AGRI-BUSINESS
Nuts & bolts
Grids blamed for price skids
Some U.S. producers think formula grid pricing is driving down prices and see live selling as the solutionBy DON STONEMAN
Beef prices have fallen into a black hole and American beef producers are blaming formula grid pricing. Last month some American feedlot operators in the key cattle feeding states of Kansas, Nebraska and Colorado were boycotting formula grid pricing schemes in favour of live markets.National Farmers Organization (NFO) president Gene Paul said in a news release that boycotting producers wanted to see if selling strictly on a negotiated cash basis would have a positive impact on prices.
The NFO charges that formulated sale arrangements put downward price pressure on the market and don't give producers the opportunity to cash bid the cattle higher. Cattle arriving at packers are priced from the previous week's market.
David Moss, general manager of cattle operations for Western Feedlots Ltd., based in High River, Alta., begs to differ. There are dozens of different pricing arrangements in the U.S., each with very different base price determination mechanisms, he says.
Furthermore, feedlot operators may be stepping backwards by boycotting progressive grid pricing systems. Packers can more easily make high margins on live cattle, meaning feedlot operators are less likely to get a fair shake, he says. Grid pricing may not be perfect, but it will evolve and mature to eventually become a fair, "quantitative" measurement of value.
What the U.S. contends with now - and what these producers seem to be supporting - is the marketing of 80,000 head for one price in a time frame of one hour. This pricing mechanism certainly cannot measure true value or represent ideal price discovery, Moss says.
The real issue in the U.S. and in Canada is the price of finished cattle, he says. If cattle prices were at US$70 per cwt. rather than $57, Moss doesn't think anyone would be makingany noise. "We are our own worst enemies because we are oversupplying a market of diminishing demand."
Average carcass weights were at record highs last year and "we are outstripping those weights in 1998," he says. In Canada increased carcass weight alone accounts for a five-per cent increase in total beef production over last year.
Dennis Laycraft, Canadian Cattlemen's Association executive vice-president, predicts that formula grid pricing will become a dominant force, perhaps priced off the value of boxed beef. Cash pricing will continue to be a force "for the foreseeable future" in Canada, but he thinks price signals from a grid formula pricing system will bring the beef industry closer to a consumer value for meat.
© copyright 1998 Agricultural Publishing Company Limited.
backBY DON STONEMAN
The Sierra Club's Brad Duplisea and Monsanto Canada's vice-president Ray Mowling both relish the return of Canada's lawmakers to Ottawa this fall.The Sierra Club of Canada, a well-known conservation group, is working with senators to subpoena a U.S. Food and Drug Administration document that it says will prove Posilac - Monsanto's synthetic Bovine Somatotropin product - unsafe. The study allegedley contains details of a 90-day, FDA rBST trial in which 30 rats were fed large amounts of Monsanto's rBST product.
Monsanto's Mowling says that the study cited by Sierra Club is a snooze. "I am hoping it will speak for itself in time," Mowling says. "We stand behind the science we have submitted."
Mid-September, Sierra Club of Canada publicly charged that Health Canada's Bureau of Veterinary Drugs (BVD), which approves animal health products used in food animals, was blocking public access to a study that damns rBST as a human health hazard and should have prevented approval of the drug in both Canada and the U.S.
The Sierra Club announcement coincided with the beginning of a Public Service Staff Relations Board hearing between the BVD and six of its scientists, who say management tried to harass them into approving products that should not have been used to produce food in Canada.
The controversial study has yet to be unearthed. Last spring, the senate agriculture committee failed to wrestle a copy of the study from federal government files. The agriculture committee plans to use its subpoena powers to get access to the study when the House of Commons and the Senate sit this fall.
The Sierra Club has excerpts from minutes of internal BVD rBST review team meetings, obtained through freedom of information channels, that it says refer to the controversial study.
Brad Duplisea, director of pesticide, toxics and agriculture at Sierra Club, says releasing the study will cause a scandal in the U.S.
The BVD is coming under fire for not being forthcoming on the issue. Confidence in the food supply is the casualty of this way of doing business, says Doug Powell, University of Guelph professor, who specializes in food safety issues.
"This is what happens when you keep things secret," Powell told Farm & Country. "Who decides these things? How do they decide these things? Open up the process, folks."
Powell wants to see the substance behind the Sierra Club claims. The existence of the rat study has been a point of speculation on the Internet for a long time, he points out.
Even if the study lives up to the expectations of BST's opponents, it doesn't mean that Posilac is dangerous. "We don't know what the references are, where it was published, or what the methodology was."
Powell points out that there are a number of cases where a group of scientists made a theory work, but no other scientific group could.
The Sierra Club's Duplisea says that's the point: "It should have set off warning bells."
© copyright 1998 Agricultural Publishing Company Limited.
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