weight with a formula taking into account an averaging of imperfections in animals they buy.
“The Commission is satisfied that the purchase by packers of live animals on a railgrade basis will provide more equity to the individual producer by eliminating the estimation of the carcass outturn of the live animal . If all purchases of slaughter animals by packers were on a railgrade basis, a much more comprehensive market could be developed to the particular benefit of the small producer and the independent packer,” the Commission wrote.
Dissent in the report
Despite the Commission recommending consolidation and a centralization in the industry there was one dissenting Commissioner.
“Any marketing system that does not protect its primary supply sources is a marketing system that eventually will be destroyed . Many have suffered grievously because the price that is paid for their produce, while gyrating wildly, has consistently been lower than the cost of production . I see no reason to load on the shoulders of a few who are least able to bear it the cost of a food policy which provides the Canadian consumer with the best beef that is available anywhere in the world. The Canadian consumer doesn't want the small unprotected man to be ground into the dirt in the interests of some phoney economic and political philosophy which is a little to the right of Adam Smith,” the dissenting opinion read.
Despite the dissent the stage was set for consolidation and the mergers leading to less than a handful of a few large processors dominating the industry.