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Packer probe finds 'exorbitant' profits
By Barry Wilson & Mary MacArthur
Ottawa, Camrose bureaus
Western Producer
December 7, 2005
Canada
A Parliament-ordered partial audit of beef packer profits in the months after the BSE crisis proves that Canada's major packing companies made "exorbitant" profits at the expense of producers, says the former chair of the House of Commons agriculture committee that oversaw the investigation.
Packers lost $40 million in the month following the announcement on May 23, 2003, that BSE had been discovered in Canada, according to a report tabled in Parliament Nov. 28 hours before the government fell and the election campaign started.
During the next 12 months, those companies made almost $600 million in net profits while the livestock industry lost billions in income and equity.
"I believe this report will verify what Canadians have long come to believe, that the packers made exorbitant profit on the backs of Canadians, not only the primary producers but certainly the consumers of Canada," committee chair Paul Steckle said as he tabled the report.
Steckle is now running for re-election in the cattle-heavy riding of Huron-Bruce in Ontario, seeking his fifth consecutive mandate as a Liberal MP.
Robert Meijer, director of public affairs with Cargill, which owns a large packing plant near Calgary, said the problem wasn't with large packing plants, but with a combination of factors from the BSE crisis, such as lost markets, closed borders and too much supply for the demand.
The report, based on evidence accumulated in confidence by Parliament-appointed auditors, deals only in aggregate numbers to avoid revealing confidential information.
It reported that during 2002, the average net packer margin per head slaughtered was $42.73. During the next 12 months after government BSE aid money began to flow, the average net margin per head soared to between four and six times the 2002 average, almost $180 per head in the first half of 2004.
Steckle said in an interview it is clear that packers manipulated the market to their benefit and it went beyond market rules of too much supply chasing too little demand.
"As tax dollars flowed to producers, packers just lowered their price to effectively receive that money on their bottom lines," said Steckle. "We have to figure out a way in future to make sure tax dollars get to the people we are trying to help. The evidence is clear that major corporate profits were being made, sometimes with the help of taxpayer dollars, at a time when farmers were losing enormous amounts."
He repeated earlier charges that the companies were profiteering, even though they were doing nothing illegal.
"I guess it was the market working and it is the way the government allows the market to work," he said. "Everyone makes as much profit as they can. But the situation is different when there is no competition on one side of the equation."
Meijer said he doesn't think anyone is surprised to hear the packers made money.
"We never denied that and in fact we worked very hard to allow the committee and its auditors to have access to as much information as possible," he said.
"At the end of the day the most important message is that there wasn't found that there was any wrongdoing. The market acted the way the market was acting and that's the way an open and free market does operate."
Steckle said the affair also shows how useless the government's competition policy is.
"We have no competition policy, Competition Bureau, in this country that means anything," he said in the interview. "I don't know why we keep it around."
By Barry Wilson & Mary MacArthur
Ottawa, Camrose bureaus
Western Producer
December 7, 2005
Canada
A Parliament-ordered partial audit of beef packer profits in the months after the BSE crisis proves that Canada's major packing companies made "exorbitant" profits at the expense of producers, says the former chair of the House of Commons agriculture committee that oversaw the investigation.
Packers lost $40 million in the month following the announcement on May 23, 2003, that BSE had been discovered in Canada, according to a report tabled in Parliament Nov. 28 hours before the government fell and the election campaign started.
During the next 12 months, those companies made almost $600 million in net profits while the livestock industry lost billions in income and equity.
"I believe this report will verify what Canadians have long come to believe, that the packers made exorbitant profit on the backs of Canadians, not only the primary producers but certainly the consumers of Canada," committee chair Paul Steckle said as he tabled the report.
Steckle is now running for re-election in the cattle-heavy riding of Huron-Bruce in Ontario, seeking his fifth consecutive mandate as a Liberal MP.
Robert Meijer, director of public affairs with Cargill, which owns a large packing plant near Calgary, said the problem wasn't with large packing plants, but with a combination of factors from the BSE crisis, such as lost markets, closed borders and too much supply for the demand.
The report, based on evidence accumulated in confidence by Parliament-appointed auditors, deals only in aggregate numbers to avoid revealing confidential information.
It reported that during 2002, the average net packer margin per head slaughtered was $42.73. During the next 12 months after government BSE aid money began to flow, the average net margin per head soared to between four and six times the 2002 average, almost $180 per head in the first half of 2004.
Steckle said in an interview it is clear that packers manipulated the market to their benefit and it went beyond market rules of too much supply chasing too little demand.
"As tax dollars flowed to producers, packers just lowered their price to effectively receive that money on their bottom lines," said Steckle. "We have to figure out a way in future to make sure tax dollars get to the people we are trying to help. The evidence is clear that major corporate profits were being made, sometimes with the help of taxpayer dollars, at a time when farmers were losing enormous amounts."
He repeated earlier charges that the companies were profiteering, even though they were doing nothing illegal.
"I guess it was the market working and it is the way the government allows the market to work," he said. "Everyone makes as much profit as they can. But the situation is different when there is no competition on one side of the equation."
Meijer said he doesn't think anyone is surprised to hear the packers made money.
"We never denied that and in fact we worked very hard to allow the committee and its auditors to have access to as much information as possible," he said.
"At the end of the day the most important message is that there wasn't found that there was any wrongdoing. The market acted the way the market was acting and that's the way an open and free market does operate."
Steckle said the affair also shows how useless the government's competition policy is.
"We have no competition policy, Competition Bureau, in this country that means anything," he said in the interview. "I don't know why we keep it around."
