@prefix vivo: . @prefix edm: . @prefix ns0: . @prefix dcterms: . @prefix skos: . vivo:departmentOrSchool "Business, Sauder School of"@en ; edm:dataProvider "DSpace"@en ; ns0:degreeCampus "UBCV"@en ; dcterms:creator "Osborn, Edward Tryon"@en ; dcterms:issued "2011-07-20T16:35:12Z"@en, "1968"@en ; vivo:relatedDegree "Master of Science in Business - MScB"@en ; ns0:degreeGrantor "University of British Columbia"@en ; dcterms:description """The study was undertaken to describe, analyze, and evaluate the Fraser Valley Fed Beef Industry in relation to the market requirements in the Lower Mainland and Vancouver Island regions of British Columbia. The information necessary to describe, analyze, and evaluate the industry was acquired by a review of the secondary data sources of the Provincial and Federal government agencies, to acquire industry statistics; a survey by personal interview with the majority of the fed beef producers, to acquire information on management techniques; and a financial analysis of a random sample of the feedlot operations, to provide the parameters on which to evaluate the profitability of investment in the industry. The study indicates that the fed beef market in the above regions has increased some 400 percent since 1951. The British Columbia fed beef industry has increased in size in the above period. However, it still only provides approximately 20 percent of the market requirements; with the Fraser Valley industry providing 82 percent of the British Columbia fed beef production. The balance of the market requirements are met by the importation of fed beef slaughter cattle and carcasses mainly from Alberta and to a lesser extent Saskatchewan. The analysis of the input factor markets indicates that the important resources necessary to produce fed beef are available from within the province although the present practices of the ranch industry in marketing the majority of the feeder cattle and calves in a few months of the year increases the difficulty of realizing optimum use of the feedlot facilities. There exists a significant variability in the sizes and types of operations in the Fraser Valley. The majority of the operations are farm feedlots utilizing by-products and pasture supplemented by the purchase of feeder cattle and feed grains from the interior regions of the Province. The manure produced in the feedlot is an important ingredient for use in the cash crop production on many of the farms located on the heavier soil zones. A few larger commercial feedlots exist within the region although the largest operation has a unit capacity of 2500 head of yearling cattle. The majority of the feedlots use barley as the main energy source although there exists a wide diversity in feedstuff ingredients utilized in the feed ration. A discounted benefit-cost ratio analysis of various types and sizes of feedlots would indicate that capital investment in the industry is undesirable investment opportunity at a after tax discount rate of 10 percent. However, the presence of special circumstances, ensures the continuing presence of the industry on the same scale and a moderate increase in the industry in the future under present institutional and economic policies."""@en ; edm:aggregatedCHO "https://circle.library.ubc.ca/rest/handle/2429/36181?expand=metadata"@en ; skos:note "ANALYSIS OF THE FED BEEF INDUSTRY IN THE FRASER VALLEY REGION OF BRITISH COLUMBIA by EDWARD TRYON OSBORN B.S.A., U n i v e r s i t y o f B r i t i s h Columbia, 1963 A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION i n the F a c u l t y of GRADUATE STUDIES We accept t h i s t h e s i s as conforming to the r e q u i r e d standard THE UNIVERSITY OF BRITISH COLUMBIA A p r i l , 1968 In p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t of the r e q u i r e -ments f o r an advanced degree a t the U n i v e r s i t y of B r i t i s h Colum-b i a , I agree t h a t the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and study. I f u r t h e r agree t h a t p e r m i s s i o n f o r exten-s i v e copying of t h i s t h e s i s f o r s c h o l a r l y purposes may be granted by the Head of my Department or by h i s r e p r e s e n t a t i v e s . I t i s understood t h a t copying or p u b l i c a t i o n of t h i s t h e s i s f o r f i n a n -c i a l g a i n s h a l l not be allowed without my w r i t t e n p e r m i s s i o n . E.T. Osborn F a c u l t y of Graduate S t u d i e s The U n i v e r s i t y of B r i t i s h Columbia Vancouver 8, Canada Date: A p r i l , 1968 i ABSTRACT The study was undertaken to describe,..analyse,, and e v a l u -ate the F r a s e r V a l l e y Fed Beef Industry, i n r e l a t i o n to the market requirements i n the Lower Mainland and Vancouver I s l a n d regions of B r i t i s h Columbia. The i n f o r m a t i o n necessary to d e s c r i b e , analyse, and e v a l u -ate the i n d u s t r y was a c q u i r e d by a review of the secondary data sources of the P r o v i n c i a l and F e d e r a l government agencies, to a c q u i r e i n d u s t r y s t a t i s t i c s ; a .survey by p e r s o n a l i n t e r v i e w with the m a j o r i t y of the fed beef producers, to a c q u i r e i n f o r m a t i o n on management techniques;.and a f i n a n c i a l a n a l y s i s of a random sample of the f e e d l o t o p e r a t i o n s , to p r o v i d e the parameters on which to e v a l u a t e the p r o f i t a b i l i t y of investment i n the i n d u s t r y . The study i n d i c a t e s t h a t .the f e d beef market i n the above re g i o n s has i n c r e a s e d some 400 percent s i n c e 1951. The B r i t i s h Columbia fed beef i n d u s t r y has i n c r e a s e d i n s i z e i n the above p e r i o d . However, i t s t i l l o n l y p r o v i d e s approximately 20 percent of the market requirements; w i t h the F r a s e r V a l l e y i n d u s t r y pro-v i d i n g 82 percent of the B r i t i s h Columbia fed b e e f - p r o d u c t i o n . The balance of the market requirements are. met by. the i m p o r t a t i o n of f e d beef s l a u g h t e r c a t t l e and c a r c a s s e s mainly from A l b e r t a and to a l e s s e r e x t e n t Saskatchewan. The a n a l y s i s of the i n p u t f a c t o r markets i n d i c a t e s t h a t the important resources necessary to produce fed beef are a v a i l -a ble from w i t h i n the p r o v i n c e although the p r e s e n t p r a c t i c e s of the ranch i n d u s t r y i n marketing the m a j o r i t y of the feeder c a t t l e and c a l v e s i n a few months of the year i n c r e a s e s the d i f f i c u l t y of r e a l i z i n g optimum use of the f e e d l o t f a c i l i t i e s . There e x i s t s a s i g n i f i c a n t v a r i a b i l i t y i n the s i z e s and types of o p e r a t i o n s i n the F r a s e r V a l l e y . The m a j o r i t y of the o p e r a t i o n s are farm f e e d l o t s u t i l i z i n g by-products and pasture supplemented by the purchase of feeder c a t t l e and feed g r a i n s from the i n t e r i o r r e g i o n s o f the P r o v i n c e . The manure produced i n the f e e d l o t i s an important i n g r e d i e n t f o r use i n the cash crop p r o d u c t i o n on many of the farms„located on the h e a v i e r s o i l zones. A few l a r g e r commercial f e e d l o t s e x i s t w i t h i n the r e g i o n although the l a r g e s t o p e r a t i o n has a u n i t c a p a c i t y of 2500 head of y e a r l i n g c a t t l e . The m a j o r i t y of the f e e d l o t s use b a r l e y as the main energy source although there e x i s t s a wide d i v e r s i t y i n f e e d s t u f f i n g r e d i e n t s u t i l i z e d i n the feed r a t i o n . A d i s c o u n t e d b e n e f i t - c o s t r a t i o a n a l y s i s of v a r i o u s types and s i z e s of f e e d l o t s would i n d i c a t e t h a t c a p i t a l investment i n the i n d u s t r y i s u n d e s i r a b l e investment o p p o r t u n i t y a t a a f t e r tax d i s c o u n t r a t e of 10 percent. However, the presence of s p e c i a l circumstances, ensures the c o n t i n u i n g presence of the i n d u s t r y on the same s c a l e and a moderate i n c r e a s e i n the indus-t r y i n the f u t u r e under prese n t i n s t i t u t i o n a l and economic p o l i c i e s . i i i TABLE OF CONTENTS CHAPTER PAGE I. THE PROBLEM AND THE REGION UNDER STUDY 2 The Problem . 2 Statement of the problem 2 Data c o l l e c t i o n methods 2 L i m i t a t i o n s of the study. 3 O r g a n i z a t i o n of the Report 3 The Region Under Study 4 Climate of the area 5 P o p u l a t i o n of the area . . . 6 I I . ECONOMICS OF THE FED BEEF INDUSTRY 8 Nature of the Demand f o r Beef... 9 C h a r a c t e r i s t i c s of the Supply of Beef 9 Sources of income i n the beef f e e d i n g process 10 Necessary resources f o r the beef f e e d i n g p r o c e s s . . 11 F a c t o r s of L o c a t i o n i n the Fed Beef Industry 13 I n t e r n a l f a c t o r s 15 Cost of producing f e d beef 15 Value o f f e d beef a t the f e e d l o t 17 E x t e r n a l f a c t o r s 19 The P r i c e Making Process 20 Nature o f the North American C a t t l e Market 25 I I I . THE FED BEEF MARKET IN THE SOUTHERN COASTAL REGION OF BRITISH COLUMBIA 27 F a c t o r s A f f e c t i n g Fed Beef Consumption i n the Region 27 i v CHAPTER PAGE Lower Mainland and Vancouver I s l a n d Fed Beef Market . . . 33 S i z e of the market 34 Sources of supply of fed beef . 34 Fed c a t t l e p r i c e s 37 IV. THE INPUT FACTOR MARKETS 40 Feeder C a t t l e 40 Number of feeder c a t t l e produced i n B r i t i s h Columbia 41 Number of c a t t l e produced and f i n i s h e d i n B r i t i s h Columbia 43 Sources of supply w i t h i n B r i t i s h Columbia 45 B r i t i s h Columbia feeder c a t t l e and c a l f exports to the United S t a t e s 4 6 Feeder c a t t l e and c a l v e s marketed to Provinces east of B r i t i s h Columbia : 47 Time of s a l e and p r i c e s of feeder c a t t l e 48 Feed Grains 50 C a p i t a l 5 4 Management and Labor • 5 8 A v a i l a b i l i t y of Slaughter F a c i l i t i e s 59 V. STRUCTURE AND CONDUCT IN THE FRASER VALLEY FED BEEF INDUSTRY : 61 O b j e c t i v e s of the F e e d l o t Entrepreneurs. 6 2 The F r a s e r V a l l e y F e e d l o t s .; 64 Types and s i z e s of f e e d l o t s . . . 64 v CHAPTER PAGE Location of the f e e d l o t s 66 Supply of fed beef from the Fraser V a l l e y fed beef i n d u s t r y ............... 66 C a t t l e purchase and marketing p o l i c i e s 7 0 Feedstuffs used i n f i n i s h i n g stage of the feeding process 7 2 Bedding . 74 Types of Feedlot and C a t t l e Ownership 75 S p e c i a l Advantages of the Region...... 7 5 Methods Used to Reduce Risk and Uncertainty 76 VI.- THE PRODUCTIVITY OF CAPITAL INVESTED IN THE FRASER VALLEY FED BEEF INDUSTRY 80 The P r i c e and Feed Margins 80 Income generated by the p r i c e margin 82 Income derived by the feed margin....... 83 Summation of p r i c e and feed margins 84 The Feedlot Analyses 86 D e s i r a b i l i t y of the investment p r o j e c t s 88 V I I . SUMMARY AND CONCLUSIONS 98 The Market and Supply of Fed C a t t l e . . . 98 A v a i l a b i l i t y of Resources 99 S t r u c t u r e and Conduct i n the Industry 101 D e s i r a b i l i t y of C a p i t a l Investment i n the Industry.. 104 An E v a l u a t i o n of the Future Industry Growth......... 106 BIBLIOGRAPHY. . 109 APPENDIX A. C a l c u l a t i o n of Real Income Per Capita i n Canada\", 1948-1966 1 1 3 v i CHAPTER PAGE APPENDIX B. Per C a p i t a Consumption and P r i c e s o f Beef Pork and Chickens i n Canada, 1947-66 114 APPENDIX C. Estimated Consumption of Choice and Good Grade Beef i n the Lower Mainland and Vancouver I s l a n d Regions 115 APPENDIX D. Channels of Supply of Fed Beef to the Lower Mainland and Vancouver I s l a n d Regional Markets (number of c a t t l e ) 117 APPENDIX E. Monthly Beef C a t t l e P r i c e s a t C a l g a r y and Vancouver, 1962-67 118 APPENDIX F. Estimated Number of Feeder C a t t l e Produced i n B r i t i s h Columbia 121 APPENDIX G. Estimated Number of Good and Choice Type Feeder C a t t l e Produced i n B r i t i s h Columbia... 122 APPENDIX H. Number o f C a t t l e and Calves Shipped to Prov i n c e s East of B r i t i s h Columbia..... 123 APPENDIX I. Movement of Feed Grains i n t o Southern B r i t i s h Columbia f o r the F i s c a l Years, 1963-64 and 1964-65 124 APPENDIX J . Movement of Feed Grains i n t o the Lower Main-land and Vancouver I s l a n d Regions f o r the F i s c a l Year 1964-65 (tons) 125 APPENDIX K. A n a l y s i s of G r a i n P r i c e s a t Vancouver, B r i t i s h Columbia, 1962-67 126 APPENDIX L. P r i c e Margin A n a l y s i s , 1962-67 ; 128 APPENDIX M. C a l c u l a t i o n of Average Feed Cost per Hundred v i i CHAPTER PAGE Pounds of Beef Gain ,129 APPENDIX N. C a l c u l a t i o n of Summation of P r i c e and Feed Margins ....... 133 APPENDIX 0. F e e d l o t Example One Income Statement f o r the S i x Years Ending A p r i l 30, 1967 136 APPENDIX P. F e e d l o t Example Two Income Statement f o r the Six Years Ending May 31, 1967 137 APPENDIX Q. F e e d l o t Example Three Income Statement f o r the S i x Years Ending October 31, 1967 139 APPENDIX R. F e e d l o t Example Four Income Statement f o r the S i x Years Ending November 30, 1967 142 APPENDIX S. F e e d l o t Example F i v e Income Statement f o r the Six Years Ending May 31, 1967 145 APPENDIX T. F e e d l o t Example S i x Income Statement f o r the Six Years Ending November 30, 1967 148 APPENDIX U. F e e d l o t Example Seven Income Statement f o r the Six Years Ending November 30th, 1967... 151 APPENDIX V. F e e d l o t Example E i g h t Income Statement f o r the Six Years Ending J u l y 31,1967 153 v i i i LIST OF TABLES TABLE PAGE I. B r i t i s h Columbia P o p u l a t i o n by Regions -19 65 7 I I . Number and O r i g i n of Choice and Good Grade Beef C a t t l e of B r i t i s h Columbia O r i g i n Slaughtered W i t h i n the Lower Mainland and Vancouver I s l a n d Region, 1962-67 44 I I I . B r i t i s h Columbia O r i g i n of Choice and Good Grade Beef C a t t l e Slaughtered W i t h i n the Lower Main-land and Vancouver I s l a n d Regions, 1966-67 45 IV. B r i t i s h Columbia Feeder C a t t l e and Calves Exported to the United S t a t e s , 1962-67 46 V. Types and S i z e s of Beef F e e d l o t s i n the F r a s e r V a l l e y - 1966 65 VI. Choice and Good Grade C a t t l e Received by the Month at F e d e r a l l y Inspected P l a n t s i n the Lower Main-land Region, 19 66-67 68 V I I . C l a s s and S i z e of Feeder Animal Purchased by the F e e d l o t s , 1966-67 ' 70 V I I I . C a t t l e Purchasing P o l i c y of the F r a s e r V a l l e y Fed Beef Industry, 1966-67 71 IX. C a t t l e Marketing P o l i c y of the F r a s e r V a l l e y Fed Beef Industry 72 X. F e e d s t u f f s Used i n F i n i s h i n g Rations of 28 F r a s e r V a l l e y F e e d l o t s , 1966-67 73 XI. Diseases Encountered i n the F r a s e r V a l l e y Fed Beef Industry • 77 i x TABLE PAGE XII. F e e d l o t Examples to be Analysed 81 X I I I . Operating P o l i c i e s of the F e e d l o t Examples 87 XIV. 1967 Income Statement f o r F e e d l o t Example One 92 XV. Summary of Income Statements, 1962-67, f o r F e e d l o t Example One 94 XVI. Discounted B e n e f i t - C o s t R a t i o s f o r the F e e d l o t Examples 96 X LIST OF FIGURES FIGURE PAGE 1. Per C a p i t a Meat Consumption i n Canada, 1948-66 . 28 2. Canada Choice and Good Grade Beef as a Percentage of T o t a l Graded Beef Slaughter i n Canada, 1948-66 29 3. Real Income Per C a p i t a i n Canada, 1948-66 30 4. Trend of Consumer Expenditures on Fed Beef, 1948-66.... • 32 5. Trend of Consumer Expenditures on Hogs, 1948-66.. 32 6. Trend of Consumer Expenditures on Chickens, 1948-66 33 7. Trend i n Monthly P r i c e s of Choice Grade St e e r s at Calgary Terminal Market, 1962-67 38 8. Trend i n Monthly P r i c e s of Good Feeder S t e e r s a t Cal g a r y Terminal Market, 1962-67...... 49 9. Trend i n Monthly P r i c e s of Feed Grains from the Peace R i v e r D i s t r i c t of B r i t i s h Columbia, 1962-67.... 55 10. L o c a t i o n of F e e d l o t s i n the Lower Mainland Region of B r i t i s h Columbia 67 11. Summation of P r i c e and Feed Margins, 1962-67 85 x i ACKNOWLEDGEMENTS The author i s g r e a t l y indebted to A s s o c i a t e P r o f e s s o r s Dr. S.M. Oberg and Mr. E.R. B l a i n e o f the F a c u l t y o f Commerce and Business A d m i n i s t r a t i o n , the U n i v e r s i t y of B r i t i s h Columbia, Vancouver, B r i t i s h Columbia. T h e i r guidance, h e l p f u l comments, and c r i t i c i s m of the p r e l i m i n a r y d r a f t o f t h i s t h e s i s c o n t r i b u t e d immeasurably to the p r e p a r a t i o n o f the f i n a l d r a f t . S p e c i a l mention i s made of the c o o p e r a t i o n of Mr. H.L. Ford and h i s s t a f f of the L i v e s t o c k P r o d u c t i o n and Marketing Branch, Canada Department of A g r i c u l t u r e a t Vancouver, B r i t i s h Columbia who made a v a i l a b l e the o f f i c e r e c o rds f o r the co m p i l i n g of the i n d u s t r y i n f o r m a t i o n . In a d d i t i o n , s i n c e r e g r a t i t u d e i s expressed t o the F r a s e r V a l l e y f e e d l o t o p e r a t o r s who were w i l l i n g to take the time to answer qu e s t i o n s and make t h e i r records a v a i l a b l e to the w r i t e r . A p p r e c i a t i o n i s expressed to the Economics Branch, Canada Department of A g r i c u l t u r e f o r p e r m i t t i n g the author to use the data he compiled w h i l e employed by the Branch. 1 CHAPTER I THE PROBLEM AND THE REGION UNDER STUDY In 1966 approximately 32,720 head of f a t t e n e d s l a u g h t e r c a t t l e 1 were brought i n t o the Lower Mainland and Vancouver I s l a n d r e g i o n s of B r i t i s h Columbia from A l b e r t a . a n d Saskatche-wan 2 . The c a t t l e were s l a u g h t e r e d i n l o c a l slaughterhouses and the high q u a l i t y b e e f 3 was consumed by l o c a l consumers. The imported c a t t l e r e p resented the feeder c a t t l e production* 4 of Saskatchewan, A l b e r t a , and B r i t i s h Columbia. That i s , B r i t i s h Columbia i s d e f i c i e n t i n the supply of fed beef animals to meet the Lower Mainland and Vancouver I s l a n d consumer requirements f o r high q u a l i t y beef when, i n f a c t , a l a r g e supply of one of the most important i n p u t f a c t o r s - feeder c a t t l e - i s being pro-duced w i t h i n the p r o v i n c e but f i n i s h e d o u t s i d e of the p r o v i n c e . The e x p o r t a t i o n of feeder c a t t l e and i m p o r t a t i o n of fed •'•Fattened s l a u g h t e r c a t t l e i n the r e p o r t are c a t t l e which have been fed to a weight and degree of f l e s h i n g t h a t d e s i g n a t e s them as f i n i s h e d or fed beef c a t t l e and which upon s l a u g h t e r w i l l be graded as Canada Choice or Canada Good under the Canada Grading A c t . 2See Appendix D of the r e p o r t . 3 H i g h q u a l i t y beef or fed beef are d e f i n e d as those beef c a r c a s s e s which are graded Canada Choice and Canada Good under the Canada Grading A c t . ^Feeder c a t t l e are beef animals which are of the age, s i z e , and conformation which w i l l a l l o w them, a f t e r being fed out on h i g h energy r a t i o n s and s l a u g h t e r e d , to become c l a s s e d as high q u a l i t y beef. Feeder c a t t l e and c a l v e s are the main p r o d u c t i o n of the c a t t l e ranch i n d u s t r y . c a t t l e i n t o B r i t i s h Columbia and the f a c t t h a t a fed beef indus-t r y e x i s t s i n B r i t i s h Columbia has r a i s e d q u e s t i o n s as to the extent of the c r o s s t r a n s p o r t a t i o n of beef c a t t l e and the nature of the fed beef i n d u s t r y i n B r i t i s h Columbia, p a r t i c u l a r l y i n the F r a s e r V a l l e y r e g i o n . I. THE PROBLEM Statement of the problem. I t i s the o v e r a l l purpose of t h i s study to i n d i c a t e the nature of the f e d beef i n d u s t r y i n the F r a s e r V a l l e y r e g i o n of B r i t i s h Columbia. The s p e c i f i c o b j e c t i v e s of t h i s study are (1) to i n d i c a t e the s i z e of the market and channels of supply of fed beef c a t t l e i n the Lower Mainland and Vancouver I s l a n d r e g i o n s ; (2) to i n d i c a t e the a v a i l -a b i l i t y of the necessary resources f o r the fed beef i n d u s t r y 5 i n the F r a s e r V a l l e y ; (3) to e x p l a i n the s t r u c t u r e and conduct i n the F r a s e r V a l l e y Fed Beef Industry; (4) to i n d i c a t e the d e s i r -a b i l i t y of i n v e s t i n g c a p i t a l i n beef f e e d l o t f a c i l i t i e s i n the F r a s e r V a l l e y ; and, (5) to e v a l u a t e the present F r a s e r V a l l e y I ndustry w i t h r e s p e c t to i t s f u t u r e growth i n s i z e . Data c o l l e c t i o n methods. The i n f o r m a t i o n r e q u i r e d to i n d i c a t e the nature and s i z e of the product and input f a c t o r markets was a c q u i r e d from the secondary data sources of the 5 F e d Beef Industry i s d e f i n e d to c o n t a i n those f i r m s which feed young beef c a t t l e on r a t i o n s t h a t w i l l allow the f i n i s h e d animals, upon s l a u g h t e r , to be graded under the Canada Grading Act as Canada Choice or Canada Good. The beef produced by the i n d u s t r y w i l l be termed fed beef or high q u a l i t y beef i n the r e p o r t . 3 p r o v i n c i a l and f e d e r a l governments. The i n f o r m a t i o n concerning the s t r u c t u r e and conduct i n the F r a s e r V a l l e y Fed Beef Industry was c o l l e c t e d by p e r s o n a l i n t e r v i e w w i t h the beef f e e d l o t o p e r a t o r s i n the F r a s e r V a l l e y i n the winter and s p r i n g o f 1967. The data necessary to i n d i -cate the d e s i r a b i l i t y o f i n v e s t i n g c a p i t a l i n f e e d l o t f a c i l i t i e s was procured from a random sample of 17 f e e d l o t s i n the F r a s e r V a l l e y . The w r i t e r s t r u c t u r e d and s u p e r v i s e d , where necessary, the f e e d l o t accounts f o r one complete f i n a n c i a l year i n 1966-67. L i m i t a t i o n s of the study. The major concern o f the study i s to d e s c r i b e the fed beef market and supply f a c t o r s of the F r a s e r V a l l e y Fed Beef Industry. No comparisons are made wit h other p r o d u c t i o n areas and the e v a l u a t i o n o f the f u t u r e growth of the i n d u s t r y i s made o n l y i n terms of the f a c t o r s t h a t w i l l most l i k e l y i n h i b i t the growth of the present i n d u s t r y . Only the f e d beef segment of the t o t a l beef market i s analyzed i n the r e p o r t . I t i s f e l t t h a t t h i s segmentation of the t o t a l market i s j u s t i f i a b l e f o r a n a l y s i s purposes because (1) the fed beef s l a u g h t e r amounted to over 50 percent of the t o t a l Canadian beef s l a u g h t e r e d i n 1966 6 and (2) the fed beef product i s promoted, d i s t r i b u t e d , and merchandized d i f f e r e n t l y from other beef products. I I . ORGANIZATION OF THE REPORT 6Canada Department of A g r i c u l t u r e , and Marketing Branch, 19 6 6 Annual Report, Mimeographed. L i v e s t o c k P r o d u c t i o n (Vancouver: 1966) P.3 4 The f i r s t s e c t i o n of the r e p o r t d i s c u s s e s , i n g e n e r a l terms, the p o s i t i o n of the f e d beef i n d u s t r y i n the l i v e s t o c k -meat s e c t o r of the a g r i c u l t u r a l economy and a l s o d i s c u s s e s the i n t e r - f i r m and i n t r a - f i r m r e l a t i o n s h i p s w i t h i n t h i s s e c t o r of the economy t h a t are r e l e v a n t to the fed beef i n d u s t r y . The second s e c t i o n o u t l i n e s the s i z e of the fed beef market i n the Lower Mainland and Vancouver I s l a n d r e g i o n s and i n d i c a t e s the p r e s e n t channels of supply of fed beef i n t o t h i s market. The t h i r d s e c t i o n i n d i c a t e s the a v a i l a b i l i t y of the necessary r e -sources f o r the F r a s e r V a l l e y Fed Beef Industry and d e s c r i b e s the s t r u c t u r e and conduct i n the present Industry. The f o u r t h s e c t i o n i n d i c a t e s the d e s i r a b i l i t y of i n v e s t i n g c a p i t a l i n feed-l o t f a c i l i t i e s and e v a l u a t e s the p o s s i b i l i t y of f u t u r e growth i n the i n d u s t r y . I I I . THE REGION UNDER STUDY The F r a s e r V a l l e y - Lower Mainland r e g i o n i s c o n s i d e r e d a l o g i c a l r e g i o n to analyze with r e s p e c t to the fed beef indus-t r y because of the f a v o u r a b l e c l i m a t e , p r o x i m i t y to a l a r g e con-sumer market, a v a i l a b l e s l a u g h t e r and t r a n s p o r t a t i o n f a c i l i t i e s and the f a c t t h a t p r e s e n t l y more c a t t l e are \" f i n i s h e d \" i n the r e g i o n than i n any other r e g i o n of B r i t i s h Columbia 7. The F r a s e r V a l l e y - Lower Mainland r e g i o n i s l o c a t e d i n the southwestern p o r t i o n of B r i t i s h Columbia and extends from \" i n f o r m a t i o n r e g a r d i n g the a v a i l a b i l i t y of s l a u g h t e r and t r a n s p o r t a t i o n f a c i l i t i e s and the number of c a t t l e \" f i n i s h e d \" i n the p r o d u c t i o n areas of B r i t i s h Columbia i s presented i n Chapter IV of the r e p o r t . 5 Hope to Vancouver. I t i s bordered on the n o r t h and the east by the c o a s t mountain range and to the south by the Canada - United S t a t e s I n t e r n a t i o n a l Boundary. I t i s a r e l a t i v e l y f l a t area t h a t c o n t a i n s a r i c h a l l u v i a l s o i l . On t h i s are based h i g h l y p r o d u c t i v e d a i r y , v e g e t a b l e , and small f r u i t i n d u s t r i e s , to mention o n l y the more important a g r i c u l t u r a l i n d u s t r i e s . Climate of the r e g i o n . The importance of a f a v o u r a b l e c l i m a t e i n c a t t l e p r o d u c t i o n i s s e l f e v i d e n t . Severe h i g h and low temperatures w i l l i n c r e a s e the feed necessary to maintain and f a t t e n a beef animal and very dry or very wet c o n d i t i o n s w i l l a l s o i n c r e a s e the feed requirement. In comparison with other a g r i c u l t u r a l p r o d u c t i o n areas of B r i t i s h Columbia the F r a s e r . V a l l e y r e g i o n has a warmer winter and a c o o l e r summer. The temperature a t Ladner v a r i e s from an average of 37° Fahren-h e i t i n January to a h i g h average of 62° F a h r e n h e i t i n J u l y with an annual mean temperature of 49° F a h r e n h e i t . In c o n t r a s t , A s h c r o f t and Kamloops have an average January temperature of 25° and 23° F a h r e n h e i t , J u l y temperatures of 72° and 71° F a h r e n h e i t and a mean annual temperature of 49° and 48° r e s p e c t i v e l y 8 . The F r a s e r V a l l e y has a longer growing p e r i o d than any other a g r i -c u l t u r a l p r o d u c t i o n area i n the i n t e r i o r r e g i o n 9 . However, the F r a s e r V a l l e y does have a wetter c l i m a t e than any of the other 8 B r i t i s h Columbia Department of A g r i c u l t u r e , Climate of B r i t i s h Columbia, ( V i c t o r i a : Queens P r i n t e r , 1966) P. 6. 9Bureau of Economics and S t a t i s t i c s , Department of I n d u s t r i a l Development, Trade and Commerce, Regional Index of B r i t i s h Columbia, ( V i c t o r i a : Queens P r i n t e r , 1966). 6 a g r i c u l t u r a l r e g i o n s i n the B r i t i s h Columbia I n t e r i o r . The mean annual p r e c i p i t a t i o n a t Ladner and C h i l l i w a c k i s 36.9 and 66.92 inches r e s p e c t i v e l y w i t h a s n o w f a l l of 15.7 and 33.4 inches r e -s p e c t i v e l y . In c o n t r a s t A s h c r o f t and Kamloops have a mean annual p r e c i p i t a t i o n of 7.55 and 9.47 inches r e s p e c t i v e l y w i t h a snow-f a l l o f 20.9 and 26.7 inches r e s p e c t i v e l y 1 0 . P o p u l a t i o n of the r e g i o n . The p o p u l a t i o n of the d i f f e r e n t r e g i o n s i n B r i t i s h Columbia i s presented i n Table I. I t can be seen t h a t the F r a s e r V a l l e y - Lower Mainland r e g i o n c o n t a i n e d 54.6 percent of the B r i t i s h Columbia p o p u l a t i o n of 1,873,674 persons i n 1 9 6 6 1 1 . I t should a l s o be noted t h a t the per c a p i t a income of persons l i v i n g i n the F r a s e r V a l l e y - Lower Mainland r e g i o n i s h i g h e r than most other r e g i o n s of B r i t i s h Columbia due to the l a r g e r c o n c e n t r a t i o n of secondary i n d u s t r i e s and a s s o c i a t e d s e r -v i c e i n d u s t r i e s 1 2 . The Vancouver I s l a n d r e g i o n a c q u i r e s the m a j o r i t y of i t s f e d beef requirements through the agencies l o c a t e d i n Vancouver. Th e r e f o r e , the requirements i n t h i s r e g i o n can be added to the F r a s e r V a l l e y - Lower Mainland requirements f o r the a n a l y s i s pur-poses. The p o p u l a t i o n of the above two r e g i o n s amounted to 72 percent of B r i t i s h Columbia's p o p u l a t i o n i n 1966. 1 0 B r i t i s h Columbia Department of A g r i c u l t u r e , op. c i t . , P. 30. 1 d o m i n i o n Bureau of S t a t i s t i c s , 1966 Census of Canada, Volume I, June 1967, (Ottawa: Queens P r i n t e r , 1967)7\" 1 2 B r i t i s h Columbia Bureau of Economics and S t a t i s t i c s , Department of I n d u s t r i a l Development, Trade and Commerce; S a l a r y and Wage Rate Survey 1966; ( V i c t o r i a : Queens P r i n t e r , 1966) . 7 TABLE 1 BRITISH COLUMBIA POPULATION BY REGIONS - 1966 Region Canada Census D i v i s i o n Number 1966 P o p u l a t i o n Percent of T o t a l P o p u l a t i o n (persons) (percent) E a s t Kootenay 1 36,687 2.0 West Kootenay 2 77,866 4.2 Okanagan -Similkameen -Boundary 3 105,759 5.6 Lower Mainland 4 1,021,791 54.6 Vancouver I s l a n d , 5 333,951 17.8 Shuswap - C h i l c o t i n 6 81,180 4.3 Lower Coast 7 23,004 1.2 C e n t r a l I n t e r i o r 8 103 ,767 5.5 Northwestern B.C. 9 48,265 2.6 Peace R i v e r 10 41,404 2.2 TOTAL 1,873 ,674 100.0 Source: Dominion Bureau of S t a t i s t i c s , 1966 Census of Canada, Volume I, June 1967, (Ottawa: Queens P r i n t e r , 1967). 8 CHAPTER I I ECONOMICS OF THE FED BEEF INDUSTRY The Fed Beef Industry i s an i n t e g r a l p a r t of the L i v e -stock-Meat I n d u s t r y 1 . The passage of c a t t l e ownership through a t y p i c a l beef i n d u s t r y marketing channel i s rep r e s e n t e d i n the f o l l o w i n g i l l u s t r a t i o n . L i v e s t o c k L i v e s t o c k L i v e s t o c k Meat Producer\"\" Feeder Slaughterer\"\" R e t a i l e r C o n s u m e r FIGURE I THE LIVESTOCK-MEAT INDUSTRY MARKETING CHANNEL The m a j o r i t y of beef c a t t l e pass through the f i v e steps of the above marketing channel. Some beef animals such as young c a l v e s f o r v e a l or c r i p p l e d cows and b u l l s may bypass the l i v e s t o c k feeder and pass d i r e c t l y from the producer to the s l a u g h t e r e r . The Fed Beef Industry c o n t a i n s the fi r m s t h a t are termed \" L i v e s t o c k Feeder\" i n the above diagram. The f u n c t i o n of the f i r m s i n the i n d u s t r y i s to f a t t e n c a t t l e f o r s l a u g h t e r . The fir m s a c q u i r e beef type c a t t l e from ranches and farms and p l a c e the c a t t l e on a hi g h energy r a t i o n f o r a p e r i o d from two to s i x months. The m a j o r i t y of the f e e d l o t f i r m s feed y e a r l i n g t o two 1The Livestock-Meat Industry c o n t a i n s those f i r m s t h a t produce, s l a u g h t e r , and r e t a i l the products and by-products of sheep, hogs, and c a t t l e . 9 year o l d c a t t l e f o r the high q u a l i t y beef consumer market. A m i n o r i t y of the f i r m s feed aged cows and b u l l s f o r the consumer market although these animals may be fed from time to time i n any f e e d l o t . H i s t o r i c a l l y the beef f e e d i n g a c t i v i t y was combined with the ranch p r o d u c t i o n a c t i v i t y i n the same f i r m e n t i t y but the change i n the consumer p r e f e r e n c e to demand a l a r g e r p r o p o r t i o n of h i s beef d i e t as high q u a l i t y beef and the i n c r e a s e d s p e c i a l -i z a t i o n t h a t was necessary to b r i n g about the i n c r e a s e d supply, r e s u l t e d i n the formation of the Fed Beef Industry. I. NATURE OF THE DEMAND FOR BEEF The demand 2 f o r b e e f . i s a f f e c t e d by many s h o r t and long run f a c t o r s . The most important f a c t o r s a f f e c t i n g the r e a l demand f o r beef per c a p i t a , i n the long run, have been changes i n r e a l income per c a p i t a , changes i n consumers' p r e f e r e n c e s , e a t i n g h a b i t s and n u t r i t i o n a l knowledge, and changes i n s u p p l i e s and p r i c e s of s u b s t i t u t e products. The important s h o r t run f a c t o r s are h o l i d a y s , Lent, weather, f a i r s , and e x h i b i t i o n s 3 . I I . CHARACTERISTICS OF THE SUPPLY OF BEEF The supply of beef depends upon the a v a i l a b i l i t y of the a p p r o p r i a t e q u a n t i t y and q u a l i t y of i n p u t f a c t o r s to produce the q u a l i t y of beef product demanded and the p o s s i b i l i t y f o r the 2Demand i s used here to mean the v a r i o u s q u a n t i t i e s of beef t h a t the consumers w i l l take o f f the market a t a l l p o s s i b l e a l t e r n a t i v e p r i c e s , other t h i n g s being equal. 3Working, Elmer J . , Demand f o r Meat, (The U n i v e r s i t y of Chicago P r e s s , Chicago, I l l i n o i s , 1954) p. 80. 10 beef f e e d i n g entrepreneurs to a c q u i r e a s a t i s f a c t o r y r e t u r n on t h e i r c a p i t a l investment. Sources of Income i n the Beef Feeding Process Income to d e f r a y the i n d i r e c t and f i x e d c o s t f a c t o r s of p r o d u c t i o n are d e r i v e d from two sources i n the beef f e e d i n g process. One source i s the net i n c r e a s e i n v a l u e of the weight of beef p l a c e d i n t o the f e e d l o t due to the f l u c t u a t i o n s i n the c a t t l e market over the p e r i o d the c a t t l e are i n the f e e d l o t and the change i n market c l a s s i f i c a t i o n of the animals from feeder c a t t l e t o f i n i s h e d c a t t l e . T h i s income source i s computed by m u l t i p l y i n g the purchase weight of the feeder c a t t l e by the d i f f e r e n c e between the s e l l i n g p r i c e and the purchase p r i c e per u n i t o f beef. The d i f f e r e n c e between the s e l l i n g p r i c e and the purchase p r i c e per u n i t of beef i s c a l l e d the p r i c e margin. The second source of income i s d e r i v e d from the i n c r e a s e i n val u e of the feed f ed to the c a t t l e i n the f e e d l o t . The income from t h i s source i s computed by m u l t i p l y i n g the g a i n i n weight i n the f e e d l o t by the d i f f e r e n c e between the s e l l i n g p r i c e and the feed c o s t per u n i t of beef g a i n . The d i f f e r e n c e between the s e l l i n g p r i c e and the feed c o s t per u n i t of beef g a i n i s c a l l e d the feed margin. The f e e d l o t entrepreneur a n t i c i p a t e s t h a t the income d e r i v e d from the p r i c e and feed m a r g i n s 5 w i l l be s u f f i c i e n t to 4The g a i n i n weight i s the d i f f e r e n c e between the s e l l i n g weight and the purchase weight of the c a t t l e . 5 I n some l o c a l i t i e s the value of the manure and bedding w i l l be higher than i t s c o s t and c o n t r i b u t e income to help d e f r a y p r o d u c t i o n c o s t s . cover the i n d i r e c t o p e r a t i n g c o s t s and p r o v i d e a s a t i s f a c t o r y r e t u r n on the i n v e s t e d c a p i t a l over the investment p e r i o d . In-deed i n the year to year o p e r a t i o n of the f e e d l o t i t i s most probable t h a t adverse f l u c t u a t i o n s i n the c a t t l e market and/or i n e f f i c i e n c e s i n the f e e d l o t o p e r a t i o n s cause the p r i c e margin or the feed margin to be a negative q u a n t i t y f o r p a r t of the year, however, as long as both margins are not negative a t the same time and/or the n e g a t i v e margin i s not so l a r g e as to cause bankruptcy of the f i r m , the l o s s e s o c c u r i n g i n one year can be recovered i n other years of higher than average p r i c e and/or feed margins. Necessary Resources f o r the Beef Feeding Process Feeder c a t t l e and feed. B a s i c to the development of beef c a t t l e f e e d i n g e n t e r p r i s e s i n any g e o g r a p h i c a l area i s the con-s i s t e n t supply of the a p p r o p r i a t e type, s i z e , and age of young beef c a t t l e . In a d d i t i o n a c o n s i s t e n t supply of good q u a l i t y feed g r a i n s must be a v a i l a b l e . I f the c a t t l e and feed g r a i n s are not a v a i l a b l e from the immediate area of the c a t t l e f e e d i n g o p e r a t i o n s then e f f i c i e n t t r a n s p o r t a t i o n f a c i l i t i e s must be a v a i l a b l e to t r a n s p o r t the r e s o u r c e s from the area of supply to the f e e d l o t . Management. Another resource t h a t i s v i t a l to the e x i s -tence of c a t t l e f e e d i n g o p e r a t i o n s i s the a v a i l a b i l i t y of the a p p r o p r i a t e management. T h i s i s an i n t a n g i b l e r e s o u r c e , com-posed of s k i l l s and a b i l i t i e s , which are a c q u i r e d through t r a i n i n g and experience. I t i s d i f f i c u l t to d e f i n e and i d e n t i f y , 12 and the q u a l i t y and q u a n t i t y of t h i s resource which i s a v a i l a b l e i n any area i s hard to measure. I t i s l i k e l y however, t h a t the management knowledge can be developed by l i v e s t o c k producers, buyers and handlers of c a t t l e , and others who a v a i l themselves of o p p o r t u n i t i e s to develop the necessary p r a c t i c a l knowledge. The management a b i l i t i e s necessary f o r the o p t i m a l oper-a t i o n of the f e e d l o t can be d i v i d e d i n t o two areas. On one hand the person must be able to e f f e c t i v e l y u t i l i z e the e x i s t i n g market i n f o r m a t i o n and have the thorough knowledge of beef c a t t l e so t h a t he can maximize the p r i c e margin; given.the e x i s t i n g s i z e , type, and method of f e e d l o t o p e r a t i o n , by purchasing the r i g h t type and s i z e and age of c a t t l e at the a p p r o p r i a t e p r i c e s . On the other hand the manager must have the a b i l i t y t o b r i n g t o -gether the necessary p r o d u c t i o n inputs a t c o s t s t h a t w i l l maxi-mize the feed margin g i v e n the e x i s t i n g feed and c a t t l e markets and method of f e e d l o t o p e r a t i o n . The o p t i m a l o p e r a t i o n of the f e e d l o t w i l l depend upon management's a b i l i t y to a c q u i r e the necessary people to c a r r y out the above investment and p r o d u c t i o n o p e r a t i o n s or undertake the management of the complete o p e r a t i o n h i m s e l f . C a p i t a l . C a p i t a l i s a very necessary resource f o r c a t t l e f e e d i n g e n t e r p r i s e s . The c a p i t a l must be a v a i l a b l e f o r the s h o r t term i n v e n t o r y requirements to c a r r y the c o s t s of the c a t t l e and feed w h i l e the f e e d l o t i s o p e r a t i n g and c a p i t a l must be a v a i l a b l e f o r long term commitments f o r f e e d l o t f a c i l i t i e s . Data on c a p i t a l a v a i l a b i l i t y are not r e a d i l y o b t a i n a b l e but there i s evidence t h a t many i n d i v i d u a l s and i n s t i t u t i o n s are i n t e r e s t e d i n i n v e s t i n g i n c a t t l e f e e d i n g i n Canada. The growth of the c a t t l e f e e d i n g i n d u s t r y i n Canada has come about through the investment of c a p i t a l by farmers, c a t t l e buyers, banks, v e t e r -i n a r i a n s , feed d e a l e r s , meat packers, and other businessmen. Whether or not the c a p i t a l w i l l be a v a i l a b l e to f e e d i n g e n t e r -p r i s e s i n any one g e o g r a p h i c a l area w i l l depend upon the i n -v e s t o r s confidence i n the a b i l i t y of the f e e d l o t managers to e c o n o m i c a l l y operate a f e e d i n g e n t e r p r i s e i n the area. Labor. A f i f t h r e s o u r c e t h a t may be important to the c a t t l e f e e d i n g e n t e r p r i s e i n a r e g i o n i s the a v a i l a b i l i t y of good q u a l i t y l a b o r f o r the f e e d l o t o p e r a t i o n . The h i g h l y mech-an i z e d modern o p e r a t i o n s t i l l r e q u i r e s some la b o r to operate the f e e d l o t . However, the q u a l i t y of the l a b o r must be h i g h because of the s i g n i f i c a n t amount of c a p i t a l i n v e s t e d i n the o p e r a t i n g machinery, c a t t l e and feed, and the n e c e s s i t y of a c q u i r i n g u n i -f o r m i t y and conformity i n the f e e d i n g p r o c e s s . Other res o u r c e s w i l l a l s o be r e q u i r e d to develop a c a t t l e f e e d i n g i n d u s t r y i n any g e o g r a p h i c a l r e g i o n . However, these res o u r c e s are of secondary importance and no problems are a n t i c i -pated i n a c q u i r i n g them i f the above f i v e r esources are a v a i l a b l e i n the a p p r o p r i a t e q u a n t i t y and q u a l i t y . I I I . FACTORS OF LOCATION IN THE FED BEEF INDUSTRY In d i s c u s s i n g the economic f a c t o r s t h a t are important i n the l o c a t i o n of c a t t l e f e e d i n g e n t e r p r i s e s , i t i s important to d i f f e r e n t i a t e between f e e d i n g e n t e r p r i s e s based on p u r e l y l o c a l r e s o u r c e s , and a f e e d i n g i n d u s t r y which r e q u i r e s an i n t e r -14 area t r a n s f e r of r e s o u r c e s . Many areas have l o c a l l y produced g r a i n , roughage, and feeder c a t t l e t h a t form a b a s i s f o r f e e d i n g some c a t t l e . The f e e d i n g i n d u s t r y we are concerned w i t h here i s t h a t p a r t o f the fe e d i n g i n d u s t r y t h a t must r e l y on the inshipment o f a s u b s t a n t i a l volume of resources from other areas. I t may or may not i n c l u d e the outshipment of fed beef. These a l t e r n a t i v e cases e x i s t : (a) An area has g r a i n but i s d e f i c i e n t i n c a t t l e , and t h e r e f o r e , imports feeder c a t t l e . (b) An area has c a t t l e but i s d e f i c i e n t i n g r a i n , and t h e r e f o r e ships i n g r a i n . (c) An area may l a c k c a t t l e and g r a i n and import both. The c h o i c e between the f i r s t two a l t e r n a t i v e s hinges l a r g e l y on the q u e s t i o n of whether i t i s more economical to s h i p g r a i n to c a t t l e or the c a t t l e to the g r a i n . T h i s p o i n t may be emphasized by n o t i n g t h a t even an e f f i c i e n t process o f feed c o n v e r s i o n i n c a t t l e f e e d i n g r e q u i r e s about 7 pounds of feed ( t o t a l d i g e s t i b l e n u t r i e n t e q u i v a l e n t ) per pound of g a i n . G r a i n would comprise approximately 80 percent, or approximately 5.6 pounds, of the 7 pounds of feed necessary per pound of g a i n i n the f i n i s h phase of f a t t e n i n g s t e e r s . The t h i r d case i m p l i e s t h a t other l o c a t i o n a l aspects such as f i n a l market, c l i m a t e , or other f a c t o r s may be more important than the l o c a t i o n of the b a s i c r e s o u r c e s . The comparison of the r e l a t i v e economic advantage between areas can be summarized under two g e n e r a l r e l a t i o n s h i p s . The f i r s t i s the c o s t per one hundred pounds of c a r c a s s weight of producing fed beef, and the second i s the v a l u e of t h a t one hundred pounds of fed beef a t the p o i n t of f e e d i n g . The q u a l i t y , age, sex and weight, and source of feeder c a t t l e a l l have an equal e f f e c t on both the c o s t of f e e d i n g and the c a r c a s s v a l u e . I n t e r n a l F a c t o r s The f a c t o r s a f f e c t i n g the c o s t of producing one hundred pounds of fed beef are the c o s t of feeder c a t t l e d e l i v e r e d to the f e e d l o t and the c o s t of a hundred pounds of g a i n . The c o s t of the feeder c a t t l e w i l l depend somewhat on the degree of con-c e n t r a t i o n of f e e d i n g i n the area and a l s o the p r o x i m i t y of the r e g i o n to a v a i l a b l e s u p p l i e s of feeder c a t t l e . As an area ex-pands i t s f e e d i n g i n d u s t r y , i t must draw feeder c a t t l e from a wider area. Thus, the c o s t of feeder c a t t l e w i l l tend to i n -crease due to the higher procurement c o s t s . Cost of producing fed beef. The c o s t of a hundred pounds of gain i n weight i s i n t u r n a f u n c t i o n of the age and h e r e d i t a r y c h a r a c t e r i s t i c s of the feeder c a t t l e , the c o s t of the feed mix, the c l i m a t e of the r e g i o n , the non-feed c o s t s of the f e e d l o t and the managerial a b i l i t y o f the f e e d l o t o p e r a t o r . The c o s t of the feed mix i n an area w i l l r e p r e s e n t the advantage or disadvantage of t h a t area due to the a v a i l a b i l i t y of g r a i n . The feed mix w i l l be the lowest i n the areas of concentrated feed g r a i n p r o d u c t i o n and higher i n areas l a c k i n g i n l o c a l p r o d u c t i o n of feed g r a i n s . An abundance of l o c a l l y produced roughage may reduce feed c o s t s somewhat i n c e r t a i n areas. However, the c o s t of feed mix i n the f i n i s h i n g phase of f e e d i n g w i l l depend p r i m a r i l y on the c o s t 16 of g r a i n . The c o s t of the feed mix w i l l probably i n c r e a s e somewhat with an i n c r e a s e i n the degree of c o n c e n t r a t i o n of f e e d i n g i n an area. As an area expands the s i z e of i t s f e e d i n g i n d u s t r y , i t w i l l have to draw g r a i n from a l a r g e r area. The c l i m a t e of the r e g i o n a f f e c t s the c o s t of g a i n i n v a r i o u s ways. C a t t l e r e q u i r e more energy f o r body heat and maintenance i n severe c o l d . In severe hot humid weather, the r a t e of g a i n may be reduced. Areas of heavy r a i n f a l l may en-counter problems with mud. The e f f e c t of c l i m a t e may be o f f s e t with the c o n s t r u c t i o n of the a p p r o p r i a t e f a c i l i t i e s , but t h i s i s r e f l e c t e d in. higher overhead c o s t s and g r e a t e r r i s k s because of the higher f i x e d c o s t s r e l a t i v e to other areas. Unfortun-a t e l y , complete data to r e f l e c t the r o l e of c l i m a t e on feed c o s t s i s not a v a i l a b l e . The non-feed c o s t s of the f e e d l o t s w i l l depend to a c o n s i d e r a b l e extent on the nature of the o r g a n i z a t i o n of the c a t t l e f e e d i n g i n d u s t r y i n the r e g i o n . A f e e d i n g i n d u s t r y based on small s c a l e farm f e e d l o t f e e d i n g e n t e r p r i s e s w i l l have e n t i r e l y d i f f e r e n t non-feed c o s t s than an i n d u s t r y based on l a r g e s c a l e mechanical f e e d i n g o p e r a t i o n s . Non-feed c o s t s vary c o n s i d e r a b l y with the s c a l e of f e e d i n g i n the mechanized type of f e e d i n g i n d u s t r y . Once the step i s made from \"hand\" f e e d i n g to mechanized f e e d i n g , economies of s c a l e are i n f a v o r of ex-panding the f e e d i n g o p e r a t i o n to a s u b s t a n t i a l e n t e r p r i s e . Non-feed c o s t s i n a s m a l l mechanized o p e r a t i o n may be t r i p l e o f what they are i n a l a r g e s c a l e f e e d l o t 6 . 6 F o r f u l l d i s c u s s i o n of the matter see S.H. Logan, 17 The managerial a b i l i t y o f the f e e d l o t operator w i l l , of course, be a f a c t o r a f f e c t i n g the e f f i c i e n c y of the fe e d i n g oper-a t i o n . Since management i s a t r a n s f e r a b l e commodity, the a v a i l -a b i l i t y and c o s t of s k i l l e d management i s not n e c e s s a r i l y depen-dent on the l o c a t i o n o f the f e e d i n g i n d u s t r y . But management c o s t per u n i t of fed beef produced may be dependent on the o r g a n i z a t i o n of the c a t t l e f e e d i n g i n d u s t r y i n a r e g i o n . Value of fed beef a t the f e e d l o t . The second g e n e r a l r e l a t i o n s h i p mentioned above - the value o f t h a t one hundred pounds of f e d beef a t the p o i n t o f fe e d i n g - i s a f f e c t e d by the l o c a t i o n o f the consuming c e n t e r s and the o r g a n i z a t i o n of the fed beef i n d u s t r y . The value of fed c a t t l e a t the f e e d l o t i s l a r g e l y a r e s u l t of t r a n s p o r t a t i o n c o s t s . Given the value o f a cho i c e grade beef c a r c a s s a t a major market p o i n t , the value of c h o i c e grade c a r c a s s a t the f e e d l o t w i l l be the major market p o i n t value l e s s the t r a n s p o r t a t i o n and ha n d l i n g c o s t s between the major market p o i n t and the l o c a l s l a u g h t e r p l a n t l e s s the t r a n s p o r t a t i o n c o s t and s e l l i n g c o s t s between the f e e d l o t and the s l a u g h t e r p l a n t , assuming the value of the by-products j u s t o f f -sets the c o s t o f s l a u g h t e r i n g . The l a r g e s c a l e type of fe e d i n g i n d u s t r y has some s e l l i n g advantages over the i n d u s t r y t h a t i s based on small s c a l e farm feeding.. The l a r g e f e e d l o t operator u s u a l l y has b e t t e r market \"Economics of Scale i n C a t t l e Feeding\", Supplement No. 3 to T e c h n i c a l Study No. 1, O r g a n i z a t i o n and Competition i n the L i v e s t o c k and\" Meat Industry, N a t i o n a l Commission on Food Marketing, June 1966. 18 i n f o r m a t i o n a t the f e e d l o t l o c a t i o n , which i n c r e a s e s the b a r g a i n -i n g power of the l a r g e s c a l e f e e d l o t o p e r a t o r i n h i s b a r g a i n i n g over the p r i c e of fed c a t t l e with the buyers. Buyers can cover more c a t t l e at l e s s c o s t i n a concentrated area of l a r g e s c a l e f e e d i n g and t h e r e f o r e can a f f o r d to pay h i g h e r p r i c e s . In a d d i t i o n a buyer can narrow the range of u n c e r t a i n t y as to grade, y i e l d , and b r u i s e damage from a l a r g e s c a l e f e e d l o t because he i s r e p e a t e d l y buying c a t t l e from the f e e d l o t and i s more aware of the type of c a t t l e the f e e d l o t process i s t u r n i n g out. In summary the important economic f a c t o r s to be c o n s i d -ered i n the l o c a t i o n of a c a t t l e f e e d i n g i n d u s t r y are numerous and because c o s t s a r i s e from a number of i n p u t s , a s i n g l e ad-vantage must be g r e a t indeed i f an area hopes to develop a f e e d i n g i n d u s t r y on t h a t b a s i s alone. As has been noted i n a p r e v i o u s s e c t i o n of the r e p o r t , the entrepreneurs' o b j e c t i v e , f o r combining the necessary r e -sources i n the a p p r o p r i a t e l o c a t i o n , i s to r e a l i z e a s a t i s f a c t o r y r e t u r n to h i s management, l a b o r , and investment over the i n v e s t -ment p e r i o d f o r the f e e d l o t o p e r a t i o n . The necessary resources and the economic f a c t o r s a f f e c t i n g the employment of these r e -sources have been d i s c u s s e d by l o o k i n g on the f e e d l o t e n t e r p r i s e from an i n t e r n a l view p o i n t . As r e l a t e d to the supply of fed beef by the p a r t i c u l a r r e g i o n to s a t i s f y the demand f o r the product i t can be seen t h a t the supply w i l l be a f f e c t e d from the q u a n t i t y and q u a l i t y of the resources employed i n the f e d beef p r o d u c t i o n , the o r g a n i z a t i o n and management of these r e -sources and methods of technology used i n the p r o d u c t i o n . 19 E x t e r n a l F a c t o r s In a d d i t i o n , e x t e r n a l f a c t o r s such as the changing s p e c i -f i c a t i o n s f o r beef and the n a t i o n a l a g r i c u l t u r a l p o l i c y w i l l a l s o a f f e c t the q u a n t i t y of fed beef s u p p l i e d by the c a t t l e f e e d i n g e n t e r p r i s e s i n any r e g i o n . That i s , the a b i l i t y of the f e e d i n g e n t e r p r i s e s i n a r e g i o n to conform to a change i n type and c o n d i t i o n of fed beef r e q u i r e d by the consumer w i l l be depen-dent upon i t s a b i l i t y t o a c q u i r e the necessary change i n r e -sources a t economical p r i c e s and to r e a l i g n the methods and technology used i n the p r o d u c t i o n of fed beef. Changes i n the n a t i o n a l a g r i c u l t u r a l p o l i c y may have a profound e f f e c t on a r e g i o n to economically supply f e d beef. Since t r a n s p o r t a t i o n r a t e s are under governmental c o n t r o l a change i n the r a t e s thereby changing the advantage or disadvan-tage of an area to supply fed beef to a p a r t i c u l a r market i s an obvious example of the e f f e c t of n a t i o n a l a g r i c u l t u r a l p o l i c y on the a b i l i t y of an area to supply fed beef to the p a r t i c u l a r markets. The economic f a c t o r s a f f e c t i n g supply of fed beef are i n s e p a r a b l e i n the i n f l u e n c e they have on the supply of fed beef from c a t t l e f e e d i n g e n t e r p r i s e s i n a p a r t i c u l a r r e g i o n to a s p e c i f i e d consumer market. In l a t e r s e c t i o n s of the r e p o r t the i n f l u e n c e s the above f a c t o r s have on the supply of fed beef to the Lower B r i t i s h Columbia Mainland and Vancouver I s l a n d markets by c a t t l e f e e d i n g e n t e r p r i s e s l o c a t e d i n the r e g i o n w i l l be d i s c u s s e d . The f a c t o r s a f f e c t i n g demand and supply of fed beef have 20 been put f o r t h i n t h i s chapter. I t now remains to d i s c u s s the process by which the p r i c e s are determined as the fed beef pro-duct produced by the f e e d l o t s , i s t r a n s f e r r e d through the i n s t i -t u t i o n a l i n t e r m e d i a r i e s to the f i n a l consumer. I t should be noted at the o u t s e t , t h a t the a c t u a l p r i c e determined at any l o c a t i o n i n the marketing sequence between two opposing p a r t i e s can be analyzed i n a manner analogous to Edgeworth's i n d i f f e r e n c e curve a n a l y s i s of b a r t e r 7 . The crux of the i n d i f f e r e n c e a n a l y s i s i s t h a t the a c t u a l f i n a l p r i c e i s i n determinate, but w i l l be somewhere along the c o n t r a c t curve, the a c t u a l l o c a t i o n on the c o n t r a c t , being c o n t i n g e n t on the balance of b a r g a i n i n g power between the two opposing p a r t i e s . IV. THE PRICE MAKING PROCESS H i s t o r i c a l l y the c e n t r a l t e r m i n a l markets r e c e i v e d and handled the bulk of the s l a u g h t e r c a t t l e . The g e n e r a l use of r a i l t r a n s p o r t a t i o n to move c a t t l e brought about the development of the c e n t r a l t e r m i n a l markets at the few l a r g e r a i l r o a d cen-t e r s . The producers brought t h e i r c a t t l e i n t o the c e n t r a l term-i n a l market and s o l d the c a t t l e through commission f i r m s . The m a j o r i t y of the buyers used the markets to purchase most of t h e i r s l a u g h t e r c a t t l e requirements. These c e n t r a l t e r m i n a l markets, wi t h the c o n c e n t r a t i o n of both supply and demand f o r c a t t l e came g e n e r a l l y to be regarded as the major p r i c e - d e t e r m i n i n g p o i n t s f o r c a t t l e . Recently the developments of hard s u r f a c e d roads, 7R.H. L e f t w i c h , The P r i c e System and Resource A l l o c a t i o n , T h i r d E d i t i o n , (New York, H o l t , Rinehart & Winston, 1966), P. 75. 21 l a r g e t r u c k s , and expanded market news s e r v i c e s have brought about a d e c e n t r a l i z a t i o n of the marketing of c a t t l e . A r e c e n t study i n A l b e r t a 8 i n d i c a t e d t h a t the m a j o r i t y of the feeder c a t t l e are marketed through l o c a l country a u c t i o n s while s l a u g h t e r c a t t l e were more g e n e r a l l y s o l d through the C e n t r a l Terminal market at C a l g a r y . In a d d i t i o n the study i n d i -c a t e d t h a t there i s an i n c r e a s i n g i n c i d e n c e i n the marketing of c a t t l e d i r e c t to the feeder or s l a u g h t e r e r thereby by-passing the a u c t i o n or c e n t r a l t e r m i n a l market. I t i s no longer f e l t t h a t the t e r m i n a l market i s as e f f e c -t i v e as i t was p r e v i o u s l y i n determining the t r u e r e l a t i o n s h i p between the supply and demand of fed beef a t any p a r t i c u l a r p o i n t i n time due to the changes i n the marketing of fed beef and the r e l a t i v e d e c l i n e of importance of the t e r m i n a l market. S t i l l the most p u b l i c i z e d and widely quoted c a t t l e p r i c e s are those pre-v a i l i n g at the major t e r m i n a l s . Whether a s u f f i c i e n t p r o p o r t i o n of s l a u g h t e r volume now c l e a r s through the t e r m i n a l s f o r these markets to be as e f f e c t i v e i n \" p r i c e making\" as f o r m e r l y , and whether the c a t t l e t h a t do move through the t e r m i n a l s are as r e p r e s e n t a t i v e as f o r m e r l y of the t o t a l run of s l a u g h t e r c a t t l e and whether the t e r m i n a l markets ever were as dominant i n p r i c e making as they were wi d e l y thought to be are moot q u e s t i o n s . Today the t r a n s a c t i o n s a t the wholesale l e v e l i n the s t r u c t u r e of p r i c e s are c o n s i d e r e d more e f f e c t i v e i n i n d i c a t i n g the 8 T r a v e s W. Manning, Country L i v e s t o c k Auctions and Market Performance, A g r i c u l t u r a l E x t e n s i o n T e c h n i c a l B u l l e t i n 1, (Edmonton: U n i v e r s i t y of A l b e r t a , 1967), P. 17. 22 r e l a t i o n s h i p between supply and demand 9. The reasons f o r the change appear to be bes t d i s c u s s e d i n the process of e x p l a i n i n g the p r i c e making pr o c e s s . At any p o i n t i n time the market p r i c e . o f fed beef i s u l t i m a t e l y determined by the purchasing a c t i o n s o f the consumer i n the r e t a i l o u t l e t . The r e t a i l p r i c e w i l l be such t h a t i t a l l o c a t e s the supply of fed beef among buyers, so t h a t a l l who are w i l l i n g to buy, secure the q u a n t i t i e s they d e s i r e . The supply of fed beef m u l t i p l i e d by the average r e t a i l p r i c e per pound, i s the o r i g i n of the aggregate number of d o l l a r s a v a i l a b l e to be d i s t r i b u t e d back through the marketing system t o pay f o r a l l s e r v i c e s performed, i n c l u d i n g payments to the pro-ducers f o r the c a t t l e . The dominant p r i c e determining f o r c e s are thus: (a) the t o t a l market s u p p l i e s and component q u a l i t i e s making up the supply, and (b) the incomes of consumers and t h e i r w i l l i n g n e s s to spend t h e i r income f o r fed beef. I f i t i s assumed f o r the moment, t h a t a t any one time both the supply schedule of fed beef and the consumers' demand schedule f o r fed beef are f i x e d , then c l e a r l y the r e t a i l p r i c e f o r f e d beef i s determined by how much the consumers are w i l l i n g to pay to j u s t c l e a r the market of e x i s t i n g s u p p l i e s . The p r i c e t h a t w i l l j u s t c l e a r the market i s the e q u i l i b r i u m p r i c e . I t re p r e s e n t s the e q u i l i b r i u m between the supply and the demand f o r fed beef a t the p a r t i c u l a r moment. 9H.F. Degr a f f , Beef P r o d u c t i o n and D i s t r i b u t i o n , ( F i r s t E d i t i o n , Norman, U n i v e r s i t y of Oklahoma Press 1960) , Chapter V I I . 23 The p r i c e of c a t t l e - a l l ages of c a t t l e d e s t i n e d to be-come fed beef e v e n t u a l l y - always w i l l be r e l a t e d to t h i s e q u i l i -brium p r i c e a t any p o i n t i n the marketing sequence adju s t e d a c c o r d i n g l y f o r (a) the time f a c t o r and (b) the c o s t of g e t t i n g the c a t t l e from the p o i n t of s a l e on i n t o the r e t a i l d i s p l a y case. T h e r e f o r e , the p r i c e f o r which c a t t l e d e s t i n e d f o r slaugh-t e r w i l l s e l l , at any p o i n t from the ranch on through the market-i n g system, i s very l a r g e l y a d e r i v e d p r i c e . Each p a r t y to the t r a n s a c t i o n has h i s own i d e a of what the e q u i l i b r i u m p r i c e w i l l be f o r the c a t t l e i n q u e s t i o n when they become fed beef at r e -t a i l . Each p a r t y bargains to a c q u i r e the g r e a t e s t revenue f o r the s e r v i c e he performs. In a c t u a l p r a c t i c e , n e i t h e r fed beef s u p p l i e s nor consumer demand are f i x e d f a c t o r s except momentarily. Both are changing from day to day. These changes, p l u s other changes i n g r a z i n g , f e e d i n g , p r o c e s s i n g and marketing c o s t s ; p l u s changes i n the a v a i l a b i l i t y and demand f o r competing products; p l u s the f a c t t h a t many c a t t l e s a l e s are n e g o t i a t e d days, weeks, or months before the animals w i l l become fed beef i n the r e t a i l d i s p l a y case, add c o m p l e x i t i e s to the p r i c e making p r o c e s s . These f a c -t o r s i n d i c a t e t h a t c a t t l e p r i c e s r e f l e c t a n t i c i p a t i o n s of what the e q u i l i b r i u m p r i c e w i l l be a t some l a t e r date. P r i c e making i s a b a r g a i n i n g f u n c t i o n between opposing i n t e r e s t s . Agreement w i l l come about on l y when the s e l l e r r e a l i z e s he can pay no l e s s . At each stage i n the marketing sequence the b a r g a i n i n g f u n c t i o n o c c u r s . The consumer at the r e t a i l counter w i l l b a r g a i n over whether the e x i s t i n g p r i c e of beef i s too high or too low r e l a t i v e to pork, p o u l t r y , and other 24 s u b s t i t u t e s . Her p r e f e r e n c e and the p r i c e w i l l i n g n e s s she has thus expressed, together with the responses of a l l other con-sumers of fed beef, add up to i n s t r u c t i o n s which the r e t a i l -buyer takes w i t h him i n t o the wholesale market where he r e p l a c e s h i s s t ock. I t i s a t wholesale, i n today's marketing system, t h a t w e l l - i n f o r m e d r e t a i l e r s r e f l e c t i n g consumer demand and w e l l -informed packers r e f l e c t i n g wholesale s u p p l i e s come together i n what now appears to be the most e f f e c t i v e s i n g l e b a r g a i n i n g p o i n t i n the whole sequence of market t r a n s a c t i o n s . The two main reasons f o r the present focus on the whole-s a l e s e c t o r to be the \" p r i c e making\" l o c a t i o n i n the c a t t l e i n d u s t r y are; f i r s t , the d i s p e r s i o n of l i v e marketings amongst c e n t r a l t e r m i n a l markets, a u c t i o n s , country d e a l e r s , and d i r e c t s a l e s from the farm or ranch has tended to weaken the e f f e c t i v e -ness of any one of these o u t l e t s i n price-making. I t i s s t i l l t r u e , however, t h a t every t r a n s a c t i o n i n l i v e animals c o n t r i b u t e s to p r i c e making by h e l p i n g t o a r r i v e at the c u r r e n t e s t i m a t i o n of what the e q u i l i b r i u m p r i c e w i l l be when the c a t t l e i n q u e s t i o n f i n a l l y become beef a t r e t a i l . But now a l l buyers and s e l l e r s t r a d i n g i n l i v e c a t t l e i n seeking every p o s s i b l e source of i n -formation to help i n t h e i r decision-making, have turned to a g r e a t e r degree to the common denominator a v a i l a b l e to a l l of them - the wholesale market q u o t a t i o n s . The second reason i s t h a t there i s now an i n c r e a s e d number of packers, averaging s m a l l e r i n s i z e and l e s s dominant than fo r m e r l y , and a much reduced number of r e t a i l e r - b u y e r s , averaging much l a r g e r and more dominant than f o r m e r l y . U l t i m a t e l y whether 25 the l o c a t i o n of the p r i c e making process i s a t the c e n t r a l term-i n a l market or at the wholesale l e v e l e i t h e r one merely r e f l e c t s the b a s i c p r i c e determinant - the e q u i l i b r i u m p r i c e o f the con-sumers . V. NATURE OF THE NORTH AMERICAN CATTLE MARKET The s i m i l a r i t y i n standards of l i v i n g and consumer trends and p r e f e r e n c e s between Canada and the United S t a t e s has g i v e n r i s e to the demand f o r s i m i l a r q u a l i t i e s of beef products. The m a j o r i t y o f the beef products are s u p p l i e d from the resources of the r e s p e c t i v e country however, at v a r i o u s times throughout the year beef p r o d u c t i o n r e s o u r c e s and fed beef products are t r a n s -p o r t e d across the border to the neighbouring country.. I t cannot be s a i d t h a t there e x i s t s one c a t t l e market i n North America because even though the demand f o r beef product i n both c o u n t r i e s i s s i m i l a r , the d i f f e r e n c e s i n g r a d i n g regu-l a t i o n s , t r a n s p o r t a t i o n p o l i c i e s , t a r i f f s t r u c t u r e , geographic and c l i m a t e f a c t o r s and the d i s s i m i l a r i t y i n market s i z e , g i v e r i s e to separate markets. Canadian and United S t a t e s c a t t l e p r i c e s u s u a l l y show s i m i l a r trends over time but the marginal p r i c e d i f f e r e n c e s changes from month to month and year to year due to the above f a c t o r s . The continued changing of the marginal p r i c e r e s u l t s i n the flow of feeder c a t t l e or fed c a t t l e back and f o r t h across the Canada-United S t a t e s border i n s i g n i f i c a n t l y f l u c t u a t i n g numbers. The flow of reso u r c e s and fed c a t t l e back and f o r t h across the border i n t u r n e f f e c t s the e q u i l i b r i u m p r i c e of c a t t l e at any p o i n t i n the two c o u n t r i e s . 26 In summary, i t can be s a i d t h a t the e q u i l i b r i u m p r i c e i n any r e g i o n i n Canada depends upon the demand and supply s i t u a t i o n i n the p a r t i c u l a r r e g i o n , the neighbouring g e o g r a p h i c a l regions w i t h i n Canada and the r e l a t i v e p o s i t i o n of the Canada and the Uni t e d S t a t e s c a t t l e markets. 27 CHAPTER I I I THE FED BEEF MARKET IN THE SOUTHERN COASTAL REGION OF BRITISH COLUMBIA Beef has always c o n s t i t u t e d a s i g n i f i c a n t p r o p o r t i o n of the Canadian consumers' meat d i e t . Not onl y has beef i n c r e a s e d i t s share of the consumers' red meat d i e t , as i n d i c a t e d i n F i g . 1, but i n a d d i t i o n the percentage of high q u a l i t y beef has i n c r e a s e d s i g n i f i c a n t l y s i n c e the end of World War I I , as i n d i c a t e d i n F i g . 2. The i n c r e a s e d p e n e t r a t i o n of the red meat market, by beef from 1948 to 1966 i s i l l u s t r a t e d by the r e l a t i v e slopes of the tre n d l i n e s i n F i g . 1. I t i s i n t e r e s t i n g to note t h a t the value of the slope of the tr e n d l i n e 1 f o r beef i s g r e a t e r than the value of the slope of the t r e n d l i n e f o r a l l r e d meats, which i n d i c a t e s t h a t the r a t e of i n c r e a s e i n per c a p i t a consumption of beef was g r e a t e r than the r a t e of i n c r e a s e i n per c a p i t a con-sumption of a l l red meats. The higher r a t e o f i n c r e a s e i n per c a p i t a consumption of beef r e l a t i v e to a l l red meats co u l d o n l y take p l a c e a t the expense of the per c a p i t a consumption of other red meats, a f a c t which i s i l l u s t r a t e d by the d e c l i n i n g r a t e of i n c r e a s e i n per c a p i t a consumption of pork and oth e r red meats. I. FACTORS AFFECTING FED BEEF CONSUMPTION IN THE REGION 1The value o f the slope o f the tr e n d l i n e i s . t h e b value i n the equation y = a + bx. 1 6 0 -P (d 0) S 1 0 0 m o o o ! , 1 , , , 1 , . . 1 . . . 1 9 4 8 50 5 2 5 4 56 58 6 0 6 2 6H 6 6 Years FIGURE 1 PER CAPITA MEAT CONSUMPTION IN CANADA 1948-66 (Canada A v e r a g e ) a Dominion Bureau of S t a t i s t i c s , A g r i c u l t u r e D i v i s i o n , Apparent Food Consumption i n Canada, (Ottawa: Queens P r i n t e r 1966). Trend l i n e c a l c u l a t e d u s i n g the Simple L i n e a r L e a s t Squares Regression technique. 29 Years FIGURE 2 CHOICE AND GOOD GRADE BEEF AS A PERCENTAGE OF TOTAL GRADED BEEF SLAUGHTER IN CANADAa aMarkets Information S e c t i o n , L i v e s t o c k P r o d u c t i o n and Marketing Branch, Canada Department of A g r i c u l t u r e , L i v e s t o c k Market Review, (Ottawa: Queens p r i n t e r ) . The i n c r e a s e d share of the beef market enjoyed by the top two grades of beef (high q u a l i t y b e e f ) , i n d i c a t e d i n F i g . 2, and the i n c r e a s e d share of beef r e l a t i v e to a l l red meats i s due to a number of f a c t o r s . In l i n e with Working's 2 f i n d i n g s , the major f a c t o r s which are contended to have r e s u l t e d i n the i n -creased share of high q u a l i t y beef i n the consumers' d i e t are the i n c r e a s e i n r e a l income per c a p i t a , i n c r e a s e d p r e f e r e n c e f o r high q u a l i t y beef and changes i n consumer e a t i n g h a b i t s and n u t r i t i o n -a l knowledge. The i n c r e a s e i n r e a l income from $815 i n 1948 to $1165 i n 1965 ( i n constant 1949 d o l l a r s ) as i n d i c a t e d i n F i g . 3 2Working, op. c i t . 30 has put more d i s c r e t i o n a r y income i n the hands of the consumers f o r the purchase of b e t t e r q u a l i t y products. The consumer has spent some of t h i s i n c r e a s e d income on the consumption of higher q u a l i t y beef. The measurement of the f a c t o r s c o n t r i b u t i n g to i n c r e a s e d p r e f e r e n c e f o r high q u a l i t y beef are i n t a n g i b l e and hard to measure o b j e c t i v e l y . 1 2 0 0 19 4 8 50 52 5 4 .5 6 5 8 6 0 6 2 ,6 4 Years FIGURE 3 REAL INCOME PER CAPITA IN CANADA CONSTANT DOLLARS - 194 9 a aSee Appendix A f o r c a l c u l a t i o n s . The w i l l i n g n e s s of the consumer to i n c r e a s e her expendi-t u r e s on beef i s evidenced i n F i g . 4. T h i s w i l l i n g n e s s to i n -crease her expenditures i s i l l u s t r a t e d by the p o s i t i v e value of the slope of the t r e n d l i n e f i t t e d to a curve i n d i c a t i n g the p r i c e per pound of c h o i c e grade beef at Calgary, A l b e r t a and a curve r e p r e s e n t i n g the per c a p i t a consumption of beef over the p e r i o d from 1948 to 1966; to the base 1947-49 = 100. In other 31 words the consumer was w i l l i n g t o purchase more beef of higher q u a l i t y at h i g h e r p r i c e s i n 1966 as c o n t r a s t e d to 1948. In c o n t r a s t , the consumer has on l y r e c e n t l y i n d i c a t e d a w i l l i n g n e s s to i n c r e a s e her expenditures on pork, a f t e r decreas-i n g her expenditures from 1948 to 1956 as i n d i c a t e d i n F i g . 5. The consumers' expenditures on b r o i l e r c h i c k e n s 3 which i s i l l u s -t r a t e d i n F i g . 6 i s even g r e a t e r on c o n t r a s t of the consumers' w i l l i n g n e s s to i n c r e a s e her consumption of chickens a t s i g n i f i -c a n t l y tower p r i c e s . The s t a t i s t i c s used to d e r i v e the graphs i n the e a r l i e r s e c t i o n s of t h i s chapter are averages f o r Canada. Each area w i t h i n the Dominion d i f f e r s i n economic s t a t u s and demographic mix r e l a t i v e to other areas. For the purposes of the r e p o r t the Canada average f i g u r e s w i l l be used as i n d i c a t i v e o f the per cap-i t a consumption of meat i n the area under study. The main reason f o r the assumption i s the l a c k of a b e t t e r a l t e r n a t i v e and the s i g n i f i c a n t v a r i a t i o n s i n economic s t a t u s and the demographic mix w i t h i n the d i f f e r e n t communities of the area under study. I t w i l l be assumed, f o r the purpose of the a n a l y s i s , t h a t the consumption of beef throughout the year i s more or l e s s u n i -form with s h o r t d u r a t i o n s of i n c r e a s e d and decreased consumption due to h o l i d a y s , f a i r s , e x h i b i t i o n s and unseasonable weather. No doubt the t o u r i s t t r a de i n the summer months does have some e f f e c t on the t o t a l f ed beef requirements, however, at the same time t h e r e i s a r e d u c t i o n i n the r e s i d e n t p o p u l a t i o n due to out of p r o v i n c e t r i p s . The e f f e c t o f the two changes w i l l be Chickens are c l a s s i f i e d as p o u l t r y and not red meats. 32 FIGURE 5 ER E> (1947-49 = 100) TREND IN CONSUM EXPENDITURE ON PORK 1948-66 a a S e e Appendix B f o r sources of i n f o r m a t i o n and c a l c u l a t i o n s , 33 c o n s i d e r e d t o c a n c e l one another. — . . . 1 , . . . , — — . . . . . . , 1 9 4 8 50 52 5h 5 6 - 5 8 . 60 6 2 6 4 6 6 Years FIGURE 6 TREND OF CONSUMER EXPENDITURES ON CHICKENS 1948-66 a See Appendix B f o r c a l c u l a t i o n s . I I . LOWER MAINLAND AND VANCOUVER ISLAND FED BEEF MARKET 34 S i z e of the Market The number of fed beef animals r e q u i r e d t o meet the con-sumer requirements of the area under study has i n c r e a s e d from an estimated 20, 970 head i n 1951 to 106,123 head i n 1966 4. The very s i g n i f i c a n t i n c r e a s e i n the number of fed c a t t l e r e q u i r e d to meet the consumer requirements i s due to the very s i g n i f i c a n t i n c r e a s e i n the p o p u l a t i o n and s i g n i f i c a n t i n c r e a s e i n the per c a p i t a consumption of the fed beef product. The consumption of Choice and Good grade beef i n c r e a s e d approximately 4 0 percent from 1951 to 1966 due to a 66 percent i n c r e a s e i n per c a p i t a consumption of beef and a 58 percent i n c r e a s e i n p o p u l a t i o n 5 . Sources of Supply of Fed Beef At present no s t a t i s t i c s are r e p o r t e d as to the t o t a l number of fed c a t t l e t h a t are consumed or t r a n s p o r t e d to the area under study through the v a r i o u s channels of supply. The f o l l o w i n g a n a l y s i s w i l l i n d i c a t e the approximate number of c a t t l e s u p p l i e d to the market through the channels and the trends i n supply through the channels from 1962 to 1966. Not a l l of the beef c a t t l e s o l d i n c a r c a s s form need to be i n s p e c t e d f o r d i s e a s e s or graded as to q u a l i t y i n Canada. The requirements f o r i n s p e c t i o n and grading d i f f e r w i t h each c i t y and p r o v i n c e . However, beef c a t t l e or c a r c a s s e s cannot be HSee Appendix C f o r the sources of i n f o r m a t i o n and c a l -c u l a t i o n s . 5See Appendix C f o r the p o p u l a t i o n f i g u r e s and c a l c u -l a t i o n s . 35 t r a n s p o r t e d i n t o or out of Canada or i n t e r p r o v i n c i a l l y u n l e s s they have been i n s p e c t e d and graded a c c o r d i n g to the r e g u l a t i o n s of the Meat I n s p e c t i o n A c t 6 . In a d d i t i o n some c i t i e s , m u n i c i -p a l i t i e s and d i s t r i c t s have set r e g u l a t i o n s such t h a t a l l beef s o l d w i t h i n t h e i r boundaries must be i n s p e c t e d f o r d i s e a s e and graded i n accordance with the g r a d i n g r e g u l a t i o n s of the pro-v i n c e . The c i t i e s of Vancouver, New Westminster, and North Van-couver; the m u n i c i p a l i t i e s of Burnaby and West Vancouver; and the d i s t r i c t of North Vancouver have r e g u l a t i o n s to the e f f e c t t h a t ; No person s h a l l , s e l l , o f f e r f o r s a l e or have i n h i s pos-s e s s i o n , a c a r c a s s or any p o r t i o n of a c a r c a s s t h a t has not been graded and branded i n accordance with t h i s r e g u l a t i o n . 7 In 1965 approximately 65 percent of the Lower Mainland r e g i o n p o p u l a t i o n or 5 0 percent of the Lower Mainland and Van-couver I s l a n d r e g i o n 8 populace r e s i d e d i n the area encompassed by the above r e g u l a t i o n . The other 50 percent of the p o p u l a t i o n a c q u i r e d beef from i n s p e c t e d and uninspected slaughterhouses. In a d d i t i o n , very few of the populace w i l l have produced and s l a u g h t e r e d i t s own beef f o r consumption purposes. No i n f o r m a t i o n i s a v a i l a b l e as to the number of Good and 6Canada Meat I n s p e c t i o n A c t . S e c t i o n 79, Paragraph 1 (Queens P r i n t e r : Ottawa). 7 B r i t i s h Columbia, Beef Grading R e g u l a t i o n s , D i v i s i o n 7.05. 8 B r i t i s h Columbia, Bureau of Economics and S t a t i s t i c s , op. c i t . , pp. 154 and 268. 36 Choice grade type beef animals which were s l a u g h t e r e d i n u n i n -spected s l a u g h t e r h o u s e s 9 . Thus, f o r the purposes of t h i s r e p o r t i t w i l l be c o n s i d e r -ed t h a t the c o n t r i b u t i o n of fed beef to the consumer market from the uninspected slaughterhouses i s i n s i g n i f i c a n t i n r e l a t i o n to the t o t a l requirements of f e d beef f o r the Lower Mainland and Vancouver I s l a n d r e g i o n s . The consumer requirements w i l l be c o n s i d e r e d to be s a t i s f i e d from the fed beef animals produced w i t h i n B r i t i s h Columbia and s l a u g h t e r e d i n l o c a l i n s p e c t e d slaughterhouses, the i m p o r t a t i o n of s l a u g h t e r animals from out-s i d e of the p r o v i n c e to be s l a u g h t e r e d i n l o c a l i n s p e c t e d slaugh-terhouses and the i m p o r t a t i o n of i n s p e c t e d and graded beef c a r -casses from o u t s i d e of the p r o v i n c e . An a n a l y s i s of the number of fed c a t t l e marketed through the v a r i o u s supply channels i n d i c a t e s t h a t the number of fed animals of B r i t i s h Columbia o r i g i n i n c r e a s e d some 5,7 63 head from 1962 to 1966 while the number of fed s l a u g h t e r animals im-p o r t e d from A l b e r t a and Saskatchewan i n c r e a s e d o n l y 7 07 head and the number of fed beef c a r c a s s e s imported from the same pr o v i n c e s i n c r e a s e d some 24,239 head of c a t t l e i n the same p e r i o d of t i m e 1 0 . I f the number of c a t t l e marketed through the v a r i o u s 9The Recorder of Brands f o r B.C., Mr. K i r k b y , r e p o r t s t h a t 3654 s t e e r s and 4438 h e i f e r s were s l a u g h t e r e d i n u n i n s p e c t -ed' slaughterhouses i n the Lower Mainland and Vancouver I s l a n d r e g i o n s i n 19 66. I t i s contended t h a t the m a j o r i t y of the beef animals represented i n the above f i g u r e s were of d a i r y c a t t l e o r i g i n and beef c a t t l e of lower q u a l i t y which d i d not have the degree of f l e s h y or conformation to be graded i n the top two beef grades. 1 0 See Appendix D f o r the sources of i n f o r m a t i o n and the c a l c u l a t i o n s . 37 supply channels are expressed as percentages of the t o t a l con-sumer requirements, i t i s i n t e r e s t i n g to note t h a t i n 1966 the number of f e d c a t t l e o f B r i t i s h Columbia o r i g i n amounted to 22 percent of t o t a l requirements while the imported fed s l a u g h t e r c a t t l e amounted to 31 pe r c e n t and fed beef c a r c a s s imports were 47 percent of t o t a l requirements. In c o n t r a s t c a t t l e of B r i t i s h Columbia o r i g i n amounted to 2 3 percent, the imported fed slaugh-t e r c a t t l e , 43 perc e n t , and fed beef c a r c a s s e s , 34 percent i n 1962. Fed C a t t l e P r i c e s The p r i c e of fed c a t t l e a t any time of the year w i l l be dependent upon the supply and demand s i t u a t i o n a t the time of s a l e . I t can be seen from examination of the graphs presented i n F i g u r e 7 t h a t the p r i c e of f e d c a t t l e vary s i g n i f i c a n t l y from month to month and year to year. F i g u r e 7 presents the p r i c e per hundred weight f o r C h o i c e 1 1 s l a u g h t e r s t e e r s ( l i v e -weight) . The p r i c e o f Good s l a u g h t e r s t e e r s w i l l f o l l o w the same f l u c t u a t i o n over time but w i l l be s l i g h t l y lower i n p r i c e a t any p a r t i c u l a r p o i n t i n time. The i n t e r v a l between the Choice and Good p r i c e w i l l depend upon the supply and demand f o r both grades of c a t t l e at the p a r t i c u l a r p o i n t i n time. In summary, a t prese n t B r i t i s h Columbia i s d e f i c i e n t i n the p r o d u c t i o n of h i g h q u a l i t y beef to meet the Lower Mainland 1 C h o i c e and Good type s l a u g h t e r c a t t l e are judged as such by the o c u l a r o b s e r v a t i o n of the buyers and s e l l e r s a t the time of s a l e . The f i n a l grade w i l l not be determined u n t i l a f t e r s l a u g h t e r . D o l l a r s per Hundredweight of Beef (l i v e w e i g h t ) CD fl> > SO M 2 CD , O CO 01 QJ H CO H -X > H O O > a H i » >-3 O •< a h t-1 HI K; 1—1 H CD 0 CD 3 » j r H H 2 O h-1 > M H K t\"1 CO O CD G OJ 2 O n > W 01 H -o « O t— 1 ft) W W CD oi i-3 O CT) H cn 0) 1—1 O M OJ K> cn 01 1 i-3 0 cn M c -J W H o cn 1—' CD CD 01 > cn i-3 cr> 0 H i a H -H i 0 H 3 i - 1 01 CO rt cn P -0 • and Vancouver I s l a n d consumer requirements. Since the Lower Mainland environment i s not a b a r r i e r t o the p r o d u c t i o n of fed c a t t l e and t h e r e i s no b a r r i e r of entry i n t o the l o c a l fed c a t t l e market i t remains to examine the a v a i l a b i l i t y of the ap-p r o p r i a t e q u a l i t y and q u a n t i t y of input f a c t o r s and s u b s t a n t i a t e whether the i n p u t f a c t o r s can be combined to produce f e d beef eco n o m i c a l l y i n the e x i s t i n g market. 40 CHAPTER IV THE INPUT FACTOR MARKETS Every i n d u s t r y r e q u i r e s a host of i n p u t f a c t o r s of the a p p r o p r i a t e q u a n t i t y and q u a l i t y f o r the economic a c t i v i t y to take p l a c e . In a d d i t i o n , f o r the i n d u s t r y to be a v i a b l e e n t i t y , the r e s o u r c e s must be a v a i l a b l e a t p r i c e s t h a t w i l l a l l o w the p r o d u c t i o n of the product a t c o s t s t h a t w i l l cover the f u l l c o s t s of p r o d u c t i o n over the investment p e r i o d . The f e d beef i n d u s t r y r e q u i r e s the feeder c a t t l e , feed g r a i n s , c a p i t a l , management, l a b o r , and other r e s o u r c e s of the a p p r o p r i a t e q u a n t i t y and q u a l i t y and at the a p p r o p r i a t e p r i c e s so t h a t the f u l l c o s t of p r o d u c t i o n per u n i t of c a r c a s s weight i s equal to or l e s s than the market value per u n i t of c a r c a s s weight at the f e e d l o t . I t i s the purpose of t h i s Chapter to e v a l u a t e the f i v e primary i n p u t markets r e l a t i v e to the F r a s e r V a l l e y Fed Beef Industry. Since other a g r i c u l t u r e e n t e r p r i s e s a l r e a d y e x i s t i n the area, the other necessary resources f o r the fed beef i n d u s t r y which are a l s o r e q u i r e d i n some of the other a g r i c u l t u r e e n t e r -p r i s e s , w i l l be assumed to be a v a i l a b l e i n the a p p r o p r i a t e quan-t i t y and q u a l i t y and at p r i c e s t h a t do not hinder the development of the i n d u s t r y i n the area. I. FEEDER CATTLE The s i z e of feeder animal p l a c e d i n the f e e d l o t v a r i e s a c c o r d i n g to the c a t t l e market s i t u a t i o n , type of f e e d l o t f a c i l -i t y , o b j e c t i v e s of the entrepreneur and a v a i l a b l e f e e d s t u f f s f o r the p a r t i c u l a r f e e d l o t . Some op e r a t o r s purchase s i x to e i g h t month o l d c a l v e s and feed them f o r up to one year or more while other o p e r a t o r s purchase heavy, long y e a r l i n g s or two year o l d animals and feed them f o r s i x t y to e i g h t y days. The m a j o r i t y of feeders purchase y e a r l i n g animals and feed them from n i n e t y to one hundred and f i f t y d a y s 1 . Number of Feeder C a t t l e Produced i n B r i t i s h Columbia The main source of feeder c a t t l e f o r the i n d u s t r y are l o c a t e d i n the p r o d u c t i o n areas of B r i t i s h Columbia Census D i v i -s i o n Number Three, S i x , and E i g h t 2 . To a c q u i r e an estimate of the number of feeder c a t t l e a v a i l a b l e to the i n d u s t r y i n any one year, s i n c e the s t a t i s t i c i s not r e p o r t e d , i t i s p o s t u l a t e d t h a t the number of feeder animals a v a i l a b l e i n any one year can be d e r i v e d by basing the estimate on the beef-cow p o p u l a t i o n of the preceding year. To a c q u i r e the s t a t i s t i c of the number of feeder c a t t l e a v a i l a b l e i n the present year a c a l f crop i s estimated and a h e i f e r replacement estimate i s s u b s t r a c t e d from the c a l f e s t i -mate to i n d i c a t e the number of feeder c a l v e s a v a i l a b l e . The necessary c a l c u l a t i o n s and a p p r o p r i a t e c r i t e r i a are presented i n Appendix F. Not a l l of the beef feeder c a l v e s as i n d i c a t e d i n Appendix F w i l l be a v a i l a b l e to the f e e d l o t i n d u s t r y which i s endeavouring 2See Table V I I I , page 70. 2Dominion Bureau of S t a t i s t i c s , Census of A g r i c u l t u r e , Volume 5, P a r t 3, (Ottawa: Queens P r i n t e r 1968). 42 to produce Choice and Good grade beef. Some animals do not have the a b i l i t y to e f f i c i e n t l y c o n v ert energy feeds i n t o beef and/or l a c k the a p p r o p r i a t e conformation; i n a d d i t i o n , poor management, d i s e a s e , p h y s i c a l i n j u r y and other s l a u g h t e r a l t e r n a t i v e s cause some of the feeder p o p u l a t i o n to be s l a u g h t e r e d when they are i n a c o n d i t i o n of f l e s h i n g below t h a t r e q u i r e d f o r i n c l u s i o n i n the top two grades. I t i s assumed t h a t the Canada average percentage of Standard and Commercial Number I grade c a t t l e would be a f a i r e stimate of the percentage of the beef c a l f p o p u l a t i o n t h a t would not be a v a i l a b l e f o r the fed beef i n d u s t r y . The number of Choice and Good type feeder c a t t l e are i n d i c a t e d i n Appendix G. A review of Appendix G i n d i c a t e s t h a t the number of B r i t i s h Columbia produced good and c h o i c e feeder c a l v e s has i n c r e a s e d some 58 percent s i n c e 1960 to an estimated t o t a l o f 90,900 head i n 1967. The s t a t i s t i c s as to the d i s p e r s i o n of any one year's feeder c a t t l e p r o d u c t i o n are not r e p o r t e d . I t would be very d i f f i c u l t to r e p o r t the d i s p e r s i o n because of the present mar-k e t i n g methods u t i l i z e d by the i n d u s t r y , the p r e s e n t methods of r e p o r t i n g the s a l e of c a t t l e , and the l e n g t h of the c a l v i n g p e r i o d i n any one year. That i s , the number of Choice and Good grade c a t t l e s l a u g h t e r e d i n any one year may r e p r e s e n t as much as two to three years c a l f p r o d u c t i o n because the beef animal upon s l a u g h t e r c o u l d be over three years o l d b e f o r e he was s l a u g h t e r e d although i n a l l p r o b a b i l i t y the bulk of the fed animals being s l a u g h t e r e d would range from one to two years of age. T h e r e f o r e , the f o l l o w i n g t a b l e s i n d i c a t i n g the number of 43 fed c a t t l e produced and s l a u g h t e r e d i n B r i t i s h Columbia, or the number of feeder c a t t l e and c a l v e s shipped to the United S t a t e s or to the p r o v i n c e s e a s t of B r i t i s h Columbia i n d i c a t e o n l y the magnitude and the year to year f l u c t u a t i o n s of the c a t t l e d i s p e r -s i o n . The t o t a l of the d i s p e r s i o n s w i l l not add up to the t o t a l number of feeder c a t t l e a v a i l a b l e i n any one year because of the divergence i n marketing methods and c a l v i n g season. The feeder c a t t l e produced i n B r i t i s h Columbia are e i t h e r f i n i s h e d and s l a u g h t e r e d i n the p r o v i n c e or t r a n s p o r t e d out of the p r o v i n c e as feeder animals to be f i n i s h e d i n some other area. The feeder c a t t l e and c a l v e s t h a t are t r a n s p o r t e d out of the p r o v i n c e move i n two d i r e c t i o n s . On one hand they are exported to the United S t a t e s f o r f i n i s h i n g and consumption or on the other hand to p r o v i n c e s e a s t of B r i t i s h Columbia. I f they are t r a n s p o r t e d to O n t a r i o i t i s most l i k e l y they w i l l be f i n i s h e d and consumed i n O n t a r i o . However, i f they are t r a n s p o r t e d to A l b e r t a , i n a l l p r o b a b i l i t y on being f i n i s h e d , they w i l l be t r a n s p o r t e d to the O n t a r i o consumer market or back i n t o B r i t i s h Columbia to help meet the consumer requirements. Number of Beef C a t t l e Produced and F i n i s h e d i n B r i t i s h Columbia The number of beef c a t t l e which are produced i n B r i t i s h Columbia and f i n i s h e d w i t h i n the p r o v i n c e f o r the Lower Mainland and Vancouver I s l a n d markets are r e p o r t e d i n Table I I . I t can be seen t h a t the number of fed c a t t l e produced i n the p r o v i n c e has i n c r e a s e d some 8500 head s i n c e 1962 to a t o t a l of 26,042 head i n 1967 3. 3 I t should be noted t h a t i n a d d i t i o n an estimated 3000 TABLE I I ESTIMATED NUMBER OF CHOICE AND GOOD GRADE BEEF CATTLE OF B.C. ORIGIN THAT WERE SLAUGHTERED WITHIN THE LOWER MAINLAND AND VANCOUVER ISLAND REGION 1962 1963 1964 1965 1966 1967 F e d e r a l l y Inspected Slaughterhouses s t e e r s h e i f e r s 14,885 4 .430 14,113 3 .852 18,422 4 .334 19,307 6.261 17,764 7.146 Sub T o t a l \" 19,315 17,965 2 2,7 56 25,568 24,910^ Estimated No. of Standard & Commer-ce? c i a l Grade Animals 3,669 3,413 4,323 4 ,857 4,904 Sub T o t a l 15,646 14,552 18,433 20,711 20,006 23 ,457 Prov. Inspected Slaughterhouses 1,889 2,256 2,715 2,314 3,292 2,585 T o t a l 17,535 16,808 21,148 23,025 23,298 26,042 Source: Market Information D i v i s i o n , L i v e s t o c k P r o d u c t i o n and Marketing Branch, op. c i t . Some of the c a t t l e r e p o r t e d i n these s t a t i s t i c s are out of p r o v i n c e beef feeder c a t t l e t h a t are f i n i s h e d i n B.C. f e e d l o t s . The number of c a t t l e so r e p o r t e d i s c o n s i d e r e d to be i n s i g n i f i c a n t . ^One F e d e r a l l y , i n s p e c t e d p l a n t was l o c a t e d o u t s i d e of the area under study and i t was assumed t h a t the 1299 B.C.. produced feeder c a t t l e t h a t were s l a u g h t e r e d i n t h i s f a c i l i t y were consumed i n other areas of the p r o v i n c e . cThe percentage of Standard and Commercial No. 1 Grade c a t t l e s l a u g h t e r e d i n F e d e r a l l y Inspected Slaughterhouses l o c a t e d i n B.C. was estimated f o r the years 1962-65 by assuming the same percentage of Standard and Commercial 1 grade c a t t l e were slaughtered as was c a l c u -l a t e d from a c t u a l r e c o r d s f o r 1966. 45 Sources of supply w i t h i n B r i t i s h Columbia. The r e l a t i v e importance o f the d i f f e r e n t p r o d u c t i o n areas w i t h i n B r i t i s h Co-lumbia i n s u p p l y i n g f ed beef to the c o a s t a l market i s . i n d i c a t e d i n Table I I I . I t should be noted t h a t o n l y 1966 and 1967 f i g u r e s were a v a i l a b l e and the f i g u r e s as r e p o r t e d i n d i c a t e o n l y those c a t t l e r e c e i v e d a t f e d e r a l l y i n s p e c t e d slaughterhouses i n the area under study. In 1966 another 2,314 head of fed c a t t l e of B r i t i s h Columbia o r i g i n were s l a u g h t e r e d i n P r o v i n c i a l l y i n s p e c t -ed slaughterhouses o u t s i d e of the area under study and consumed i n other r e g i o n s , and an unknown number of fed c a t t l e were shipped out of the Peace R i v e r Block and the e a s t e r n s e c t i o n of Southern B r i t i s h Columbia to A l b e r t a l i v e s t o c k markets or slaugh-terhouses . TABLE I I I BRITISH COLUMBIA ORIGIN OF CHOICE AND GOOD GRADE CATTLE SLAUGHTERED IN THE LOWER MAINLAND AND VANCOUVER ISLAND REGIONS u CO c u cu Cu 0 nj rH O > a u >-, o 0 fU -H 3 13 3: C C -P C rH X! -P X U -r) -P cu u m fo m CU - H CU G fO W 0 O C • M 0 > u o ft « U H > H CO £H D P Q O 1966 15,723 2,214 616 872 522 59 20,006 3,292 23,298 1967 19,000 1,641 457 1,071 1, 268 — 20 23,457 2,585 26,042 Source: L i v e s t o c k P r o d u c t i o n and Marketing Branch Re-cords, Canada Department o f A g r i c u l t u r e , Vancouver, B.C. \"For a f u l l d i s c u s s i o n of the f i g u r e s see Table VI i n Chapter V. head were f i n i s h e d w i t h i n the p r o v i n c e f o r consumption i n other areas i n 19 67. B r i t i s h Columbia Feeder C a t t l e and C a l f Exports to the United S t a t e s Each year v a r i o u s f e e d l o t f i r m s , l o c a t e d mainly i n Wash-ing t o n and Idaho S t a t e s , f i n d i t economical to purchase a number of t h e i r feeder requirements from B r i t i s h Columbia. Although the Canadian c a t t l e market p a r a l l e l s the United S t a t e s c a t t l e markets f a i r l y c l o s e l y there are p e r i o d s of time when i t i s more p r o f i t a b l e to purchase Canadian feeder c a t t l e than feeder c a t t l e produced i n the neighbouring p r o d u c t i o n areas w i t h i n the United S t a t e s . Whether or not B.C. feeder c a t t l e w i l l be exported to the United S t a t e s depends upon the r e l a t i v e p r i c e between the Canadian and the American c a t t l e markets. I t can be seen on examination of Table IV t h a t the number of feeder c a t t l e 4 and c a l v e s exported to the United S t a t e s v a r i e s s i g n i f i c a n t l y from year to year due to the f l u c t u a t i o n s i n the p r i c e r e l a t i o n s h i p s between the two Markets. TABLE IV BRITISH COLUMBIA FEEDER CATTLE AND CALVES EXPORTED TO THE U.S.A. 1962-67 ITEM 1962 a 1963 1964 1965 1966 1967 Grade beef s t e e r s 15,341 8,539 3,338 19,870 8,868 1,251 Grade beef h e i f e r s 3,766 942 769 5,559 4 ,632 485 Sub- •Total 19,107 9,481 4,107 25,429 13,500 1,736 Grade beef c a l v e s 4,469 3,385 866 6,176 4,404 1,069 Source: Canada Department of A g r i c u l t u r e , L i v e s t o c k Pro-d u c t i o n and Marketing D i v i s i o n Branch, Vancouver, B r i t i s h Colum-b i a . Annual Reports 1962-67, mimeographed. a l n c l u d e s some grade d a i r y s t e e r s and h e i f e r s . kThe number of Good and Choice type animals are not 47 Feeder C a t t l e and Calves Marketed to P r o v i n c e s East of B r i t i s h Columbia Each year a number of f e e d l o t f i r m s , l o c a t e d , i n the major-i t y , i n A l b e r t a and O n t a r i o , purchase a s i g n i f i c a n t number of B r i t i s h Columbia feeder c a t t l e and c a l v e s . I t i s assumed t h a t i n the m a j o r i t y these f i r m s purchase c h o i c e and good grade feeder animals. Although no i n f o r m a t i o n i s a v a i l a b l e as to the t o t a l marketings of good and c h o i c e type animals an e s t i m a t i o n can be d e r i v e d from an a n a l y s i s of the Brand C e r t i f i c a t e s . The movement of l i v e s t o c k i n B r i t i s h Columbia r e q u i r e s the buyer or s e l l e r to have the ownership of the shipment i n s p e c t -ed by a l o c a l Royal Canadian Mounted P o l i c e O f f i c e r or govern-mented appointed Brand Inspector b e f o r e the l i v e s t o c k may be t r a n s p o r t e d between d i s t r i c t s . The w r i t t e n r e c e i p t of the i n -s p e c t i o n , Brand C e r t i f i c a t e s , p r o v i d e a source* of i n f o r m a t i o n as to the movement of l i v e s t o c k throughout the p r o v i n c e . An analy-s i s of the 1966 Brand C e r t i f i c a t e s f o r the B r i t i s h Columbia c a t t l e and c a l v e s t r a n s p o r t e d to p r o v i n c e s e a s t 5 , i n d i c a t e s t h a t approximately 33 percent of the t o t a l shipments were c a l v e s , 4 2 percent were s t e e r s and h e i f e r s , and 25 percent were cows and b u l l s . Figures: f o r the breakdown of other y e a r s ' shipments are not a v a i l a b l e . However, the s i g n i f i c a n t y e a r l y changes of des-t i n a t i o n of the c a t t l e and c a l v e s i s evidenced by the year to i n d i c a t e d i n the a v a i l a b l e s t a t i s t i c s , however\", i t i s p o s t u l a t e d t h a t very few standard and commercial type animals are exported. 5See Appendix H f o r Brand C e r t i f i c a t e a n a l y s i s . 48 year f l u c t u a t i o n s i n movement to the e a s t , to the s o u t h 6 or changes i n the p r o v i n c e ' s i n v e n t o r y of c a t t l e and c a l v e s . Time of Sale and P r i c e s of Feeder C a t t l e The time of year the feeder c a t t l e and c a l v e s are p r e s e n t -l y marketed i s important to the f e e d l o t o p e r a t o r . I f he wishes to operate a l l year he w i l l r e q u i r e a continuous supply of c a t t l e throughout the year or a l t e r n a t i v e l y i f he wishes to feed o n l y p a r t of the year,the time of feeder c a t t l e marketings i s impor-t a n t . In a d d i t i o n the f l u c t u a t i o n s i n the supply p r i c e of feeder c a t t l e i s important to the o p e r a t o r . No s t a t i s t i c s are r e p o r t e d on the t o t a l monthly marketings of feeder c a t t l e i n B r i t i s h Columbia. However, from the i n f o r -mation a c q u i r e d by the w r i t e r on the i n t e r v i e w s h e l d with f e e d -l o t o p e r a t o r s , c a t t l e buyers, and c a t t l e a u c t i o n p e r s o n n e l , i t appears t h a t the bulk of the feeder c a t t l e are p l a c e d on the market i n the p e r i o d of September to November each year. The number p l a c e d on the market tapers o f f i n December with a s h o r t r i s e i n the beginning of January, then f a l l s again to r i s e i n the p e r i o d from the l a t t e r h a l f of March to the middle of May, then tapers o f f u n t i l l a t e summer. I t can be seen from an examination of F i g u r e 8 t h a t there are s i g n i f i c a n t p r i c e f l u c t u a t i o n s of feeder c a t t l e p r i c e s from month to month and year to year. In a d d i t i o n the r i s e and f a l l of the p r i c e s by no means appear at the same time each year. \"Canada Department of A g r i c u l t u r e , L i v e s t o c k P r o d u c t i o n and Marketing Branch, op. c i t . D o l l a r s p e r H u n d r e d w e i g h t o f B e e f ( l i v e w e i g h t ) i—< cn ft N> Cn CD fD RE > 13 D 13 CD H 3 Z cn & cu s X CA ON M LG TH H i > 0 Hi K 3 o M H cr> n f+ H t r H cn M H K3 <^ > O o CD CJ CU H Q H CO O o O oo CD D cn ET *1 cn cu a M 3 M DE cn 0 3 cn i-l o M (D W cn RS cn 0 H) AT H -H3 H i 0 W h 3 OJ r t cn H -O 13 6P 50 In summary, i t appears t h a t there e x i s t s a s i g n i f i c a n t number of feeder c a t t l e a v a i l a b l e f o r an i n c r e a s e d B r i t i s h Colum-b i a f e d beef i n d u s t r y , i f the l o c a l c a t t l e buyer can compete with the United S t a t e s and out of p r o v i n c e buyer. The e f f e c t of the f l u c t u a t i o n of feeder c a t t l e marketings throughout the year and the f l u c t u a t i o n of p r i c e s throughout the year are important f a c -t o r s t h a t w i l l have to be taken i n t o account i n e v a l u a t i n g the economic s t a t u s of the present i n d u s t r y . I I . FEED GRAINS Feed g r a i n s w i l l c o n s t i t u t e up to 80 percent of t o t a l f i n i s h i n g feed r a t i o n . The balance of the feed r a t i o n w i l l con-s i s t of approximately 5-10 percent roughage and 10-15 percent p r o t e i n and m i n e r a l supplements. The exact percentage of each f e e d s t u f f i n the f i n i s h i n g feed r a t i o n w i l l depend upon the ex-p e r i e n c e of the f e e d l o t o p e r a t o r , the a v a i l a b i l i t y and p r i c e s of the a l t e r n a t i v e f e e d s t u f f s , the s i z e and age of the animals being f e d and the a n t i c i p a t e d f i n i s h i n g time r e q u i r e d to maximize the feed and p r i c e margin g i v e n the c a t t l e market c o n d i t i o n s . The s e l e c t i o n of the p a r t i c u l a r feed g r a i n to use at any one p e r i o d i n the year w i l l be c a r r i e d out on the c r i t e r i a o f a v a i l a b i l i t y and c o s t per u n i t of e n e r g y 7 . The f e e d l o t f i r m can a l t e r n a t e feed g r a i n s when economic advantages warrant i t . The Lower Mainland and Vancouver I s l a n d areas are d e f i c i e n t 7The h i s t o r i c a l measure i s T o t a l D i g e s t i b l e N u t r i e n t s , however, advances i n the n u t r i t i o n f i e l d have brought i n more exact measures of p r o d u c t i v e energy. Some authors p r e f e r to use gross energy, m e t a b o l i z a b l e energy, or p r o d u c t i v e energy. 51 i n the p r o d u c t i o n of feed g r a i n s . The weather c o n d i t i o n s and a v a i l a b l e economic a l t e r n a t i v e s f o r the a r a b l e land are f a c t o r s t h a t i n h i b i t any hope of p r o v i d i n g the r e q u i r e d energy feed from w i t h i n the area. I t should be noted a t t h i s p o i n t t h a t there i s i n c r e a s i n g i n t e r e s t being expressed i n the use of corn s i l a g e grown i n the area and u t i l i z e d i n the feed r a t i o n to r e p l a c e some of the feed g r a i n requirement. The c o n t i n u i n g r e s e a r c h being c a r r i e d out, by the Dominion Experimental Farm at A g a s s i z , B r i t i s h Columbia, has been of s i g n i f i c a n t b e n e f i t . The corn s i l a g e c o u l d be a d e c i d i n g f a c t o r i n i n c r e a s i n g the c o n c e n t r a t i o n of f e e d i n g , how-ever, a t present the percentage of corn g r a i n to corn s t a l k , moisture content of the corn being p l a c e d i n the s i l o and u n i -f o r m i t y i n p r o d u c t i o n per acre between years are f a c t o r s p r e s e n t -l y being researched f u r t h e r to improve the q u a l i t y of t h i s f e ed-s t u f f . However, even i f corn s i l a g e does become an important f e e d s t u f f f o r the i n d u s t r y , feed g r a i n s probably w i l l s t i l l r e -main important c o n s t i t u e n t s i n the f i n i s h i n g feed r a t i o n . The two f e e d g r a i n s t h a t are r e l e v a n t to the Lower Main-land and Vancouver I s l a n d f e d beef i n d u s t r y under the e x i s t i n g market c o n d i t i o n s are feed grade b a r l e y and wheat. The t o t a l supply of these f e e d s t u f f s to the i n d u s t r y i s from Canadian pro-d u c t i o n and to a l a r g e extent from the P r a i r i e r e g i o n s of the Dominion. Although the s t a t i s t i c s as to the disappearance of feed g r a i n s i n the fed beef i n d u s t r y are not a v a i l a b l e , an i n d i c a t i o n of the supply of feed g r a i n s to the area under study can be d e r i v e d from the r e c o r d s of the Canada L i v e s t o c k Feed Board. 52 Feed g r a i n s t h a t are shipped by r a i l i n t o B r i t i s h Columbia or t r a n s p o r t e d by r a i l from designated areas w i t h i n B.C. f o r domestic consumption are e l i g i b l e f o r a subsidy of a p r e s c r i b e d amount per ton of m a t e r i a l . The p o l i c y i s administered by the Crown C o r p o r a t i o n , the Canada L i v e s t o c k Feed B o a r d 8 . Most of the feed g r a i n i s marketed through companies t h a t have g r a i n e l e v a t o r f a c i l i t i e s i n the areas of supply. A l l g r a i n t h a t i s moved i n t e r p r o v i n c i a l l y , except f o r some desig n a t e d areas, comes under the Canada Wheat Board. The feed g r a i n t h a t i s t r a n s p o r t e d w i t h i n the p r o v i n c e s does not come under the Wheat Board. The feed g r a i n moved from the B.C. Peace River Block to the area under study i s lower p r i c e d than feed g r a i n t r a n s p o r t e d i n t o B r i t i s h Columbia from the P r a i r i e p r o v i n c e s under the Canada Wheat Pool j u r i s d i c t i o n . The movement of feed g r a i n s i n t o the F r a s e r V a l l e y can be analyzed by u s i n g the tonnage of feed g r a i n on which feed f r e i g h t a s s i s t a n c e was p r o v i d e d . I t i s c o n s i d e r e d t h a t almost 100 percent of the feed g r a i n moving i n t o the area would be represented i n these f i g u r e s . The tonnage of wheat, o a t s 9 , and b a r l e y moving i n t o the area under study and t h a t area of B r i t i s h Columbia west of the Rocky Mountains are r e p o r t e d i n Appendix I 8The Canada L i v e s t o c k Feed Board was i n c o r p o r a t e d i n 1966, f o r a comprehensive d i s c u s s i o n of feed f r e i g h t a s s i s t a n c e i n Canada; see T.C. Kerr, An Economic A n a l y s i s of the Feed F r e i g h t A s s i s t a n c e P o l i c y . A g r i c u l t u r a l Economics Research C o u n c i l of Canada, Ottawa, 1966. 9Oats i s i n c l u d e d i n the Table because i t i s of importance i n the p r e l i m i n a r y f e e d i n g p e r i o d . I t i s not used commonly i n the l a t t e r p a r t of the f e e d i n g p e r i o d because of i t s lower energy v a l u e . and Appendix J . I t i s i n t e r e s t i n g to note i n Appendix I t h a t while the domestic requirements f o r feed g r a i n s i n southern B r i t i s h Colum-b i a i n c r e a s e d by a t l e a s t 12.6 percent i n 1964-65 over 1963-64, the B r i t i s h Columbia Peace R i v e r Block was able to p r o v i d e 9.8 p e r c e n t . o f the i n c r e a s e while o n l y 2.8 percent of the i n c r e a s e was needed to be imported from the P r a i r i e P r o v i n c e s . I t can be seen from the f i g u r e s i n Appendix J t h a t the area under study consumes 98 percent of the wheat, 83 percent of the o a t s , and 95 percent of the b a r l e y on which feed f r e i g h t s u b s i d i e s were p a i d under the Canada Feed L i v e s t o c k Board i n the f i s c a l year 1964-65. R e l a t i v e to the fed beef i n d u s t r y i t i s expected t h a t the feed g r a i n requirements w i l l be met, i n the m a j o r i t y , by feed g r a i n s p r o d u c t i o n i n the B r i t i s h Columbia Peace R i v e r Block. I t i s a n t i c i p a t e d by personnel of the B r i t i s h Columbia Department of A g r i c u l t u r e t h a t the p r o d u c t i o n of g r a i n s i n the Peace River area w i l l i n c r e a s e s i g n i f i c a n t l y i n the years a h e a d 1 0 . The de-f i c i e n c y or oversupply of the feed g r a i n s t h a t c o u l d occur i s o n l y important as the d i s c o n t i n u i t y i t causes i n the p r i c e of the feed g r a i n s and a v a i l a b i l i t y of feed g r a i n s to the Lower Mainland f e e d l o t o p e r a t o r . I t i s a n t i c i p a t e d t h a t any feed g r a i n r e q u i r e -ments t h a t are needed from the P r a i r i e P rovinces can be e f f i c i e n t l y t r a n s p o r t e d to the area s i n c e the feed g r a i n movement i s a small p r o p o r t i o n of the t o t a l g r a i n movement to the p o r t of Vancouver. 1 0 A . J . A l l a n , Second Approximation Report - Peace River D i s t r i c t , B r i t i s h Columbia Department of A g r i c u l t u r e , V i c t o r i a 1966, mimeographed. 54 The a v a i l a b i l i t y of the a p p r o p r i a t e q u a n t i t y and q u a l i t y o f p r o t e i n and m i n e r a l supplements i s important to the fed beef i n d u s t r y . R e l a t i v e to the Lower Mainland and Vancouver I s l a n d c o n d i t i o n s i t does not appear unreasonable to assume t h a t an adequate supply of these supplements w i l l e x i s t i f the i n d u s t r y should i n c r e a s e i n s i z e , s i n c e the f a c i l i t i e s t h a t handle these commodities a l r e a d y e x i s t and the requirements of the fed beef i n d u s t r y are only a p a r t of the t o t a l needs of these commodities i n the present a g r i c u l t u r a l s e c t o r of the l o c a l economy. An a n a l y s i s of the feed g r a i n p r i c e s presented i n F i g u r e 9 would i n d i c a t e t h a t the p r i c e s of the f e e d s t u f f s do not f l u c -t u a t e s i g n i f i c a n t l y from season to season although i n the f a l l of the year the p r i c e s do d e c l i n e f o r a few months every year. The d i s c o n t i n u i t y i n the l e v e l of feed grade oats and b a r l e y p r i c e s which i s caused by the u n a v a i l a b i l i t y of B r i t i s h Columbia Peace Ri v e r r e g i o n b a r l e y and oats i s c l e a r l y i n d i c a t e d by the s i g n i f i -cant i n c r e a s e s i n p r i c e s from May to August 1962. I t i s i n t e r -e s t i n g to note t h a t i n terms of a c t u a l d o l l a r s the p r i c e s of g r a i n s c r e e n i n g s , g r a i n s c r e e n i n g p e l l e t s , oats and b a r l e y have i n c r e a s e d over the 1963-67 p e r i o d . Feed grade oats has shown the g r e a t e s t i n c r e a s e i n p r i c e and r e l a t i v e to feed grade b a r l e y i t has r i s e n i n p r i c e to such an extent t h a t i n c o n t r a s t to 1963, oats had a higher p r i c e than b a r l e y i n 1967. I I I . CAPITAL Two c l a s s e s of c a p i t a l are r e q u i r e d i n the o p e r a t i o n of a f e e d l o t f i r m . Funds are needed f o r investment i n (1) long term a s s e t s and (2) c a t t l e and feed d u r i n g the p e r i o d of f e e d l o t P r i c e of Number One Grade G r a i n Screenings P r i c e of Number One Grade Feed Oats P r i c e of Number One Grade Feed B a r l e y 1 9 6 2 63 6 4 6 5 6 6 67 Years FIGURE 9 J TREND IN MONTHLY FEED GRAIN PRICES AT VANCOUVER BRITISH COLUMBIA 1962-67 a See Appendix K f o r sources of i n f o r m a t i o n . o p e r a t i o n w i t h i n the year. Approximately 60-70 percent of the c a p i t a l requirements w i l l be t i e d up f o r a p e r i o d of l e s s than one year i n the form of feeder c a t t l e , feed and other d i r e c t o p e r a t i n g expenses i n the f e e d l o t which does not u t i l i z e pasture i n i t s f e e d i n g program. The c a p i t a l r e q u i r e d i n the nature of l a n d , b u i l d i n g s , and equipment can be very small or q u i t e l a r g e per u n i t of pro-duct produced. The s i z e of the c a p i t a l investment v a r i e s s i g n i f -i c a n t l y i n the area under study. The e x i s t e n c e of unused d a i r y barns, hay storage sheds, and f l a x d r y i n g sheds, allows the par-t i c u l a r o p e r a t o r to keep h i s investment i n c a p i t a l a s s e t s to a minimum. A l t e r n a t i v e l y s p e c i a l l y c o n s t r u c t e d f e e d l o t s t r u c t u r e s with s i g n i f i c a n t l y h i g h e r c a p i t a l investment such as \" s l o t t e d f l o o r \" barns, \"enclosed c e n t e r l a n e s \" and \"overhead feed lane\" s t r u c t u r e s have been c o n s t r u c t e d f o r beef c a t t l e f e e d i n g . Whether the i n d i v i d u a l wishes to purchase e s t a b l i s h e d f a c i l i t i e s , i n c r e a s e h i s present f a c i l i t i e s or c o n s t r u c t new f a c i l i t i e s , he w i l l have to e i t h e r p r o v i d e the funds from h i s own source or a c q u i r e the funds through loans from other i n d i -v i d u a l s or e s t a b l i s h e d f i n a n c i a l l e n d i n g f i r m s . Two f i n a n c i a l i n t e r m e d i a r i e s of top p r i o r i t y to the feed-l o t f i r m i n the long term lo a n f i e l d are the Crown Cor p o r a t i o n s - the Farm C r e d i t C o r p o r a t i o n and the I n d u s t r i a l Development Bank. The c o s t of funds from the Farm C r e d i t C o r p o r a t i o n are cheaper than the I n d u s t r i a l Development Bank, however, the p o l i c i e s of the two i n s t i t u t i o n s d i f f e r as to e l i g i b i l i t y and to a s s e t s on which funds w i l l be loaned. For b r e v i t y the w r i t e r w i l l not summarize the p o l i c i e s of the two i n s t i t u t i o n s because easy access to o f f i c e r s of these i n s t i t u t i o n s i s a f f o r d e d to any person i n t e r e s t e d i n a c q u i r i n g f i n a n c i a l i n f o r m a t i o n . Other f i -n a n c i a l i n s t i t u t i o n s w i l l l o a n funds f o r long term commitment depending upon the p o l i c i e s of the p a r t i c u l a r i n s t i t u t i o n . Whether or not the e x i s t i n g i n s t i t u t i o n s are adequate f o r the requirements of the i n d u s t r y i s a d i f f i c u l t q u e s t i o n to answer. The importance of the s h o r t term c a p i t a l requirements was noted e a r l i e r i n the chapter. I f the f e e d l o t f i r m cannot f i n a n c e the s h o r t term requirements of feeder c a t t l e , feed, h i r e d l a b o r , v e t e r i n a r y s u p p l i e s and medicines, and equipment o p e r a t i n g ex-penses through i t s own r e s o u r c e s , then i t w i l l have to a c q u i r e the funds through loans from the vendors, f i n a n c i a l i n t e r m e d i a r -i e s and/or i n d i v i d u a l i n v e s t o r s . Most f e e d l o t f i r m s have s u f f i c e n t funds to f i n a n c e a l l the v a r i a b l e expenses except a p r o p o r t i o n of the feeder c a t t l e and feed expenses. The common p r a c t i c e i n f i n a n c i n g the feeder c a t t l e and feed i s to a c q u i r e a c h a t t e l mortgage from one of the Chartered Banks f o r the balance of the feeder c a t t l e expense and the p r o p o r t i o n of the feed expense t h a t w i l l not be born by the r e s p e c t i v e feed company. The feed companies vary i n t h e i r p o l i c y of repayment of feed account payable without a p e n a l t y . The u s u a l non-penalty p e r i o d i s from seven to t h i r t y days but the feed companies w i l l on o c c a s i o n , c a r r y the account f o r up to n i n e t y days without a p e n a l t y . The l e n g t h of repayment p e r i o d appears to depend upon the p a r t i c u l a r feed company and the volume of b u s i n e s s , c r e d i t worthiness of the f e e d l o t f i r m and the a s s o c i a t i o n of the f e e d -58 l o t f i r m with the feed company 1 1. A l t e r n a t i v e l y the f e e d l o t f i r m f i n a n c e s the o p e r a t i o n by f e e d i n g c a t t l e on a custom b a s i s . The two common methods, i n which feeder c a t t l e ownership i s r e t a i n e d by the o u t s i d e i n v e s t o r , are (a) the f e e d l o t f i r m charges the i n v e s t o r a c o n t r a c t e d fee per pound of beef g a i n i n the f e e d l o t , or (b) the f e e d l o t f i r m charges the c o s t of the feed p l u s a yardage fee f o r the d u r a t i o n of time the c a t t l e are being fed i n the f e e d l o t . The q u e s t i o n of paramount importance i n the f i e l d of adequacy of s h o r t term funds to the fed beef i n d u s t r y , i s whether the r e e x i s t s an optimum flow of funds to the f i r m g i v e n the quan-t i t y of l o a n a b l e funds a v a i l a b l e i n the economy and the degree of r i s k and u n c e r t a i n t y present i n the fed beef f i r m i n compari-son to other f i r m s of equal r i s k and u n c e r t a i n t y i n the economy. The q u e s t i o n r e q u i r e s f u r t h e r study r e l a t i v e to the f e d beef i n -d u s t r y i n B r i t i s h Columbia; however, before the q u e s t i o n can be f u r t h e r e v a l u a t e d more i n f o r m a t i o n i s r e q u i r e d as to the economic s t a t u s of the i n d u s t r y so the r i s k and u n c e r t a i n t y can be e v a l u -ated. IV. MANAGEMENT AND LABOR The type of management and l a b o r r e q u i r e d f o r the opera-t i o n of the f e e d l o t f i r m were c h a r a c t e r i z e d i n Chapter I I of the r e p o r t . I t w i l l be assumed t h a t the adequacy of good q u a l i t y management and l a b o r w i l l not be a d e t e r r e n t t o the i n c r e a s e of 1 1 I n f o r m a t i o n a c q u i r e d through p e r s o n a l c o n v e r s a t i o n with the C r e d i t Managers of the three l a r g e s t feed companies doing business i n t h i s area. 59 the l o c a l f e d beef i n d u s t r y g i v e n adequate education f a c i l i t i e s with the area or from adjacent areas of Washington State or A l b e r t a and p r o v i d e d t h a t employment i n the l o c a l fed beef i n -d u s t r y w i l l p r o v i d e the manager and/or the h i r e d l a b o r a r e t u r n to h i s r e s o u r c e s t h a t i s e q u i t a b l e to the a l t e r n a t i v e s a v a i l a b l e f o r the use of h i s r e s o u r c e s . V. THE AVAILABILITY OF SLAUGHTER FACILITIES A 1966 r e p o r t 1 2 by Mr. H.L. Ford, S u p e r v i s o r , P r o d u c t i o n and Marketing Branch, Canada Department of A g r i c u l t u r e , a t Van-couver, B.C., i n d i c a t e s t h a t at present there i s excess s l a u g h t e r c a p a c i t y i n the l o c a l packing i n d u s t r y . In a d d i t i o n , a s i g n i f i -cant p r o p o r t i o n of the l o c a l s l a u g h t e r c o n s t i t u t e s animals t h a t have been imported from o u t s i d e the p r o v i n c e . Thus i t does not appear u n r e a l i s t i c to assume t h a t the necessary s l a u g h t e r f a c i l i -t i e s w i l l be a v a i l a b l e to process fed c a t t l e produced by the l o c a l i n d u s t r y i n the f u t u r e should the fed beef i n d u s t r y remain at i t s p r e s e n t s i z e or i n c r e a s e i n s i z e . In r e t r o s p e c t , there does not appear to be any s e r i o u s d e f i c i e n c y i n the q u a n t i t y and q u a l i t y of input f a c t o r s to deter an i n c r e a s e of the fed beef i n d u s t r y i n the Lower Mainland pro-v i d e d the fed beef f e e d i n g process can employ the f a c t o r i n p u t s at t h e i r o p p o r t u n i t y p r i c e s and cover f u l l c o s t s over the i n v e s t -ment p e r i o d . Before e v a l u a t i n g the f i n a n c i a l aspects i t i s 1 2 F e e d Q u a l i t y Sub-Committee Report, Ruminant N u t r i t i o n Committee Meeting October 26th, 1966, P e n t i c t o n , B.C., P. 37, mimeographed. 60 deemed important to d i s c u s s the s t r u c t u r e and conduct i n the present f e d beef i n d u s t r y w i t h i n the Lower Mainland. 61 CHAPTER V STRUCTURE AND CONDUCT IN THE FRASER VALLEY FED BEEF INDUSTRY I t i s the purpose of t h i s chapter to i n d i c a t e the present s t r u c t u r e and conduct i n the F r a s e r V a l l e y Fed Beef Industry so t h a t the f i n a n c i a l a n a l y s i s of the i n d u s t r y i n the next chapter can be m e a n i n g f u l l y conceived i n r e l a t i o n to the c a u s a l f a c t o r s which e x p l a i n the c h a r a c t e r i s t i c s of the i n d u s t r y i n the above g e o g r a p h i c a l r e g i o n . H i s t o r i c a l l y , very few beef c a t t l e were kept i n the F r a s e r V a l l e y i n p r o p o r t i o n to the p o p u l a t i o n of c a t t l e kept f o r m i l k i n g p u r p o s e s 1 . Although the census f i g u r e s taken on June 1st i n d i -cate the h e i f e r and s t e e r p o p u l a t i o n a t a time w i t h i n the year when a s i g n i f i c a n t number of f e e d l o t s are low i n c a t t l e inven-t o r y , the s i g n i f i c a n t i n c r e a s e i n the beef s t e e r and beef h e i f e r p o p u l a t i o n from 2938 head i n 1951 to 15,289 i n 1966 2 i s contended to be due to the s i g n i f i c a n t i n c r e a s e i n the number of firms g r a z i n g c a t t l e on farms to produce feeder c a t t l e f o r t h e i r own f e e d l o t , f o r other f e e d l o t s or a c t u a l l y f i n i s h i n g the c a t t l e on the grass supplemented with dry f e e d s t u f f s . The o p e r a t o r s who purchase feeder c a t t l e o n l y to graze the 1Dominion Bureau of S t a t i s t i c s , Canada Yearbook (Ottawa: Queens P r i n t e r ) . 2Dominion Bureau of S t a t i s t i c s , 1966 Census of Canada, Volume 5, P a r t 3 (Ottawa: Queens P r i n t e r 1968) . c a t t l e on grass and s e l l the c a t t l e to f e e d l o t f i r m s w i l l not be i n c l u d e d i n the a n a l y s i s . The balance of the f i r m s who f a t t e n young c a t t l e on grass and supplemented f e e d s t u f f s or purchase the c a t t l e , graze them on pasture and then complete the f a t t e n i n g process i n a dry l o t w i l l be d i s c u s s e d . I. OBJECTIVES OF THE FEEDLOT ENTREPRENEURS The g r e a t d i v e r s i t y i n s i z e s and types of o p e r a t i o n i n the Lower Mainland beef f e e d l o t i n d u s t r y can be e x p l a i n e d , l a r g e l y , by the o b j e c t i v e s of the o perator and the complement of resources t h a t are a t h i s d i s p o s a l . The two p o l a r extremes i n s i z e s of f e e d l o t are on one hand the s i n g l e e n t e r p r i s e f i r m whose onl y economic a c t i v i t y i s the investment i n feeder c a t t l e and the c o n v e r s i o n of feed to beef product and on the other hand the m u l t i - e n t e r p r i s e f i r m i n which the f e e d l o t i s o n l y one p a r t of the t o t a l economic a c t i v i t i e s performed by the f i r m . In the f i r s t case a l l s u b - a c t i v i t i e s of the f i r m are centered on the maximization o f the t o t a l p r o f i t s of the f i r m by c r e a t i n g the l a r g e s t c o n t r i b u t i o n to p r o f i t from the summation of the p r i c e and feed margins i n the beef fee d i n g program. In the second case the s u b - a c t i v i t i e s of the f i r m are i n a l l p r o b a b i l i t y centered on the maximization of p r o f i t from a l l economic a c t i v i t i e s of the f i r m . Thus the complement of r e -sources a v a i l a b l e to the f e e d l o t a c t i v i t y w i t h i n the m u l t i - e n t e r -p r i s e f i r m may c o n t r i b u t e to the maximization of the f i r m ' s pro-f i t i n a d i f f e r e n t manner than the same resources i n the s i n g l e e n t e r p r i s e f i r m ; r e s u l t i n g i n an emphasis of d i f f e r e n t o b j e c t i v e s when the two p o l a r extremes of f e e d l o t types are c o n t r a s t e d . 63 The commercial f e e d l o t w i l l endeavor to use the c a p i t a l , l a b o r , management, b u i l d i n g and equipment, and land a t i t s d i s -p o s a l i n the most e f f i c i e n t manner to maximize p r o f i t s w i t h i n the year. W i t h i n the f i r m , the above resources w i l l be c o n s i d -ered to have t h e i r h i g h e s t and best use i n the beef f e e d i n g op-e r a t i o n . There w i l l be no other e n t e r p r i s e s competing f o r the resources a t d i f f e r e n t times of the year. In c o n t r a s t the feed-l o t type a t the other p o l a r extreme has one or more e n t e r p r i s e s w i t h i n the f i r m t h a t compete f o r the same r e s o u r c e s . Short term c a p i t a l , l a b o r and management may f i n d t h e i r h i g h e s t and best use i n cash crop p r o d u c t i o n throughout the growing season of the year. Thus the f e d beef e n t e r p r i s e w i l l only be e n t e r t a i n e d d u r i n g the winter months when s u r p l u s s h o r t term c a p i t a l , l a b o r , and management are a v a i l a b l e . Another case t h a t i s s e l f e v i d e n t , i s the o p e r a t i o n of the pasture f e e d l o t o n l y d u r i n g the growing season of the year. T h i s type of o p e r a t i o n may not have the necessary b u i l d i n g s f o r f e e d i n g c a t t l e throughout the wet seasons of the year and thus the o p e r a t i o n of the f e e d l o t i s c o n f i n e d to the d r i e r summer p e r i o d . In a d d i t i o n , the m u l t i - e n t e r p r i s e f i r m u s u a l l y has by-products from other e n t e r p r i s e s which i t can u t i l i z e i n f e e d i n g c a t t l e to i n c r e a s e the net income of the f i r m . C u l l potatoes and t u r n i p s , pea hay or s i l a g e can be used along w i t h the hay, grass s i l a g e or corn s i l a g e , grown f o r beef p r o d u c t i o n , to form the b a s i s of the feed r a t i o n of the fed beef e n t e r p r i s e . Another f a c t o r was impressed upon the w r i t e r by the farm f e e d l o t o p e r a t o r s i n the h e a v i e r s o i l zones w i t h i n the v a l l e y . They emphasized the importance of the ' c a t t l e manure, produced 64 i n the f e e d l o t , f o r crop l a n d . The op e r a t o r s expressed the view t h a t the major b e n e f i t of the a d d i t i o n of the manure to the land was i n the betterment of the p h y s i c a l s t r u c t u r e of the heavy s o i l f o r cash crop p r o d u c t i o n and pasture r a t h e r than the a d d i t i o n o f n u t r i e n t s , which would a l s o be r e a l i z e d . Some ope r a t o r s went as f a r as to express the view t h a t the major reason they were feed-i n g c a t t l e was to i n s u r e they had an adequate supply of manure f o r the cash crops, which i n most cases formed the b a s i s of t h e i r farm o p e r a t i o n . Inbetween the two p o l a r extremes the o b j e c t i v e s o f the f e e d l o t o p e r a t o r s v a r i e d from hobby f e e d i n g to \"retirement feed-i n g \" . Some ope r a t o r s expressed the view t h a t t h e i r c a t t l e f e ed-i n g e n t e r p r i s e was more of a hobby to them than a business e n t e r -p r i s e per se. Other o p e r a t o r s f e l t t h a t the fe e d i n g o f beef was an e n t e r p r i s e t h a t was most s u i t a b l e to the use of t h e i r o l d d a i r y barns and land which they were m a i n t a i n i n g u n t i l such time they f e l t i t a d v i s a b l e to r e t i r e from a c t i v e l i f e a l t o g e t h e r or the market value o f the lan d , f o r i n d u s t r i a l or housing purposes, i n c r e a s e d s i g n i f i c a n t l y . I I . THE FRASER VALLEY FEEDLOTS Types and S i z e s of F e e d l o t s The s i z e s and types of f e e d l o t s are i n d i c a t e d i n Table V:. , The commercial f e e d l o t i s d e f i n e d as being the only economic a c t i v i t y of the f i r m e n t i t y while the farm f e e d l o t i s d e f i n e d as being on p a r t of a m u l t i - e n t e r p r i s e f i r m e n t i t y . I t i s i n t e r e s t i n g t o note t h a t o n l y twelve percent of the TABLE V TYPES AND SIZES-OF BEEF FEEDLOTS IN THE FRASER VALLEY - 1966-67 TYPE ESTIMATED UNIT CAPACITY (NO. OF HEAD -- YEARLINGS) 20-50 51-100 101- 250 251- 5 0 0 1000 1200-2500 T o t a l Lots Percent of T o t a l Lots Commercial dry l o t 1 3 2 2 2 10 18 Commercial dry l o t and pasture 1 6 2 9 16 Farm dry l o t 1 6 2 1 10 18 Farm dry l o t and grass 12 8 2 3 1 1 27 48 T o t a l f e e d l o t s 13 10 17 9 3 4 56 Percent of t o t a l f e e d l o t s 23 18 31 16 5 7 100 Source: Primary data c o l l e c t e d by w r i t e r . u n estimated t o t a l number of f e e d l o t s have a u n i t c a p a c i t y of g r e a t e r than 500 head. I t i s a l s o i n t e r e s t i n g t o note t h a t 64 percent of the estimated t o t a l number of f e e d l o t s use pasture as an i n t e g r a l p a r t of the f e e d i n g process e i t h e r f o r f e e d s t u f f source i n the f i n a l f i n i s h i n g phase or \"growing out\" c a t t l e i n p r e p a r a t i o n f o r the f i n i s h i n g stage. I t . i s indeed d i f f i c u l t to estimate the t o t a l estimated u n i t c a p a c i t y i n any one year f o r the Lower Mainland i n d u s t r y because of the d i v e r s i t y of types and s i z e s of f e e d l o t s , as evidenced by the above t a b l e , i n a d d i t i o n to the f l u c t u a t i o n s i n number of c a t t l e on feed t h a t can occur from season to season and year to year due to changing weather and market c o n d i t i o n s . L o c a t i o n of the F e e d l o t s F i g u r e 10 i n d i c a t e s the l o c a t i o n of fed beef f e e d l o t s i n the Lower Mainland i n 1966-67. I t can be seen t h a t 23 of the 56 estimated t o t a l o p e r a t i n g f e e d l o t s are s i t u a t e d i n the D e l t a and Richmond areas, immediately adjacent to Vancouver. The balance of the f e e d l o t s are l o c a t e d on the more f e r t i l e southern s i d e of the F r a s e r V a l l e y except f o r 2 commercial f e e d l o t s and one farm f e e d l o t l o c a t e d i n the Haney area. In a d d i t i o n , i t can be seen t h a t the commercial f e e d l o t o p e r a t i o n s are spread throughout the V a l l e y . Supply of fed beef from the F r a s e r V a l l e y fed beef indus-t r y . An i n d i c a t i o n of the s e a s o n a l i t y of the supply of fed beef from the l o c a l f ed beef i n d u s t r y to the l o c a l market can be ob-t a i n e d from an a n a l y s i s of the o r i g i n of fed beef to the f e d e r a l -FIGURE 10 LOCATION OF BEEF FEEDLOTS IN THE FRASER VALLEY REGION 1966-67 The above sketch i s not drawn to s c a l e . 68 l y i n s p e c t e d s l a u g h t e r p l a n t s . Table VI i n d i c a t e s a breakdown of the l o c a l supply. Although the f i g u r e s do not g i v e a complete summation of the fed c a t t l e produced by the l o c a l i n d u s t r y , the t a b l e does i n d i c a t e the time o f year the m a j o r i t y of the c a t t l e are marketed. The o r i g i n of the fed c a t t l e r e c e i v e d a t p r o v i n -c i a l l y i n s p e c t e d p l a n t s are not a v a i l a b l e . TABLE VI CHOICE AND GOOD GRADE CATTLE RECEIVED BY THE MONTH AT FEDERALLY INSPECTED PLANTS IN THE LOWER MAINLAND REGION - 1966-67 1966 PRODUCTION AREA Month F r a s e r V a l l e y a Vancouver I s l a n d Okanagan Kamioops Cariboo Peace , Riv e r T o t a le Jan. Feb. Mar. Apr. May June J u l y Aug. Sept. Oct. Nov. Dec. 1600 1529 1827 1288 1492 1316 610 406 1051 1039 14 70 2095 7 3 4 3 10 2 3 1 11 2 13 112 94 129 131 83 127 43 13 45 29 20 46 133 263 349 200 164 84 20 84 275 115 366 c 161 50 52 1 27 52 67 21 28 99 110 63 46 153 79 13 17 35 20 18 60 0 24 103 0 2055 2020 2323 1666 1836 1616 715 592 1481 1317 2024 2361 T o t a l 15723 59 872 2214 616 522 20006 1967 Jan. Feb. Mar. Apr. May June J u l y Aug. Sept. Oct. Nov. Dec. 1929 1990 2539 2697 1232 1026 580 633 782 1182 2254 2156 10 1 5 1 2 1 158 & 52 85 158 121 43 59 103 24 44 88 136 176 161 309 71 97 73 8 93 78 46 349 180 16 5 37 11 30 22 23 1 52 41 77 142 139 204 183 111 119 93 36 100 80 51 44 108 2428 2413 3128 3048 1599 1257 707 930 1018 1365 2812 2722 T o t a l 19000 20 1071 1641 457 1268 23457 69 TABLE VI (continued) Source: L i v e s t o c k P r o d u c t i o n and Marketing Branch Records, Canada Department of A g r i c u l t u r e , Vancouver, B.C. aSome of the fed c a t t l e w i l l have been f i n i s h e d i n other areas o f B r i t i s h Columbia and shipped to the Lower Mainland to be s o l d by p u b l i c a u c t i o n . The number of fed c a t t l e o r i g i n a t i n g from other areas and s o l d i n the Lower Mainland area i s not a v a i l a b l e . ^The f e d c a t t l e s l a u g h t e r e d i n the Okanagan are assumed to be consumed i n the area and are not i n c l u d e d i n the f i g u r e s . The re p o r t e d number of Canada Choice and Canada Good grade c a t t l e s l a u g h t e r e d i n the Okanagan i s n i l f o r 1966 and 109 head i n 1967. cThe r e l a t i v e l y high f i g u r e i n November i s due to the Kamloops F a t s t o c k show. Some of the c a t t l e r e p r e s e n t e d i n t h i s f i g u r e would have been f i n i s h e d elsewhere. The f ed c a t t l e s l a u g h t e r e d i n the Peace R i v e r area are assumed to be consumed i n the area and are not i n c l u d e d i n the f i g u r e s . The r e p o r t e d number of Canada Choice and Canada Good grade c a t t l e s l a u g h t e r e d i n the Peace River area was 225 head i n 1966 and 280 head i n 1967. eThe fed c a t t l e s l a u g h t e r e d i n Lower Mainland p r o v i n c i a l l y i n s p e c t e d slaughterhouses are not r e p o r t e d i n the f i g u r e s . A l -though the o r i g i n of these f e d c a t t l e are not a v a i l a b l e , the num-ber of Canada Choice and Canada Good grade c a r c a s s e s amounted to 3292 head i n 1966 and 2585 head i n 1967. The decrease i n number of f e d c a t t l e s l a u g h t e r e d i n p r o v i n c i a l l y i n s p e c t e d p l a n t s i n 1967 as c o n t r a s t e d to 1966 i s a r e s u l t of some of the 1966 pro-v i n c i a l l y i n s p e c t e d p l a n t s coming under F e d e r a l i n s p e c t i o n i n 1967. 70 C a t t l e Purchasing and Marketing P o l i c i e s The s i z e and c l a s s of feeder animal purchased by f e e d l o t f i r m s i n the Lower Mainland r e g i o n are i n d i c a t e d i n Table V I I . I t i s noted t h a t approximately 8 2 percent of the f e e d l o t s pur-chased y e a r l i n g s as c o n t r a s t e d to 18 percent of the f i r m s which purchased c a l v e s . TABLE VII CLASS AND SIZE OF FEEDER ANIMAL PURCHASED BY THE FEEDLOTS*2 1966-67 CALF YEARLING H e i f e r Steer H e i f e r Steer 400- 700- 850 l b s 700 l b s 850 l b s and over 500- 700- 800 l b s 700 l b s 800 l b s and over 9% 9% 24% 8% 2% 33% 10% 5% 18% 34% 48% General Management Q u e s t i o n n a i r e A n a l y s i s , op. c i t . The method of purchase d i f f e r s with the s i z e o f the f e e d -l o t as noted i n Table V I I I . I t i s i n t e r e s t i n g to note t h a t the m a j o r i t y of the f e e d l o t o p e r a t o r s purchase c a t t l e through a u c t i o n s a l e s . However, the l a r g e r f e e d l o t s tend t o do more of the pur-chasing d i r e c t from ranches. The l e n g t h of time t h a t e l a p s e s between the time of pur-chase and the time of s a l e v a r i e s s i g n i f i c a n t l y w i t h i n types of f e e d l o t s and s i z e s o f c a t t l e purchased. The average f e e d i n g p e r i o d i s estimated to be between 100 and 150 days although some heavy c a t t l e w i l l o n l y be fed f o r 60 days and some l i g h t e r c a t t l e f e d on p a s t u r e , and/or s i l a g e may be kept f o r up to 340 days. 71 TABLE VI I I CATTLE PURCHASING POLICY OF THE FRASER VALLEY FED BEEF INDUSTRY 1966-67 S i z e CATTLE PURCHASER PLACE OF PURCHASE Group ( c a p a c i t y of l o t ) Oper a t o r - Commis-s i o n Agent D i r e c t from Ranch Au c t i o n Sales No. of F e e d l o t s Sampled No. i n S i z e Group Sample as a % of Total\" 2 20-50 50 50 12 88 4 13 31 51-100 37 63 10 90 6 10 60 101-250 52 48 24 76 10 17 59 251-500 43 57 14 86 6 9 67 800-2500 59 41 49 51 6 7 86 Average 47 53 22 78 32 56 57 Source: General Management Q u e s t i o n n a i r e A n a l y s i s , op. c i t . The percentage of f e e d l o t s to t o t a l estimated f e e d l o t s i s r e p r e s e n t a t i v e f o r Tables IX and XI. 72 The method of s a l e of the fed c a t t l e v a r i e s s i g n i f i c a n t l y as i n d i c a t e d i n Table IX. I f the fed animal i s s o l d d i r e c t l y to the packer, the p r i c e per pound, i n most cases, w i l l be d e t e r -mined at the f e e d l o t whereas i f i t i s s o l d by a u c t i o n , the p r i c e w i l l be determined at the l o c a t i o n of the a u c t i o n s a l e . TABLE IX CATTLE MARKETING POLICY OF THE FRASER VALLEY FED BEEF INDUSTRY 1966-67 M e t h o d o f S a l e A u c t i o n D i r e c t to Packer S i z e Group (u n i t c a p a c i t y ) L i v e b a s i s percent Dressed b a s i s percent T o t a l percent 20 - 50 50 25 25 100 51 - 100 54 23 23 100 101 - 250 17 22 61 100 251 - 500 • 4 15 81 100 800 - 2500 17 17 66 100 Average 28 20 52 100 Source: General Management Q u e s t i o n n a i r e , op. c i t . In caseswhere the f e e d l o t operator s e l l s d i r e c t l y to the packer on a dressed b a s i s ; the grades, on which the p r i c e was d e t e r -mined at the f e e d l o t , w i l l be determined by a Government Grader a f t e r the s l a u g h t e r of the animal i n the slaughterhouse. F e e d s t u f f s Used In the F i n i s h i n g Stage of the Feeding Process An i n d i c a t i o n of the v a r i a b i l i t y i n the f e e d s t u f f s used i n the f i n i s h i n g r a t i o n s and the percentages of f e e d s t u f f s used i n the r a t i o n s are i n d i c a t e d i n Table X. Most r a t i o n s i n c l u d e d a t l e a s t three f e e d s t u f f s - an energy, a p r o t e i n and a m i n e r a l source - and a few i n c l u d e d as many as f i f t e e n d i f f e r e n t n u t r i e n t and m i n e r a l sources. Two feed companies were s e l l i n g a prepared 73 TABLE X FEEDSTUFFS USED IN FINISHING RATIONS BY 28 FRASER VALLEY CATTLE FEEDLOTS 1966-67 a Number of Operators Feeding t h i s Percent of T o t a l R a t i o n Feed I n g r e d i e n t I n g r e d i e n t Range Average Feed Grains B a r l e y 28 40 - 85 68 .1 Oats 1 45. Screening p e l l e t s 7 10 - 45 30.1 P r o t e i n Supp. Commercial supp. c 17 4 - 5 4.8 Chicken l i t t e r 1 40. Other 2 5. Roughages L o c a l grass hay 7 ! 1 0 - 15 12.1 Potatoes ^ 3 30. Corn s i l a g e 3 20 - 40 30 . Pea hay 3 i 8 - 20 12.5 Grass s i l a g e 7 I ; 25. Other 1 1 Other Energy Feeds Beet pulp 11 6 - 10 9.3 Molasses 12 3 - 5 4.7 Other 2 4 - 7 5.5 Source: General Management Q u e s t i o n n a i r e , i b i d . a F e e d l o t s which used pasture i n the l a s t p e r i o d of f i n i s h -i n g the c a t t l e were not i n c l u d e d i n the r a t i o n . ^The feed i n g r e d i e n t s were c a l c u l a t e d as a percentage of the t o t a l r a t i o n on a i r dry b a s i s . Most of the o p e r a t o r s t h a t used a commercial supplement used the 32 percent p r o t e i n supplement which u s u a l l y contained not over 10 percent e q u i v a l e n t crude p r o t e i n from urea. ^One operator had added 10 pounds of Urea #28 2 per ton of corn m a t e r i a l a t the time the s i l o was f i l l e d i n the f a l l of the year. \"complete\" f i n i s h i n g r a t i o n which was f i n d i n g i n c r e a s i n g popu-l a r i t y i n the i n d u s t r y . Most of the operations produced a la r g e percentage of t h e i r roughage requirements and purchased the energy feeds, p r o t e i n and mineral supplements. A few of the l a r g e r f e e d l o t s purchased t h e i r feed requirements i n ca r l o a d l o t s e a r l y i n the ha r v e s t i n g season and i n as l a r g e a q u a n t i t y f o r which they had storage space. None of the f e e d l o t s had s u f f i c i e n t storage space to purchase a l l t h e i r energy food r e -quirements i n the f a l l of the year, although a s i g n i f i c a n t pro-p o r t i o n of the f e e d l o t s purchased t h e i r roughage requirements i n the summer and f a l l of the year. L o c a l l y produced by-products such as c u l l potatoes, pea hay, and s t i l l a g e are used by some operators as important parts of the f i n i s h i n g r a t i o n s . The degree of v a r i a b i l i t y i n f e e d s t u f f s used i s no doubt due to the v a r i a b i l i t y i n o b j e c t i v e s of the entrepreneurs and the a v a i l a b l e resources. Bedding A l l of the f e e d l o t s u t i l i z e d wood shavings and sawdust fo r bedding m a t e r i a l i n the f e e d l o t . The m a j o r i t y of the bedding was wood shavings. The p r i c e of the shavings v a r i e d s i g n i f i c a n t -l y from season to season and a l s o upon geographical l o c a t i o n . There appears to be a surplus i n the supply of shavings i n the summer months and a shortage during thewinter. The p r i c e v a r i e d i n the winter from $9.00 per 3 u n i t load i n Ladner to $24.00 per 3 u n i t load i n the C h i l l i w a c k area. At times during the winter no shavings are a v a i l a b l e at a l l . Most f e e d l o t s endeavoured to 75 keep a supply of shavings i n r e s e r v e f o r such times of low supply and some f e e d l o t s endeavoured t o purchase a s i g n i f i c a n t propor-t i o n of t h e i r requirements d u r i n g the summer months. I I I . TYPES OF FEEDLOT AND CATTLE OWNERSHIP The m a j o r i t y of the f e e d l o t s were owned by the f i r m s o p e r a t i n g the f a c i l i t i e s . Only four f e e d l o t f a c i l i t i e s were rented by the p r i n c i p a l o p e r a t o r s . Three of the rented f a c i l i -t i e s were o l d d a i r y barns which were i n temporary use pending the s a l e or use of the p r o p e r t y f o r housing or i n d u s t r i a l pur-poses. The f o u r t h rented f e e d l o t was b u i l t by a p r i v a t e i n d i -v i d u a l to be rented to other f i r m s who had the necessary r e -sources to operate the f e e d l o t . The m a j o r i t y of the c a t t l e were purchased i n the name o f the f e e d l o t o p e r a t o r . A few c a t t l e were being purchased by a second p a r t y who c o n t r a c t e d with the f e e d l o t o p e r a t o r to f i n i s h the c a t t l e f o r a c o n t r a c t e d p r i c e per pound of beef g a i n . IV. SPECIAL ADVANTAGES OF THE REGION The s p e c i a l advantages of the area f o r f i n i s h i n g c a t t l e , as c o n t r a s t e d to the i n t e r i o r r e g i o ns of the p r o v i n c e , are con-s i d e r e d to be i t s p r o x i m i t y to the l a r g e consumer market and s l a u g h t e r i n g f a c i l i t i e s and the fa v o u r a b l e temperatures. Whether or not these s p e c i a l advantages are s u f f i c i e n t to a t t r a c t the necessary c a p i t a l r e s o u r c e s to i n c r e a s e the s i z e of the i n d u s t r y w i l l depend on t h e i r e f f e c t on the c o s t and value per u n i t of beef produced i n the area as c o n t r a s t e d to other a l t e r n a t i v e areas. These que s t i o n s w i l l be f u r t h e r evaluated i n the next 76 two c h a p t e r s . V. METHODS USED TO REDUCE RISK AND UNCERTAINTY The r i s k and u n c e r t a i n t y i n the fed c a t t l e i n d u s t r y are of two types. One type i s t h a t a s s o c i a t e d with d i s e a s e or p h y s i -c a l i n j u r y of the animal i n the f e e d l o t and the other type i s t h a t due to the f l u c t u a t i o n s of the feeder c a t t l e , fed c a t t l e and f e e d s t u f f markets d u r i n g the o p e r a t i n g p e r i o d . The r i s k o f the f i r s t type can be hedged with the use of l i v e s t o c k i n s u r a n c e . I t i s i n t e r e s t i n g to note t h a t not a l l the op e r a t o r s are us i n g l i v e s t o c k i n s u r a n c e . The reason they do not have l i v e s t o c k insurance coverage i s no doubt due to t h e i r low c a t t l e l o s s e s d u r i n g the f e e d i n g p r o c e s s . Table XI i n d i c a t e s the t a b u l a t i o n of the average expected c a t t l e l o s s e s i n the feed-l o t and the d i s e a s e s t h a t are present i n the area i n v a r y i n g extent from f e e d l o t to f e e d l o t . Another method of reducing the f i r s t type of r i s k and u n c e r t a i n t y i s to v a c c i n a t e the c a t t l e e i t h e r at the p l a c e o f purchase or upon a r r i v a l a t the f e e d l o t f o r the most p r e v a l e n t d i s e a s e f o r which there are v a c c i n e s a v a i l a b l e . T h i s p r a c t i c e i s by no means predominant i n the V a l l e y as i n d i c a t e d i n Table XI. The reasons g i v e n f o r not v a c c i n a t i n g p r i o r to feed i n g are low s i c k n e s s or death l o s s e s or i f the p o l i c y i s i n f r e q u e n t , good weather and t r a n s p o r t a t i o n c o n d i t i o n s at the time the c a t t l e were shipped to the f e e d l o t from i n t e r i o r r e g i o n s . That i s , some ope r a t o r s have found from experience t h a t s h i p p i n g f e v e r i s more p r e v a l e n t w i t h poor t r a v e l l i n g c o n d i t i o n s and of very l i t t l e problem wi t h good t r a v e l l i n g c o n d i t i o n s to the extent t h a t they TABLE XI DISEASES ENCOUNTERED IN THE FRASER VALLEY FED BEEF INDUSTRY S i z e Group Number i n Number of Firms Reporting the F o l l o w i n g Diseases 0 1 Present^ Average Death Losses (per-Shipping f e v e r t r e a t -ment b e f o r e s h i p p i n g u n i t c a p a c i t y S i z e Group s h i p p i n g f e v e r pneumonia f o o t r o t pink eye lump jaw IBR C centage o f year-l y t o t a l c a t t l e ) or on a r r i v a l (no. of firms) 20-50 13 - - 3 1 2 - 1.7 1 51-100 10 5 1 4 2 - - 1.1 4 101-250 17 6 2 3 6 1 1 .85 4 251-500 9 3 2 5 5 1 3 1.0 2 800-2500 7 3 3 6 4 - 1 1.0 5 T o t a l s 56 17 8 21 18 4 4 5.65 16 Average f o r T o t a l F e e d l o t s ( % ) 30 14 37 32 7 7 1.0 28 Ringworm, warbles, founder and b a r l e y t o x i c i t y were a l s o present to a minor extent. ^In most cases the e x i s t i n g medicines were s u f f i c i e n t to cure the i l l n e s s . T h i s r e l a t i v e l y new d i s e a s e may be on the i n c r e a s e and become more of a problem i n f u t u r e y e a r s . ct Some of the l a r g e r f e e d l o t s s h i p any c a t t l e t h a t become s i c k thus t h e i r death l o s s e s w i l l be very low. The ope r a t o r ' s estimate of the number of c a t t l e t h a t would have been death l o s s e s was used f o r the above t a b u l a t i o n s . -J o n l y v a c c i n a t e when c o n d i t i o n s are adverse. Risk and u n c e r t a i n t y o f the second type can be hedged by purchasing the r e q u i r e d f e e d s t u f f s i n the summer or f a l l o f the year when the p r i c e s are lower and s t o r i n g the feed u n t i l i t i s r e q u i r e d . As i n d i c a t e d e a r l i e r i n the chapter the m a j o r i t y of the f e e d l o t s have found i t to t h e i r advantage to purchase the balance o f t h e i r roughage requirements i n the summer and f a l l but have not found i t of s u f f i c i e n t advantage to c o n s t r u c t or r e n t f a c i l i t i e s to s t o r e the e n t i r e requirements of energy feed-s t u f f s . In the case of adverse r e l a t i v e f l u c t u a t i o n s i n the feeder c a t t l e and fed c a t t l e markets duri n g the f e e d i n g process, the use of the c a t t l e f u t u r e s market c o u l d a t times be of m e r i t i n r e -ducing the r i s k of a severe n e g a t i v e p r i c e margin. The hedge i n v o l v e s s e l l i n g c a t t l e f u t u r e s c o n t r a c t s on the Chicago or West Coast United S t a t e s Commodity Markets a t the time the feeder c a t t l e are pl a c e d i n the f e e d l o t and then pur-chasing c o n t r a c t s on the spot market and d e l i v e r i n g them a g a i n s t the f u t u r e s c o n t r a c t s at the time the c a t t l e are f i n i s h e d i n the f e e d l o t . Although the t r a n s a c t i o n s i n v o l v e d i n purchasing and s e l l i n g c a t t l e c o n t r a c t s are q u i t e separate from the t r a n s a c t i o n s i n v o l v e d i n purchasing and s e l l i n g c a t t l e , the s a l e o f c a t t l e f u t u r e s c o n t r a c t s a t the time the feeder c a t t l e are p l a c e d i n the f e e d l o t guarantee the p r i c e margin f o r the fed beef c a t t l e at the estimated time the fed c a t t l e w i l l be ready f o r market. The use of the c a t t l e f u t u r e s market to hedge r i s k i s of the g r e a t e s t b e n e f i t to the f e e d l o t o p e r a t i o n which purchases and s e l l s c a t t l e only a few times a year s i n c e the r i s k of l o s s of income i s high because of the l e n g t h of time between market t r a n s a c t i o n s . In c o n t r a s t the f e e d l o t o p e r a t i o n which operates to c a p a c i t y a l l year w i l l be purchasing and s e l l i n g c a t t l e almost every week which w i l l minimize the income l o s s due to f l u c t u a t i n g c a t t l e p r i c e s . Since most of the F r a s e r V a l l e y f e e d l o t s do not operate a t c a p a c i t y a l l year, i t i s p o s s i b l e the c a t t l e f u t u r e s market might be of b e n e f i t to them i n hedging a g a i n s t the r i s k of adverse c a t t l e p r i c e f l u c t u a t i o n s w hile the f e e d l o t was i n o p e r a t i o n . In d i s c u s s i o n w i t h the f e e d l o t o p e r a t o r s and a represen-t a t i v e o f a l a r g e stock brokerage f i r m i n Vancouver, who has c o n t r a c t e d many of the f e e d l o t o p e r a t o r s i n the V a l l e y , there i s i n t e r e s t i n the use of the f u t u r e s market, however, few c o n t r a c t s have been taken out as of y e t . Some reasons f o r low c o n t r a c t s a l e s amongst the f e e d l o t o p e r a t o r s i s contended to be due to the newness of the c a t t l e f u t u r e s market, the absence of a c a t t l e f u t u r e s market i n Canada, l a c k of a v a i l a b l e s h o r t term c a p i t a l to c a r r y the necessary t r a n s a c t i o n s , and perhaps l a c k o f an o p p o r t u n i t y of the f u t u r e s market to a c t as a hedge f o r the f e e d l o t operator i n the Lower Mainland. 80 CHAPTER VI THE PRODUCTIVITY OF CAPITAL INVESTED IN THE FRASER VALLEY FED BEEF INDUSTRY The d i v e r s i t y i n s i z e s and types of f e e d l o t f a c i l i t i e s i s evidenced i n Table V of the r e p o r t . I t i s d i f f i c u l t , w ith such a d i v e r s i t y i n s i z e s and types of o p e r a t i o n , t o s t r u c t u r e a f i n a n c i a l analyses t h a t w i l l be r e p r e s e n t a t i v e f o r a l l the f e e d l o t s . The w r i t e r w i l l endeavour to i n d i c a t e the p r o d u c t i v -i t y o f c a p i t a l o n l y i n the types and s i z e s o f f e e d l o t s t h a t con-s t i t u t e the m a j o r i t y ; based on the a n a l y s i s of Table V and the f i n a n c i a l i n f o r m a t i o n t h a t c o u l d be a c q u i r e d from the f e e d l o t cooperators over the 1966-67 fe e d i n g p e r i o d . The types and s i z e of f e e d l o t s t h a t w i l l be analyzed are i n d i c a t e d i n Table X I I . Since i t was not p o s s i b l e to a c q u i r e f i n a n c i a l i n f o r m a t i o from an adequate number of the d i f f e r e n t types and s i z e s of feed l o t s to i n d i c a t e average parameters, s u b j e c t i v e e v a l u a t i o n s were made by the w r i t e r as to what c o n s t i t u t e d a r e a l i s t i c mea-sure based on the i n f o r m a t i o n a c q u i r e d from the a n a l y s i s of 17 f e e d l o t f i n a n c i a l r e c o r d s . The c o l l e c t i o n of the records was s u p e r v i s e d by the w r i t e r i n c o o p e r a t i o n with the f e e d l o t opera-t o r s . The f i g u r e s t h a t are generated i n the f o l l o w i n g analyses do not p e r t a i n to any one f e e d l o t i n e x i s t e n c e i n the F r a s e r V a l l e y but are an i n d i c a t i o n o f the magnitude of the measurement f o r the s i z e of f e e d l o t under a n a l y s i s . I. THE PRICE AND FEED MARGINS 81 TABLE XII FEEDLOT EXAMPLES TO BE ANALYZED F e e d l o t Example Number F e e d l o t u n i t c a p a c i t y (no. of y e a r l i n g s ) F e e d l o t Type Type of F a c i l i t i e s 1 50 Farm d r y l o t Converted d a i r y barn 2 250 Farm d r y l o t S p e c i a l l y c o n s t r u c t e d f a c i l i t i e s 3 100 Farm d r y l o t and grass Converted d a i r y barn and pasture used as p a r t of cash crop r o t a t i o n 4 100 Farm d r y l o t and grass Converted d a i r y barn and pasture used as p a r t o f cash crop r o t a t i o n 5 500 Farm d r y l o t S p e c i a l l y c o n s t r u c t e d f a c i l i t i e s 6 500 Farm d r y l o t and grass S p e c i a l l y c o n s t r u c t e d f a c i l i t i e s 7 See 5 and 6 See 5 and 6 See 5 and 6 8 1500 Commercial d r y l o t S p e c i a l l y c o n s t r u c t e d f a c i l i t i e s 82 I t was i l l u s t r a t e d i n F i g u r e s 7 and 8 t h a t the p r i c e s of fed beef c a t t l e and feeder c a t t l e vary s i g n i f i c a n t l y from month to month and year to year due to the changing demand and supply c o n d i t i o n s . The r e l a t i v e changes i n the above p r i c e s e r i e s , w i l l to a l a r g e extent, determine the amount of net income t h a t w i l l be generated i n the f e e d l o t o p e r a t i o n a t any time i n the year. To i n d i c a t e the v a r i a b i l i t y of income generated i n the f e e d l o t o p e r a t i o n d u r i n g the year and over the s i x year p e r i o d a p r i c e and feed margin i s t a b u l a t e d i n t h i s s e c t i o n of the r e p o r t . Income Generated by the P r i c e Margin The p r i c e margin was d e f i n e d i n Chapter II as the d i f f e r -ence between the s e l l i n g p r i c e and the purchase p r i c e per u n i t of beef p l a c e d i n t o the f e e d l o t . The income generated by the p r i c e margin to a s s i s t i n d e f r a y i n g f e e d l o t c o s t s i s c a l c u l a t e d by m u l t i p l y i n g the p r i c e margin by the net weight of beef placed i n t o the f e e d l o t . The feeder c a t t l e purchase p r i c e i s lagged_by the l e n g t h of the f e e d i n g p e r i o d to i n d i c a t e the p r i c e margin. In other words the October feeder c a t t l e p r i c e i s s u b t r a c t e d from the February fed c a t t l e p r i c e . S ince the p r i c e p a i d f o r feeder c a t t l e by the f e e d l o t o p erator and the p r i c e r e c e i v e d by the o p e r a t o r f o r the f i n i s h e d c a t t l e are determined by f o r c e s o u t s i d e the c o n t r o l of the feed-l o t o p e r a t o r and s i n c e i t i s h i g h l y probable i n most cases t h a t the small o p e r a t o r can purchase and s e l l c a t t l e on the same ba-s i s and at the same p r i c e f o r s i m i l a r c a t t l e as the l a r g e r f eed-l o t o p e r a t o r 1 a common a n a l y s i s of the d i f f e r e n c e between the 1A review of the purchasing and marketing p o l i c i e s of the 83 the s e l l i n g p r i c e and the purchase p r i c e w i l l be used. The p r i c e margin a n a l y s i s f o r F r a s e r V a l l e y f e e d l o t s i s i l l u s t r a t e d i n Appendix L. Income Derived by the Feed Margin To i l l u s t r a t e the feed margin t h a t e x i s t e d f o r the feed-l o t s from 1962-67 i t i s necessary to make a number of assumptions. The assumptions are based on the w r i t e r ' s e v a l u a t i o n o f the feed c o s t s per hundred pounds of beef g a i n as c a l c u l a t e d i n the feed-l o t r e c o r d a n a l y s i s c a r r i e d out over the 1966-67 feed i n g p e r i o d 2 . The average feed c o s t per hundred weight of beef g a i n i n the 1966-67 winter f e e d i n g p e r i o d i s estimated t o be $24.75 3 per hundred weight f o r the small f e e d l o t and $20.00 per hundred f e e d l o t s presented i n Tables V I I I and IX i n d i c a t e s t h a t the l a r g e o p e r a t o r s f a v o r d i r e c t purchasing and marketing o f t h e i r c a t t l e whereas the s m a l l e r o p e r a t o r s favor s e l l i n g t h e i r c a t t l e by p u b l i c a u c t i o n . In a d d i t i o n there i s not a s i g n i f i c a n t d i f -f e r e n c e between s i z e s of f e e d l o t and whether the purchasing of the c a t t l e i s done by the f e e d l o t operator or a commission agent. I t i s f e l t t h a t any d i f f e r e n c e s t h a t e x i s t i n the purhcasing and marketing p o l i c i e s are due more to other c o n s i d e r a t i o n s than advantages i n p r i c e d i f f e r e n c e s i n volume purchasing by the l a r g e f e e d l o t . 2No r e s u l t s of the f e e d l o t r e c o r d a n a l y s i s are presented i n t a b u l a r form because the v a r i a b i l i t y i n the i n d u s t r y made i t u n r e a l i s t i c t o c r e a t e averages f o r the v a r i o u s types and s i z e s of f e e d l o t s . 3 I n c l u d e s a l l the feed r e q u i r e d to f a t t e n the c a t t l e to the f i n i s h weight. The home grown feed i s valued a t market p r i c e s . The feed c o s t per hundred weight o f ga i n i s c a l c u l a t e d by d i v i d i n g the t o t a l feed c o s t by the net ga i n i n weight i n the f e e d l o t , t h a t i s , the i n v o i c e net s e l l i n g weight i n c l u d i n g c l o s i n g c a t t l e i n v e n t o r y and weight of c a t t l e l o s s i s su b t r a c t e d from the i n v o i c e net purchasing weight. No pasture i s used f o r the f e e d i n g p r o c e s s . 84 weight f o r the l a r g e f e e d l o t i n the f o l l o w i n g a n a l y s i s . The average feed c o s t per hundred weight of beef g a i n i n the 1967 summer f e e d i n g p e r i o d i s estimated to be $17.0 0 per hundred weight of beef g a i n 4 . The average c o s t per hundred weight of beef g a i n , t h e r e -f o r e , w i l l be assumed to be $24.75 f o r the f o u r month fe e d i n g p e r i o d from December 1966 to A p r i l 1967 i n the f o l l o w i n g feed margin a n a l y s i s . The average feed r a t i o n over the f e e d i n g p e r i o d w i l l be assumed to c o n s i s t of 40 percent b a r l e y , 20 percent s c r e e n i n g p e l l e t - s , 5 percent m i n e r a l and p r o t e i n supplement and 35 percent good q u a l i t y hay. The feed c o s t s for the years p r i o r to 1967 are c a l c u l a t e d f i r s t by assuming t h a t the method of f e e d i n g and the feed r a t i o n does not change over the s i x year p e r i o d and secondly by c o s t i n g the feed r a t i o n a c c o r d i n g to the p r i c e s of the f e e d s t u f f s t h a t e x i s t e d i n the p a r t i c u l a r year under a n a l y s i s . The income de-r i v e d by the feed margin i s i n d i c a t e d i n Appendix M. Summation of P r i c e and Feed Margins The p r i c e and feed margins generated i n the l a s t two s e c t i o n s of the r e p o r t are added together and presented i n F i g -ure 11. I t can be seen t h a t the t o t a l income generated by the p r i c e and feed margins v a r i e s s i g n i f i c a n t l y w i t h i n the year and year to year. In some i n s t a n c e s the p o s i t i v e feed margin was 4 I n c l u d e s the supplemental feed t h a t was r e q u i r e d to f i n i s h the c a t t l e f o r market on pasture but does not i n c l u d e the pasture management or o p e r a t i n g c o s t s . A pasture p e r i o d of f i v e months i s assumed i n the a n a l y s i s . Years FIGURE 11 SUMMATION OF PRICE AND FEED MARGINS FOR FED BEEF CATTLE 1962-67 a See Appendix N f o r c a l c u l a t i o n s . C O Ln 86 s u f f i c i e n t l y l a r g e to minimize the l o s s i n c u r r e d from a negative p r i c e margin b u t - i n s e v e r a l cases the negative p r i c e and feed margins caused a s u b s t a n t i a l income l o s s f o r some peri o d s . Whether or not the net margin i s s u f f i c i e n t to allow f o r a p r o f i t a b l e f e e d l o t business w i l l depend upon the s t r u c t u r e and magnitude of the f e e d l o t nonfeed operating costs and the s i z e of the f e e d l o t . The above a n a l y s i s i s only accurate f o r the f e e d l o t f i r m t h a t conforms to the assumptions put f o r t h i n the beginning of the a n a l y s i s . I t can be appreciated that the longer or shorter feeding p e r i o d , d i f f e r e n c e i n sex, s i z e and type of c a t t l e placed i n t o the f e e d l o t and magnitude of the feed costs w i l l a l t e r the magnitude of the net margins a c c o r d i n g l y . However, the above a n a l y s i s does i n d i c a t e the v a r i a t i o n i n net margins t h a t d i d occur w i t h i n the years from 1962-67 and which d i d occur, although of d i f f e r e n t magnitude, f o r d i f f e r e n t types and s i z e s of f e e d l o t . The f e e d l o t a n a l y s i s to f o l l o w w i l l use a s i m i l a r type of a n a l y s i s as tha t i l l u s t r a t e d above, but w i l l c a r r y out a complete a n a l y s i s according to set operating p o l i c i e s f o r the d i f f e r e n t s i z e s and types of f e e d l o t . I I . THE FEEDLOT ANALYSES The operating p o l i c i e s of the f e e d l o t examples to be analysed are i n d i c a t e d i n Table X I I I . The p o l i c i e s were formu-l a t e d by the w r i t e r according to the m a j o r i t y of types of oper-a t i o n that e x i s t i n the Fraser V a l l e y region and according to the amount of f i n a n c i a l i n f o r m a t i o n ;.that was a v a i l a b l e to c a r r y out meaningful analyses. TABLE X I I I OPERATING POLICIES OF THE FEEDLOT EXAMPLES F e e d l o t type & s i z e S i z e No. of . Y e a r l i n g s Average f e e d i n g p e r i o d days No. of times f e e d l o t f i l l e d P u r c h a s i n g date S e l l i n g date Purchase weight (lbs per animal) S e l l i n g weight (l b s per animal) 1 50 150 1 Oct-Nov Mar-Apr 700a 1050 2 250 150 1 Oct-Nov Mar-Apr-May 700 a 500b 1050 3 100 335 1 Sept-Oct-Nov Aug-Sept-Oct 1050 4 100 210 1 Mar-Apr Sept-Oct-Nov 500 a 950 5 500 150 1 Oct-Nov Mar-Apr-May 700 a 1050 6 500 210 1 Mar-Apr Sept-Oct-Nov 550 a 950 7 500 See 5 and 6 2 See 5 and 6 See 5 and 6 See 5 and 6 See 5 and 6 8a 1500 90 1 Sept-Oct-Nov Dec-Jan-Feb 750 a 1000 8b 1500 9 0 1 Feb-Mar-Apr May-June-J u l y 750 a 1000 Good Feeder Y e a r l i n g S t e e r s Good Stocker Steer C a l v e s 88 The f e e d l o t examples are not r e p r e s e n t e d to be optimum s i z e s and types of f e e d l o t s and the o p e r a t i n g p o l i c i e s are not r epresented to be the best p o l i c i e s but the examples are deemed to be r e a l i s t i c under e x i s t i n g c o n d i t i o n s . D e s i r a b i l i t y of the Investment P r o j e c t s The next step of the a n a l y s i s i n d i c a t e s the d e s i r a b i l i t y of investment i n the d i f f e r e n t types of f e e d l o t s . F e e d l o t Ex-ample One i s used to i n d i c a t e the p r o d u c t i v i t y of c a p i t a l i n v e s t -ed i n the f e e d l o t . The d i s c o u n t e d b e n e f i t - c o s t r a t i o c r i t e r i o n i s deemed to be the a p p r o p r i a t e c r i t e r i o n to use i n the a n a l y s i s . The d i s c o u n t e d b e n e f i t - c o s t r a t i o i s one of the c r i t e r i a used i n the e v a l u a t i o n process f o r measuring the p r o d u c t i v i t y of c a p i t a l i n investment p r o j e c t s . The d i s c o u n t e d b e n e f i t - c o s t r a t i o c r i t e r i o n i s the r a t i o of the p r e s e n t value of the f u t u r e b e n e f i t s , a t a s p e c i f i e d r a t e of d i s c o u n t , to the present value of the present and f u t u r e investment o u t l a y s and other c o s t s , a t the same r a t e 5 . I t i s f e l t t h a t the d i s c o u n t e d b e n e f i t - c o s t r a t i o c r i t e r i o n i s one of the most a p p r o p r i a t e c r i t e r i a to use -f o r the a n a l y s i s on hand. The c r i t e r i o n takes account of a l l income and i t s t i m i n g with a p p r o p r i a t e weights. In a d d i t i o n , the s i g n i f i c a n t f l u c t u a t i o n i n income l e v e l from year to year can e f f e c t i v e l y be taken i n t o account by the c r i t e r i o n . The i n t e r n a l r a t e of- r e t u r n c r i t e r i o n a l s o c o u l d be used f o r the 5 F o r a f u l l d i s c u s s i o n of the e v a l u a t i o n process c r i t e r i a f o r measuring d e s i r a b i l i t y see - G. David Q u i r i n , The C a p i t a l Expenditure D e c i s i o n , (Richard D. Irwin Inc., Homewood, I l l i n o i s , 1967). 89 a n a l y s i s with e q u a l l y good r e s u l t s . However, the accounting r a t e of r e t u r n and payback c r i t e r i a are not deemed to be appro-p r i a t e e v a l u a t i o n c r i t e r i a because they do not take i n t o ac-count a l l of the income generated by a p r o j e c t over i t s l i f e and the t i m i n g of the income with a p p r o p r i a t e w e i g h t s 6 . The use of the d i s c o u n t e d b e n e f i t - c o s t c r i t e r i o n r e q u i r e s t h a t the b e n e f i t and investment streams be formulated f o r the l i f e o f the p r o j e c t and then d i s c o u n t e d by the a p p r o p r i a t e i n -t e r e s t r a t e . For the purposes a t hand, the b e n e f i t and i n v e s t -ment streams for- the l i f e o f the f e e d l o t w i l l not be t a b u l a t e d because of the d i f f i c u l t y i n f o r e c a s t i n g the behaviour of the product and i n p u t markets over a twenty to f o r t y year p e r i o d i n t o the f u t u r e . Instead the net cash income 7, generated i n the f i r s t s i x years of o p e r a t i o n w i l l be assumed tb be i n d i c a t i v e of the b e n e f i t stream t h a t w i l l be d e r i v e d over the 20 year i n v e s t -ment p e r i o d . I f an a f t e r tax annual i n t e r e s t r a t e of 10 percent i s a r b i t r a r i l y s e l e c t e d to be r e a l i s t i c f o r the purposes at hand then the f i r s t s i x year income stream r e p r e s e n t s 51 p e r c e n t 8 of the t o t a l income stream over the twenty year p e r i o d . The e s t i -mated t o t a l net income stream f o r the 2 0 year investment p e r i o d can. be c a l c u l a t e d by m u l t i p l y i n g the d i s c o u n t e d net cash income f o r the f i r s t s i x year p e r i o d by the r e c i p r o c a l of the above 6 I b i d . , P. 32. 7The y e a r l y o p e r a t i n g expenses are s u b t r a c t e d from the y e a r l y o p e r a t i n g income to a c q u i r e a net cash income. 8The percentage of the t o t a l income stream represented by the f i r s t s i x years i s c a l c u l a t e d by d i v i d i n g the present value of an annuity f o r 6 years by the present value of an annuity f o r 20 years a t a 10 percent d i s c o u n t r a t e .4.355 (8.514 X 1 U 90 percentage. In a d d i t i o n to the income d e r i v e d by the f e e d l o t o p e r a t i o n , i n the case of the F r a s e r V a l l e y r e g i o n , an a p p r e c i -a t i o n i n l a n d value w i l l occur. The annual a p p r e c i a t i o n i n land value w i l l be assumed to be f i f t y d o l l a r s per acre per y e a r 9 f o r the investment p e r i o d . The investment r e q u i r e d i n 1961 to commence f e e d l o t oper-a t i o n w i l l be assumed to be the market value of the converted d a i r y barn (or the c o s t of c o n s t r u c t i o n of the new f a c i l i t i e s ) p l u s the necessary s p e c i a l equipment r e q u i r e d f o r the f e e d l o t o p e r a t i o n and the market value of the l a n d 1 0 . The g e n e r a l farm equipment w i l l not be i n c l u d e d i n the c a l c u l a t i o n s , except f o r f e e d l o t Example E i g h t , because of the i n s i g n i f i c a n t percentage of t o t a l machinery use i n the f e e d l o t . In a d d i t i o n to the b u i l d -i n g and l a n d investment, an i n v e n t o r y investment i n c a t t l e and feed i s r e q u i r e d f o r the f e e d i n g p e r i o d each year. The c a p i t a l i n v e s t e d i n feeder c a t t l e i s t r e a t e d as a c a p i t a l outflow a t the beginning of the f e e d i n g p e r i o d and i s compounded monthly at 10 percent u n t i l the end of the f e e d i n g p e r i o d . The s a l e of the fed c a t t l e i s t r e a t e d as a cash i n f l o w a t the end of the oper-a t i n g year. The d i f f e r e n c e between the end of year feeder c a t t l e c o s t and the feeder c a t t l e i n v o i c e c o s t i s represented to be the net c a t t l e investment c o s t f o r the o p e r a t i n g year. A l l other cash flows are assumed to occur a t the end of the o p e r a t i n g year.. To be c o r r e c t c o n c e p t u a l l y the t o t a l net d i s c o u n t e d c a t t l e i n v e s t -9The a p p r e c i a t i o n i n land value i s based upon d i s c u s s i o n s with farmers and r e a l e s t a t e personnel i n the F r a s e r V a l l e y . 1°The 1961 market value of the land i s assumed to be $700.00per acre based upon d i s c u s s i o n s with farmers and r e a l e s t a t e personnel i n the r e g i o n . 91 ment c o s t should be added to the b u i l d i n g and land investments. However, i n the present a n a l y s i s the annual net c a t t l e investment w i l l be s u b t r a c t e d from the annual net b e n e f i t s before the net b e n e f i t s are d i s c o u n t e d . The d i s c o u n t e d b e n e f i t - c o s t r a t i o i s c a l c u l a t e d by adding the d i s c o u n t e d net cash flow and the d i s c o u n t e d land value and d i v i d i n g the sum by the summation of the 1961 value of the b u i l d i n g , l a n d , and equipment l e s s the d i s c o u n t e d salvage value of the b u i l d i n g and machinery. F e e d l o t Example One i s used to i l l u s t r a t e the method of c a l c u l a t i o n of the y e a r l y income and i n d i c a t e s the d e r i v a t i o n of the d i s c o u n t e d b e n e f i t - c o s t r a t i o . The development of the income measurement f o r F e e d l o t Example One f o r the o p e r a t i n g year ending A p r i l 30, 1967 i s i l l u s t r a t e d i n Table XIV. The f o o t n o t e s to the t a b l e i n d i c a t e the method of c a l c u l a t i o n and sources of r e f e r e n c e . The revenue and expenses f o r the years p r i o r t o 1967, using the same pro-cedure as i l l u s t r a t e d i n Table XIV are r e p o r t e d i n Table XV. The net cash income a f t e r taxes i n d i c a t e s the b e n e f i t s r e c e i v e d f o r the o p e r a t i n g year from the f e e d l o t o p e r a t i o n . The net c a t t l e investment c o s t i s s u b t r a c t e d from the above f i g u r e to a c q u i r e the net cash flow f o r the o p e r a t i n g year. The y e a r l y net cash flows are d i s c o u n t e d back to 1961 a t a d i s c o u n t r a t e of 10 percent to g i v e a t o t a l d i s c o u n t e d b e n e f i t of -$660.00. To a c q u i r e a measure of the d i s c o u n t e d b e n e f i t s f o r the twenty year p e r i o d the -$660.00 i s - m u l t i p l i e d by the f a c t o r of 1.95„to pro-v i d e b e n e f i t s of -$1287 1 1. The net b e n e f i t s to be used i n the 1 1 See page 8 9 f o r the e x p l a n a t i o n of the c a l c u l a t i o n s . 92 TABLE XIV 1967 INCOME STATEMENT FOR FEEDLOT EXAMPLE ONE (For the Operating Year Ending A p r i l 30, 1967) Net C a t t l e S a l e s a (50 head of c a t t l e ) $13,230 .00 Cost of c a t t l e s o l d feeder c a t t l e * (50 head) 8907 .00 f e e d c 4340 .00 13,247 .00 Gross Margin $ -17 .00 Less Operating Expenses A/ D i r e c t cash expenses Bedding^ 187 .00 V e t e r i n a r y e 25 .00 Gas & o i l - f 13 .00 225 . 00 Net oyer d i r e c t cash o p e r a t i n g expenses -242 .00 B/ A l l o c a t e d o p e r a t i n g expenses Land & B u i l d i n g , taxes^ 20 .00 Labor^ 300 .00 A d m i n i s t r a t i o n 75 .00 C a t t l e loss* 7 100 .00 495 .00 k I Net over o p e r a t i n g expenses 3 $ -737 .00 Other revenue manure and b e d d i n g m 405 .00 Net \"cash\": income before taxes -332 .00 C a l c u l a t e d by m u l t i p l y i n g Average M a r c h - A p r i l 1967 fed c a t t l e p r i c e a t the f e e d l o t (Appendix E) by weight of fed beef (50 head a t 1050 pounds per head). (10.50 x 50 x $25.20/cwt) ^ C a l c u l a t e d by m u l t i p l y i n g Average October-November 1966 feeder c a t t l e p r i c e a t the f e e d l o t (Appendix E) by the weight of c a t t l e p l a c e d i n the f e e d l o t (50 head a t 700 pounds per head). (7.00 x 50 x $25.45/cwt) C a l c u l a t e d by m u l t i p l y i n g the average feed c o s t f o r the l a s t 120 days of f e e d i n g (Appendix M) by the weight of beef pro-duced i n the f e e d l o t (3.50 cwt x 50 head x $24.80/cwt). 93 TABLE XIV (continued) Cost of shavings i s e s t imated t o be $.75.per head per month, ($.75 per head x 50 head x 5 months) - Cost of v e t e r i n a r y and medicine expenses i s estimated to be $.50 per head. (50 head x $.50 per head) f J Includes the gas and o i l expense of equipment used i n spreading the shavings and c l e a n i n g the f e e d l o t . ^ Estimated land and b u i l d i n g taxes f o r one acre of l a n d . h Includes d a i l y f e e d i n g and h a n d l i n g l a b o r p l u s an estimate f o r l a b o r requirement f o r c l e a n i n g out the f e e d l o t . •£ Includes c l e r i c a l , accounting and other r e l a t e d m i s c e l -laneous expenses. ^ C a l c u l a t e d on the b a s i s of a 1 percent c a t t l e l o s s and an average v a l u e of $200.00 per head. k The management c o s t . i s c o n s i d e r e d to be i n c l u d e d i n the d i s c o u n t r a t e used i n the b e n e f i t - c o s t r a t i o a n a l y s i s . I The c o s t of c a t t l e investment i s i n c l u d e d i n the c a p i t a l investment. The annual net c a t t l e investment c o s t as an i n t e r e s t r a t e of 10 percent compounded monthly i s found i n Table XV-IB. m T h e value of manure and bedding i s c a l c u l a t e d on the b a s i s of an estimated value (cleaned out of the f e e d l o t and s t o r e d on the f e e d l o t premises) a t $2.50 per ton and a recovery of .65 tons of manure and bedding per head per month. TABLE XV SUMMARY OF INCOME STATEMENTS 1962-1967 FOR FEEDLOT EXAMPLE ONE N e t a Net^ Cash Net Cash C a t t l e 1 Income C a p i t a l Net Income Net Income Income Inv e s t - Net ; Gross Before Cost Before Income 1 3 A f t e r A f t e r ment Cash i Year Margin Taxes Allowance Tax Tax Tax Tax Cost Flow 1962 $694 $452 $100 $352 $-70 $282 $382 $323 $59 ' 1963 -1263 -1511 100 -1611 +70 -1541 -1441 37 3 -1814 j 1964 859 604 100 504 0 504 604 316 j 288 • 1965 1034 762 100 662 0 662 762 297 465 1966 1870 1580 100 1480 -277 1203 1303 334 969 | 1967 -17. 00 -332 100 -432 +86 -346 -246 374 -620 ! a S e e Appendix 0 f o r d e t a i l e d c a l c u l a t i o n s . f C a p i t a l Cost Allowance i s c a l c u l a t e d on the b a s i s of a 1961 b u i l d i n g value of $2000 and no salvage value i n 20 y e a r s . The s t r a i g h t l i n e method of c a l c u l a t i o n i s used i n the a n a l y s i s . Income tax p r o v i s i o n f o r carryback and c a r r y f o r w a r d of income l o s s u t i l i z e d i n c a l c u l a t i o n s . Reference: Department of N a t i o n a l Revenue, T a x a t i o n : Farmers' and F i s h e r -mans ' Income Tax Guide, (Ottawa; Queens P r i n t e r 1967), P. 13. ^The net c a t t l e investment c o s t i s c a l c u l a t e d by s u b t r a c t i n g the feeder c a t t l e i n v o i c e c o s t from end of the year feeder c a t t l e c o s t . The end of year feeder c a t t l e c o s t i s c a l c u -l a t e d by compounding the feeder c a t t l e i n v o i c e c o s t by 10 percent monthly., f o r the f e e d i n g p e r i o d . 4^ b e n e f i t - c o s t r a t i o analyses are c a l c u l a t e d by adding the d i s -counted value of the l a n d 1 2 to the above f i g u r e to p r o v i d e f o r a t o t a l of -$1034.00. The investment to be used i n the b e n e f i t - c o s t a n a l y s i s i s d e r i v e d by s u b t r a c t i n g the d i s c o u n t e d salvage value of the b u i l d i n g s and equipment from the o r i g i n a l i n v e s t m e n t 1 3 . Since the net b e n e f i t s f o r F e e d l o t Example One are nega-t i v e a d i s c o u n t e d b e n e f i t - c o s t r a t i o cannot be c a l c u l a t e d . The d i s c o u n t e d b e n e f i t - c o s t r a t i o s f o r a l l the f e e d l o t examples are i l l u s t r a t e d i n Table XVI. The b e n e f i t - c o s t r a t i o a n a l y s i s i n d i c a t e s t h a t the p o l i c y of p u r chasing y e a r l i n g feeder animals i n the f a l l of the year and s e l l i n g them as fed beef the f o l l o w i n g s p r i n g as i l l u s t r a t e d i n F e e d l o t Examples One, Two, and F i v e are u n d e s i r a b l e investment p r o j e c t s when a l l i n p u t resources are i n c l u d e d i n the a n a l y s i s at e x i s t i n g o p p o r t u n i t y values and d i s c o u n t e d a t 10 percent. The balance of the f e e d l o t p o l i c i e s which i n c o r p o r a t e use of pasture i n the f e e d i n g process have a b e t t e r r e c o r d of perform-ance, although they s t i l l appear u n d e s i r a b l e i n t h a t the b e n e f i t -c o s t r a t i o i s s t i l l l e s s than one. However, the p o l i c i e s of the 1 2 T h e d i s c o u n t e d land v a l u e of $253.00 i s c a l c u l a t e d by adding the 1961 land value of $700.00 per acre and the t o t a l 20 year a p p r e c i a t i o n i n land value ($1000 per acre) and d i s -c o unting the value back to 1961 a t 10 percent. 1 3 T h e o r i g i n a l investment i s c a l c u l a t e d by adding the 1961 v a l u e of the l a n d , b u i l d i n g , and equipment. The q u a n t i t y of land f o r the f e e d l o t examples i s found i n the footnote to the income statement f o r the f e e d l o t example i n the Appendix and the value of the b u i l d i n g and equipment i s found i n the f o o t n o t e s to the summary of income statements f o r the f e e d l o t example i n the Appendix. TABLE XVI DISCOUNTED BENEFIT-COST RATIOS FOR THE FEEDLOT EXAMPLES Feedlot Example Net Discounted Cash Flow 6 Years Net Discounted Cash Flow 20 Years Discounted Land Value Net B e n e f i t s INVESTMENT Land, Build-ings and Equipment Less Discounted Salvage Value Net I n v e s t -ment Benefit-Cost Ratio la -660 -1,287 253 -1,034 2,700 0 2,700 2b 1,476 2,878 507 3,385 20,000 750 19,250 0. 18 3° 7,710 15,034 12,918 27,952 40,700 0 40,700 0. 69 ,d 9,488 18 ,502 12,918 31,420 40,700 0 40,700 0. 77 5e 2,422 4,723 507 5,230 51,400 1490 49,910 0. 15 6? 53,287 103,910 63,832 167,742 226,400 1490 224,910 0. 75 79 54,502 106,280 63,832 170,112 226,400 1490 224,910 0. 76 Qh 38 ,584 75,240 1,520 76,760 104,200 1490 102,710 0. 75 ,See Appendix 0 f o r d e t a i l e d c a l c u l a t i o n s . See Appendix P f o r d e t a i l e d c a l c u l a t i o n s . ^See Appendix Q f o r d e t a i l e d c a l c u l a t i o n s . See Appendix R f o r d e t a i l e d c a l c u l a t i o n s . ^.See Appendix S_ f o r d e t a i l e d c a l c u l a t i o n s . ^See Appendix T f o r d e t a i l e d c a l c u l a t i o n s . ^See Appendix U f o r d e t a i l e d c a l c u l a t i o n s . See Appendix V f o r d e t a i l e d c a l c u l a t i o n s . 97 l a t t e r examples and the s i z e o f the examples are not deemed to be n e c e s s a r i l y o p t i m a l thus there e x i s t s a p o s s i b i l i t y t h a t these types of o p e r a t i o n s .might be d e s i r a b l e under good manage-ment. The b e n e f i t - c o s t r a t i o f o r F e e d l o t Example E i g h t would i n d i c a t e t h a t t h i s s i z e o f f e e d l o t which feeds on a \" d r y l o t \" b a s i s a l l year may be d e s i r a b l e under good management. S p e c i f i c a l l y d i s c u s s i n g a l t e r n a t i v e p o l i c i e s i n the same f a c i l i t i e s the p o l i c y o f f e e d l o t Example Three i s l e s s d e s i r a b l e than Example Four and the p o l i c y of F e e d l o t Example F i v e i s l e s s d e s i r a b l e than Example S i x . Fu r t h e r i n t e r p r e t a t i o n o f the b e n e f i t - c o s t r a t i o a n a l y s i s i s l e f t u n t i l the next chapter. 98 CHAPTER VII SUMMARY AND CONCLUSIONS The F r a s e r V a l l e y - Lower Mainland a g r i c u l t u r a l p r o d u c t i o n area l i e s w i t h i n a r e g i o n which c o n t a i n s an estimated 72 percent of B r i t i s h Columbia's p o p u l a t i o n . The c l i m a t e of the area i s conducive to the p r o d u c t i o n of h i g h q u a l i t y beef. The i n c r e a s e d per c a p i t a r e a l income and r e s u l t a n t higher standard of l i v i n g along with the i n c r e a s e d consumer p r e f e r e n c e f o r high q u a l i t y beef has r e s u l t e d i n the top two grades of c a r -cass beef, Canada Choice and Canada Good, i n c r e a s i n g from 20 per-cent to 52 percent of t o t a l i n s p e c t e d s l a u g h t e r i n Canada i n the p e r i o d from 1948 to 1966. In a d d i t i o n the consumer has been w i l l i n g t o i n c r e a s e her consumption of beef a t a f a s t e r r a t e than the i n c r e a s e i n her d i e t of the other red meats and she has been w i l l i n g to i n c r e a s e her consumption a t higher beef p r i c e s ; which would i n d i c a t e t h a t she has been w i l l i n g to i n c r e a s e her expen-d i t u r e s f o r h i g h q u a l i t y beef. I. THE MARKET AND THE SUPPLY OF FED CATTLE The above f a c t o r s and the f a c t t h a t the p o p u l a t i o n of the Lower Mainland and Vancouver I s l a n d r e g i o n s has i n c r e a s e d by 58 percent i n the same p e r i o d helps e x p l a i n the s i g n i f i c a n t i n -crease i n the r e g i o n s ' consumer fed beef requirements from an estimated 20,970 head of c a t t l e i n 1951 to 107,150 head i n 1966. The supply of c a t t l e necessary to meet the demand has been from 99 an i n c r e a s e i n s i z e of the B r i t i s h Columbia fed beef i n d u s t r y and i n c r e a s e d i m p o r t a t i o n of s l a u g h t e r c a t t l e and beef c a r c a s s e s from the p r a i r i e p r o v i n c e s . An a n a l y s i s of the channels of supply of fed beef to meet the l o c a l consumer requirements i n d i c a t e s t h a t B r i t i s h Columbia fed c a t t l e amounted to approximately 21 percent of t o t a l l o c a l estimated consumer requirements i n the 1962-1966 p e r i o d while the i m p o r t a t i o n s of s l a u g h t e r beef c a t t l e from the p r a i r i e pro-v i n c e s i n d i c a t e d a t r e n d of d e c r e a s i n g , from 42 percent i n 1962 to 31. percent i n 1966, and the i m p o r t a t i o n of c a r c a s s beef i n d i -cated a t r e n d of i n c r e a s i n g , from 34 percent i n 1962 to 48 per-cent i n 1966. However, i t should be noted t h a t the number of c a t t l e i n a l l three c a t e g o r i e s has i n c r e a s e d i n the 1962-66 p e r i o d . The F r a s e r V a l l e y r e g i o n has c o n t r i b u t e d by f a r the major-i t y o f f e d c a t t l e of B r i t i s h Columbia o r i g i n t o the l o c a l con-sumer market. In 1966, the F r a s e r V a l l e y fed beef i n d u s t r y pro-duced approximately 18 percent of the t o t a l l o c a l consumer r e -quirements w h i l e the balance of the p r o v i n c e c o n t r i b u t e d o n l y an estimated 4 percent. The balance of consumer requirements was met with an i m p o r t a t i o n of fed beef from the p r a i r i e p r o v i n c e s w i t h approximately 31 percent being imported as s l a u g h t e r c a t t l e and approximately 48 percent imported as c a r c a s s beef. I I . AVAILABILITY OF RESOURCES An a n a l y s i s of the a v a i l a b i l i t y of the necessary i n p u t f a c t o r s of feeder c a t t l e , f e e d s t u f f s , c a p i t a l , l a b o r and manage-ment i n d i c a t e s t h a t the r e s o u r c e s e x i s t i n s u f f i c i e n t q u a n t i t y 100 f o r an i n c r e a s e i n the l o c a l fed beef i n d u s t r y . In 1966 an e s t i -mated 129,000 beef c a l v e s were produced i n B r i t i s h Columbia and approximately 90,9000 of these c a l v e s would have been a v a i l a b l e i n 1967 as c h o i c e and good type feeder c a t t l e i f a s i g n i f i c a n t percentage o f them had not been shipped elsewhere. A v a i l a b l e i n f o r m a t i o n would i n d i c a t e t h a t approximately 29,04 2 head of the above feeder c a t t l e supply were f i n i s h e d and s l a u g h t e r e d w i t h i n B r i t i s h Columbia f o r consumption i n B r i t i s h Columbia, a p p r o x i -mately 1,736 head were shipped to the United S t a t e s to be f i n -i s h e d and consumed t h e r e , and the remainder were e i t h e r shipped* to p r o v i n c e s east of B r i t i s h Columbia, mainly A l b e r t a and O n t a r i o to be f i n i s h e d and consumed there or shipped back i n t o B r i t i s h Columbia to help meet the consumer requirements, or s t i l l r e -mained on the ranees at the end of the year. I t i s c o n s i d e r e d t h a t the a v a i l a b l e sources of funds from the e x i s t i n g f i n a n c i a l i n s t i t u t i o n s should be adequate to accom-modate the long term f i n a n c i a l requirements of the f e e d l o t f i r m s . However, the adequacy of s h o r t term funds to c a r r y the c o s t of the c a t t l e and feed over and above t h a t p o r t i o n of the expense the o p e r a t o r i s able to c a r r y from h i s own source of funds i s a q u e s t i o n which r e q u i r e s f u r t h e r r e s e a r c h . I t i s not f e l t t h a t the q u a n t i t y and q u a l i t y of management and l a b o r w i l l be c o n s t r a i n i n g f a c t o r s to an i n c r e a s e i n the s i z e of the l o c a l f ed beef i n d u s t r y . These resources are a v a i l a b l e from other a g r i c u l t u r a l p r o d u c t i o n areas or can be developed through the p r e s e n t e d u c a t i o n a l f a c i l i t i e s p r ovided t h a t the l o c a l i n d u s t r y can compete w i t h a l t e r n a t i v e employment i n the 101 form of wages and s a l a r i e s . No problems are f o r e s e e n i n the adequacy of the t r a n s p o r -t a t i o n and s l a u g h t e r i n g f a c i l i t i e s f o r the p r e s e n t i n d u s t r y or an i n c r e a s e d s i z e of the i n d u s t r y . At present there e x i s t s an over-c a p a c i t y i n s l a u g h t e r i n g f a c i l i t i e s and the past good performance of the t r a n s p o r t a t i o n and s l a u g h t e r i n g i n d u s t r i e s to accommodate an i n c r e a s e i n s i z e of the fed beef i n d u s t r y w i l l i n a l l p r o b a b i l -i t y c o n t i n u e . I I I . STRUCTURE AND CONDUCT IN THE INDUSTRY The s u r v e y of the p r e s e n t l o c a l fed beef i n d u s t r y t h a t was undertaken to a c q u i r e the i n f o r m a t i o n on the s t r u c t u r e and con-duct w i t h i n the i n d u s t r y was most i l l u m i n a t i n g . I t was found t h a t the o b j e c t i v e s of the entrepreneurs who were f i n i s h i n g c a t -t l e v a r i e d s i g n i f i c a n t l y . The o b j e c t i v e s v a r i e d from the opera-t o r who endeavoured to maximize h i s p r o f i t s from f i n i s h i n g c a t t l e per se to \"hobby\" f e e d i n g . The l a r g e d i v e r s i t y i n o b j e c t i v e s i s f e l t to be due t o - t h e v a r i e d circumstances of the p a r t i c u l a r op-e r a t o r s and the d i v e r s i t y of a g r i c u l t u r a l e n t e r p r i s e s found i n the F r a s e r V a l l e y . There i s a l s o the unanswered q u e s t i o n as to whether or not the present .industry i s i n t r a n s i t i o n from a group of complementary e n t e r p r i s e s to an i n d u s t r y i n which the m a j o r i t y of f i r m s ' o n l y economic a c t i v i t y i s to produce high q u a l i t y beef. The F r a s e r V a l l e y - Lower Mainland r e g i o n c o n t a i n e d an estimated 55 f e e d l o t s i n 1966 . Twenty-three of the f e e d l o t s are s i t u a t e d immediately adjacent to the l a r g e consumer markets with the balance of the f e e d l o t s spread throughout the F r a s e r V a l l e y . The l o c a l fed beef i n d u s t r y c o n s i s t s of f e e d l o t s which vary i n 102 s i z e from 20 head to 2500 head with 72 percent of the f e e d l o t s having a u n i t c a p a c i t y of under 250 head. The types of f e e d l o t d i f f e r s i g n i f i c a n t l y w i t h 64 percent of the f e e d l o t s u t i l i z i n g p a sture i n p a r t of t h e i r f e e d i n g programme. I t i s a l s o i n t e r e s t -i n g to note t h a t 66 percent of the f e e d l o t s are onl y one e n t e r -p r i s e i n a m u l t i - e n t e r p r i s e farm. The s e a s o n a l i t y of supply of fed c a t t l e to slaughterhouses from the l o c a l f e d beef i n d u s t r y i s c l e a r l y i n d i c a t e d i n the a n a l y s i s of the o r i g i n of fed beef r e c e i v e d a t l o c a l s l a u g h t e r i n g p l a n t s . M a r c h - A p r i l and November-December p e r i o d s appear to be the months i n which the g r e a t e s t number of fed c a t t l e are r e c e i v e d and J u l y and August are the months i n which the lowest number of fed c a t t l e are r e c e i v e d from the l o c a l i n d u s t r y . The 1966-1967 comparison o f the number of fed c a t t l e produced i n d i f f e r e n t a g r i c u l t u r a l p r o d u c t i o n areas i n B r i t i s h Columbia would suggest t h a t f ed c a t t l e p r o d u c t i o n i s on the i n c r e a s e i n the F r a s e r V a l l e y , Okanagan, and Peace R i v e r areas. The a n a l y s i s of the feeder c a t t l e purchasing and marketing J p o l i c i e s i n d i c a t e s t h a t 8 2 percent of the f e e d l o t s purchase year-l i n g animals with the emphasis being on the animals under 700 pounds 1. The m a j o r i t y of the f e e d l o t s purchase c a t t l e through p u b l i c a u c t i o n s although some operat o r s p r e f e r to purchase a l l x I t should be noted t h a t although 82 percent of the feed-l o t s purchase y e a r l i n g c a t t l e which are under 700 pounds, 72 per-cent of the f e e d l o t s have a c a p a c i t y of 250 head or l e s s . The remaining 28 percent of the f e e d l o t s , with c a p a c i t i e s ranging from 250 head to 2500 head, on the most p a r t , purchase y e a r l i n g c a t t l e which are 750 l b s . and over. The l a t t e r group of f e e d l o t s produce a t l e a s t f i f t y percent of the fed c a t t l e produced i n the F r a s e r V a l l e y . 103 t h e i r c a t t l e d i r e c t l y from the ranch on which the feeder c a t t l e were r a i s e d . The purchases of the feeder c a t t l e are s p l i t a l -most evenly between the f e e d l o t o perator and a commissioned a-gent. Most of the f e d c a t t l e are s o l d between the weights of 950 to 1100 pounds. On the average, the op e r a t o r s f a v o r s e l l i n g t h e i r c a t t l e on a dressed b a s i s d i r e c t to the packer although i t should be emphasized t h a t the sm a l l e r o p e r a t o r s f a v o r s e l l i n g t h e i r f e d c a t t l e by a u c t i o n and although, on the average, the l a r g e r f e e d l o t s f a v o r s e l l i n g t h e i r c a t t l e on a dressed b a s i s to the packer, some l a r g e f e e d l o t s s e l l a l l t h e i r c a t t l e on a l i v e weight b a s i s d i r e c t to the packer or by p u b l i c a u c t i o n . The a n a l y s i s of the f e e d s t u f f s used i n the f e e d l o t s i l l u s -t r a t e s the d i v e r s i t y of the types of f e e d l o t o p e r a t i o n . B a r l e y i s used e x t e n s i v e l y i n the i n d u s t r y as the prime energy feed source although o a t s , g r a i n , s c r e e n i n g p e l l e t s , beet pulps and molasses are a l s o used. Commercial p r o t e i n supplements, grass . hay, grass and corn s i l a g e are a l s o important r a t i o n i n g r e d i e n t s . Some f e e d l o t s have as many as f i f t e e n i n g r e d i e n t s i n the r a t i o n and one r a t i o n i n a s m a l l f e e d l o t c o n s i s t s o f b a r l e y , c h i c k e n l i t t e r , molasses and grass hay. The bedding used i n the f e e d l o t s i s , i n the m a j o r i t y , wood shavings and sawdust. The a v a i l a b i l i t y of the wood shavings v a r i e s s i g n i f i c a n t l y throughout the year. I t i s u s u a l l y i n s h o r t supply d u r i n g some wint e r months and i n p l e n t i f u l supply d u r i n g the summer months. The p r i c e of the wood shavings i s s i g n i f i c a n t -l y h i g h e r i n the Upper F r a s e r V a l l e y as c o n t r a s t e d to the Lower F r a s e r V a l l e y area. 104 The m a j o r i t y of the f e e d l o t s are owned by the f e e d l o t op-e r a t o r s . Only one f e e d l o t was s p e c i f i c a l l y b u i l t to be r e n t e d to a f e e d l o t o p e r a t o r . L i v e s t o c k insurance i s used by some operat o r s to hedge a g a i n s t the r i s k of l o s s of animals due to p h y s i c a l i n -j u r y or s i c k n e s s . Not a l l of the o p e r a t o r s use l i v e s t o c k i n s u r -ance. Perhaps the low annual expected c a t t l e l o s s and the ade-quacy of medicines to t r e a t the common ailments e x p l a i n s the non-use of insurance by many of the o p e r a t o r s . The number of f e e d l o t s u s i n g the United S t a t e s C a t t l e Futures Market to hedge the r i s k of l o s s e s due to adverse c a t t l e market c o n d i t i o n s i s not known. The f u t u r e s market, a t l e a s t i n p r i n c i p l e , c o u l d have a b e n e f i t i n r e d u c i n g the r i s k s i n c e the m a j o r i t y of the f e e d l o t s feed f o r o n l y p a r t of the year. IV. DESIRABILITY OF CAPITAL INVESTMENT IN THE INDUSTRY The f i n a n c i a l a n a l y s i s c a r r i e d out i n Chapter IV i n d i c a t e s t h a t the p r o d u c t i o n of high q u a l i t y beef i n the F r a s e r V a l l e y r e g i o n produced s u f f i c i e n t income to cover o p e r a t i n g c o s t s i n at l e a s t f o u r out of the s i x years from 1962 to 1967. However, the a n a l y s i s would i l l u s t r a t e t h a t the income generated i n the fed beef p r o d u c t i o n i s i n s u f f i c i e n t to i n d i c a t e e f f i c i e n t use i s being made of a l l resources used i n the p r o d u c t i o n process at an a f t e r tax d i s c o u n t r a t e of 10 percent. S p e c i f i c a l l y the a n a l y s i s would i n d i c a t e t h a t , f i r s t l y , the p o l i c y of purchasing y e a r l i n g feeder c a t t l e i n the f a l l , f a t t e n i n g them on imported feed g r a i n s and s e l l i n g the fed c a t t l e i n the s p r i n g , then l e a v i n g the f e e d l o t empty f o r the balance of 105 the year does not generate s u f f i c i e n t income to cover the i n v e s t -ment i n b u i l d i n g s , l a n d , and equipment. Secondly, the p o l i c y of i n c o r p o r a t i n g the use of pasture i n the f e e d i n g process decreases the c o s t per hundredweight of beef g a i n and thereby i n c r e a s e s the income c o n t r i b u t i o n to the investment i n l a n d , b u i l d i n g s , and equipment, although the a n a l y s i s undertaken s t i l l i n d i c a t e s t h a t the net b e n e f i t s were not q u i t e s u f f i c i e n t to cover the pre-s c r i b e d investment at a 10 percent d i s c o u n t r a t e . T h i r d l y , the a n a l y s i s i n d i c a t e s t h a t the high c a p i t a l investment f e e d l o t f i r m with a u n i t d r y l o t c a p a c i t y of 1500 head and a y e a r l y volume of 3000 head of fed c a t t l e i s a d o u b t f u l investment o p p o r t u n i t y a t an a f t e r tax d i s c o u n t of 10 percent. I t should be emphasized t h a t the p o l i c i e s s e t up and analyzed i n the r e p o r t do not r e p r e s e n t any one f e e d l o t e n t e r -p r i s e i n e x i s t e n c e per se thus i t cannot be n e c e s s a r i l y con-cluded t h a t any p a r t i c u l a r e x i s t i n g f e e d l o t t h a t conforms to the p a r t i c u l a r s i z e group i s a d o u b t f u l investment. Many of the l a r g e r f e e d l o t s i n e x i s t e n c e enjoy s p e c i a l circumstances t h a t would not be a v a i l a b l e to another entrepreneur who commenced op-e r a t i o n s i n the r e g i o n . Such s p e c i a l circumstances as low cap-i t a l investment i n b u i l d i n g s due to the a v a i l a b i l i t y of unused d a i r y barns or other s u i t a b l e b u i l d i n g s w i l l decrease the neces-sary investment but not n e c e s s a r i l y change the p r i c e and feed margins i n the f e e d l o t o p e r a t i o n and thereby change the r a t i o of b e n e f i t s to investment s u f f i c i e n t l y to make the investment a d e s i r a b l e o p p o r t u n i t y . In a d d i t i o n i t i s not i n c o n c e i v a b l e t h a t an a s t u t e entrepreneur c o u l d i n c r e a s e h i s p r i c e and feed margins s u f f i c i e n t l y to change b e n e f i t - c o s t r a t i o s from 0.7 to g r e a t e r 106 than 1.0 f o r some of the f e e d l o t examples. L a s t l y , i n some areas the a p p r e c i a t i o n i n l a n d value w i l l be g r e a t e r than f i f t y d o l l a r s per acre per year and thereby f u r t h e r i n c r e a s e the a l -ready a p p r e c i a b l e income from i n c r e a s e d l a n d v a l u e i n those f e e d -l o t s making an e x t e n s i v e use of land i n t h e i r program. V. AN EVALUATION OF THE FUTURE . INDUSTRY GROWTH An e v a l u a t i o n of the p r e s e n t F r a s e r V a l l e y fed beef i n -d u s t r y i n terms of the f a c t o r s t h a t w i l l most l i k e l y i n h i b i t the growth of the present i n d u s t r y i s set out i n t h i s s e c t i o n of the r e p o r t . At the o u t s e t i t can be s a i d t h a t l a c k of demand f o r the product produced by the i n d u s t r y w i l l not be an i n h i b i t i n g f a c -t o r i n the s h o r t or long run g i v e n the c o n t i n u a t i o n of the p r e -sent l e v e l of consumer p r e f e r e n c e f o r high q u a l i t y , b e e f products. The a n a l y s i s of the i n p u t resource markets would i n d i c a t e t h a t the necessary resources e x i s t and w i l l e x i s t i n the f u t u r e f o r an a p p r e c i a b l e i n c r e a s e i n s i z e of the i n d u s t r y . However, the present ranch i n d u s t r y p r a c t i c e of marketing the m a j o r i t y of t h e i r feeder c a t t l e and c a l v e s i n a few months of the year w i l l c ontinue to c r e a t e d i f f i c u l t i e s f o r the fed beef f e e d l o t opera-t i o n i n a c q u i r i n g a continuous supply of feeder c a t t l e throughout the year. The q u e s t i o n of adequacy of i n v e n t o r y c a p i t a l i s l e f t unanswered although i t should be mentioned t h a t any d i s c r i m i n a t i o n p r a c t i c e d by the l e n d i n g i n t e r m e d i a r i e s i s no doubt due somewhat to l a c k of knowledge of the i n d u s t r y but more l i k e l y to the l a c k of i n f o r m a t i o n r e g a r d i n g the s e c u r i t y and p r o f i t a b i l i t y of the 107^ p a r t i c u l a r e n t e r p r i s e . I t i s c o n s i d e r e d t h a t the most c o n s e q u e n t i a l i n h i b i t i n g f a c t o r to a s u b s t a n t i a l i n c r e a s e 2 i n the i n d u s t r y i s the l a c k of o p p o r t u n i t y f o r the entrepreneur to a c q u i r e s u f f i c i e n t r e t u r n s to h i s r e s o u r c e s , g i v e n the present a l t e r n a t i v e o p p o r t u n i t i e s f o r the use of h i s l a b o r , management, land, and c a p i t a l i n the economy. No doubt some more f e e d l o t o p e r a t i o n s w i l l come i n t o being i n the f u t u r e due to the f a c t t h a t the o p e r a t o r s , i n most cases, a l r e a d y own the b u i l d i n g s and/or the land which they can use i n the f e e d i n g program and the fed beef o p e r a t i o n w i l l complement other e n t e r p r i s e s , or the o p e r a t o r wishes to stay i n the area f o r p e r s o n a l reasons, or the encroachment of i n d u s t r i a l development, i s r e s u l t i n g i n a s u b s t a n t i a l i n c r e a s e i n the l a n d v a l u e or other s p e c i a l circumstances permit the p r o f i t a b l e o p e r a t i o n of the f e e d l o t . In summation, without s p e c i a l circumstances, the commit-ment of resources to the p r o d u c t i o n of f e d beef i n the F r a s e r V a l l e y r e g i o n w i l l not n e c e s s a r i l y be the b e s t use of the r e -sources i n the economy. 2The s u b s t a n t i a l i n c r e a s e i s r e f e r r i n g to an i n c r e a s e i n r e l a t i o n to the t o t a l fed beef market requirements of the Lower Mainland and Vancouver I s l a n d r e g i o n s . 108 Topics For F u r t h e r Research 1. The adequacy of the s h o r t term c a p i t a l supply to meet the requirements of the f e e d l o t f i r m i n B r i t i s h Columbia. 2. The comparative economic advantage or disadvantage of the F r a s e r V a l l e y - Lower Mainland r e g i o n f o r p r o v i d -i n g high q u a l i t y beef f o r the l o c a l l a r g e consumer market. 3. A comprehensive study of the marketing of a l l c a t t l e and c a l v e s i n B r i t i s h Columbia. 4. A study of the f a c t o r s which cause the m a j o r i t y of beef c a t t l e from the ranches to be marketed i n three months of the year; with the view to i n d i c a t i n g whether or not i t would be an advantage to a l l p a r t i e s concerned to spread the marketing of c a t t l e more evenly throughout the year. B I B L I O G R A P H Y 110 BIBLIOGRAPHY A. BOOKS DeGraff, H.F. Beef P r o d u c t i o n and D i s t r i b u t i o n . F i r s t E d i t i o n . Norman: U n i v e r s i t y of Oklahoma Pr e s s , 1960. L e f t w i c h , R.H. The P r i c e System and Resource A l l o c a t i o n . New York: H o l t , R i n e h a r t and Winston, 1966. Q u i r i n , David G. The C a p i t a l Expenditure D e c i s i o n . Homewood, I l l i n o i s : R i c hard D~. Irwin Inc., 1967. Urquhart, M.C., and K.A.H. Buckley. H i s t o r i c a l S t a t i s t i c s of Canada. Toronto: MacMillan Company of Canada L t d . , 1965. Working, Elmer J . Demand f o r Meat. Chicago, I l l i n o i s : The Uni -v e r s i t y of Chicago Press, 1954. B. PUBLICATIONS OF THE GOVERNMENT A l l a n , A . J . B r i t i s h Columbia Department of A g r i c u l t u r e , \"Second Approximation Report - Peace R i v e r D i s t r i c t . \" V i c t o r i a , B.C. Mimeographed. B r i t i s h Columbia. Beef Grading A c t . V i c t o r i a : Queens P r i n t e r , 1959. B r i t i s h Columbia Department of i n d u s t r i a l Development, Trade and Commerce. Bureau of Economics and S t a t i s t i c s . S a l a r y and Wage Rate Survey. V i c t o r i a : Queens P r i n t e r , 1966. B r i t i s h Columbia Department of I n d u s t r i a l Development, Trade and Commerce. Bureau o f Economics and S t a t i s t i c s . Regional Index of B r i t i s h Columbia. V i c t o r i a : Queens P r i n t e r , 1966. B r i t i s h Columbia Department of A g r i c u l t u r e . Climate of B r i t i s h Columbia. V i c t o r i a : Queens .Pri n t e r , 1966. Canada Department o f A g r i c u l t u r e , L i v e s t o c k P r o d u c t i o n and Mar-k e t i n g Branch. Annual Reports. Vancouver, B.C. Mimeographed. Canada Department of A g r i c u l t u r e , P r o d u c t i o n and Marketing Branch. L i v e s t o c k Market Review •. - Ottawa: Queens P r i n t e r . Canada Department o f A g r i c u l t u r e , Markets Information S e c t i o n . P o u l t r y Market - Review. Ottawa: Queens Printer.-... Canada Meat I n s p e c t i o n A c t and the Meat I n s p e c t i o n Regulations P.C. 1965-2176. Ottawa: Queens P r i n t e r , 1965. I l l Dominion Bureau of S t a t i s t i c s , A g r i c u l t u r e D i v i s i o n . Apparent Food Consumption i n Canada. Ottawa: Queens P r i n t e r , 1966. Dominion Bureau of S t a t i s t i c s , A g r i c u l t u r e D i v i s i o n . Report on L i v e s t o c k Surveys, C a t t l e ^ Sheep - Horses. Ottawa: Queens-P r i n t e r . Dominion Bureau of S t a t i s t i c s . Canada Yearbook. Ottawa: Queens P r i n t e r . Domion Bureau of S t a t i s t i c s . L i v e s t o c k and Animal Product S t a -t i s t i c s . Ottawa: Queens P r i n t e r . ' Dominion Bureau of S t a t i s t i c s . 1966 Census of Canada, Volume 1. June 1967. Ottawa: Queens P r i n t e r , 1967. Department of N a t i o n a l Revenue, T a x a t i o n . Farmers' and F i s h e r - mans ' Income Tax Guide. Ottawa: Queens P r i n t e r , 1967. C. MISCELLANEOUS PUBLICATIONS Kerr, T.C. An Economic A n a l y s i s of the Feed F r e i g h t A s s i s t a n c e P o l i c y . A g r i c u l t u r a l Economics Research C o u n c i l of Canada. Ottawa: Queens P r i n t e r , 1966. Logan, S.H. \"Economics of S c a l e i n C a t t l e Feeding,\" Supplement No. 3 to T e c h n i c a l Study No. 1, O r g a n i z a t i o n and Competition i n the L i v e s t o c k and Meat Industry. N a t i o n a l Commission on Food Marketing, June 1966. Manning, T r a v i s W. Country L i v e s t o c k A u c t i o n s and Market Per- formance . A g r i c u l t u r a l E x t e n s i o n T e c h n i c a l B u l l e t i n 1. Edmonton: U n i v e r s i t y of A l b e r t a , 19 67. . \"Feed Q u a l i t y Sub-Committee Report,\" Ruminant N u t r i -t i o n Committee Meeting October 26th, 1966. Mimeographed. A P P E N D I C E S 113 APPENDIX A C a l c u l a t i o n o f Real Income Per C a p i t a i n Canada 1948-19.66<*j Year Personal expenditures on consumer goods and s e r v i c e s constant & 1949 P o p u l a t i o n 1000's Real income per c a p i t a • $ 1948 $10,451,000,000 12,823 815 1949 10,923,000,000 13,447 812 1950 11,642,000,000 13,712 849 1951 11,817,000,000 14,009 . 843 1952 12,633,000,000 14,459 874 1953 13,338,000,000 14,845 898 1954 13,650,000,000 15,287 893 1955 14,662,000,000 15,698 934 1956 15,603,000,000 16,081 970 1957 16,083,000,000 16,610 968 1958 16,585,000,000 17,080 971 1959 17,392,000,000, 17,483 995 1960 17,945,000,000 17,870 1004 1961 18,508,000,000 18,238 1015 1962 19,351,000,000 18,570 1042 1963 20,175,000,000 18,896 1068 1964 21,336,000,000 19,235 1109 1965 22,800,000,000 19,571 1165 1966 23,943,000,000 Dominion Bureau of S t a t i s t i c s , Canada Yearbook, (Ottawa: . Queens P r i n t e r ) . ^Urquhart, M.C., and K.A.H. Buckley, H i s t o r l e a l S t a t i s t i c s of Canada, (Toronto, MacMillan Company of Canada L t d . , 1965). APPENDIX B Per C a p i t a Consumption and P r i c e s of Beef, Pork and Chickens i n Canada 1947-66 F i g u r e s 4,5, and 6 were drawn by c o n v e r t i n g the per c a p i t a consumption f i g u r e s and the p r i c e s to base of 10 0. The base used was the average of the 1947-49 p e r i o d f o r beef and pork and 1951-53 f o r the c h i c k e n s . F i g u r e 4, r e p r e s e n t i n g , beef consumption and p r i c e s , was based on the per c a p i t a consumption of beef (carcass weight) and the average monthly p r i c e per pound f o r Choice s t e e r s a t C a l g a r y . F i g u r e 5, r e p r e s e n t i n g pork consumption and p r i c e s was based on the per c a p i t a consumption of pork (carcass weight) and the average monthly p r i c e per.pound f o r Grade A Hogs at C a l g a r y . F i g u r e 6, r e p r e s e n t i n g the c h i c k e n consumption and p r i c e s , was based on the per c a p i t a consumption of c h i c k e n and the p r i c e of 4-5 pound b r o i l e r chickens a t Vancouver. The sources of i n f o r m a t i o n f o r the above c a l c u l a t i o n s were the Canada Year Book and the L i v e s t o c k and Animal Product S t a t i s t i c s , p u b l i s h e d by the Dominion Bureau of S t a t i s t i c s , Ottawa, Canada; and the L i v e s t o c k Market Review and the P o u l t r y Market Review p u b l i s h e d by the P r o d u c t i o n and Marketing Branch, Canada Department of A g r i c u l t u r e , Ottawa, Canada. APPENDIX C Estimated Consumption of Choice and Good Grade Beef i n the Lower Mainland and Vancouver I s l a n d Regions Un i t s 1951 1961 1962 1963 1964 1965 1966 P o p u l a t i o n a Lower Mainland Vancouver I s l a n d persons 649,238 215,003 907,531 290,835 934,323 298,151 961,115 305,467 987,907 1 312,783 ,014,700 320,100 T o t a l 864,241 1 ,198,366 1 ,232,474 1 ,266,582 1 ,300,690 1 ,334,800 1,355,742 Consumption of Choice & Good Grade B e e f & percent 24.9 51.4 46.9 52.2 54.3 49.3 51.6 Apparent per C a p i t a Con-sumption of B e e f e l b s / c a p i t a 49.3 69.7 69.2 73.7 78.5 81.7 82 .7 Average Car-cass Wts of , Beef Animals lbs/hd 507 .0 530. 2 529.5 542. 7 542.1 530. 7 545.5 Apparent per C a p i t a Con-sumption of Choice & Good Grade Beefd l b s 12.3 35.8 32.4 38.5 42.6 40.3 42.7 Consumption of Choice & Good Grade Beef C a t t l e 6 head 20,967 80,916 75,414 89,852 102,211 101,361 106,123 APPENDIX C (continued) Sources of Information aDominion Bureau of S t a t i s t i c s , 1951, 1961, 1966 Census Of Canada, op. c i t . and B r i t i s h Columbia Department o f I n d u s t r i a l Development, Trade and Commerce, op. c i t . ^Canada Department of A g r i c u l t u r e , Markets Information S e c t i o n , P r o d u c t i o n and Marketing Branch, op. c i t . ^Dominion Bureau of S t a t i s t i c s , Apparent per C a p i t a Consumption of Food, (Ottawa: Queens P r i n t e r , 1967). ^Apparent per C a p i t a Consumption of Canada Choice and Canada Good grade beef was c a l c u -l a t e d my m u l t i p l y i n g the apparent consumption of beef ( a l l grades) by, the percentage of the t o t a l i n s p e c t e d c a t t l e s l a u g h t e r which graded Canada Choice and Canada Good. eThe number of Canada Choice and Canada Good grade f e d c a t t l e r e q u i r e d to meet the con-sumer requirements i s c a l c u l a t e d by m u l t i p l y i n g the r e g i o n s 1 p o p u l a t i o n by the apparent con-sumption of Canada Choice and Canada Good grade beef and d i v i d i n g the q u o t i e n t by the average weight of c a t t l e (per head) f o r the p a r t i c u l a r year under a n a l y s i s . 117 APPENDIX D Channels of Supply of Fed Beef to the Lower Mainland and Vancouver I s l a n d Regional Markets (Number of C a t t l e ) Year E s t i m a t e d a Consumption of Choice and Good Grade Beef Slaughtered i n the Lower Main-land & Vancouver I s l a n d area Estimated Imports as c a r c a s s beef of B.C. O r i g i n imported as Slaughter C a t t l e no. no. no. no. 1962 75,410 17,535 32,013 25,866 1963 89,850 16,808 36,157 36,887 1964 102,210 21,148 30,269 50,794 1965 101,360 23,025 24,655 53,681 1966 106,123 23,298 32,720 50,105 See Appendix C f o r c a l c u l a t i o n s . ^ L i v e s t o c k P r o d u c t i o n and Marketing Branch, Canada Depart-ment of A g r i c u l t u r e , Vancouver, B.C., \"Weekly Summary S l a u g h t e r -house I n s p e c t i o n Sheets.\" 118 APPENDIX E Monthly Beef C a t t l e P r i c e s a t Ca l g a r y and Vancouver 19 62-67 Year C a l g a r y \" Choice S t e e r s C a l g a r y \" Good Ste e r s 1^ F e e d l o t Fed Beef P r i c e s C a l g a r y \" Good Fdr St e e r s F e e d l o t c Feeder Steer P r i c e s $/cwt $/cwt $/cwt $/cwt $/cwt 1961 S 21.01 21.52 0 20.43 20.94 N 21.22 21.73 D 21.71 22.22 1962 J 24.20 23.15 25.76 21.95 22.76 F 22.86 21.75 24.40 21.32 21.83 M 23. 00 21. 97 23.56 22.41 22.92 A 23.74 22.46 24.27 22.99 23.50 M 24.74 23.68 25.02 23.40 23.91 J 25.32 24.01 25.84 23.89 24.40 J 26. 24 24.92 26.60 24.16 24.67 A 26.96 25.48 26.95 25.12 25.63 S 27. 98 26. 64 27.52 25.77 26. 28 0 27.83 26.35 27.91 25.36 25.87 N 27.56 26.02 27.46 24.92 25.43 D 25.98 25.00 26.64 24.80 25.31 1963 J 23.63 22.88 24.94 23.38 23.89 F 22. 28 21. 53 23.19 22.97 23.48 M 21.52 20. 67 22. 07 22.70 23.21 A 22.86 21.77 22. 39 24.31 24.82 M 23.1.9 22.10 23. 08 24.11 24.62 J 23.93 22.87 23.50 24.18 24.69 J 2.5.13 24.03 24.69 24. 60 25.11 A 25. 52 24. 20 25.17 24.70 25.21 S 25. 23 24. 28 25. 31 23.91 24.42 0 23.12 22. 04 25.09 22.59 23.10 N 22.09 21.07 22.7.9 21.54 22. 05 D 20.98 20.16 21.89 20.46 2 0.97 1964 J 20.96 19.91 21.25 20.32 20.83 F 21.19 20.30 21.71 21.14 21. 65 M 22. 44 21.49 22.66 21.92 22.43 A 23. 08 22.11 23. 64 22.40 22.91 M 23. 06 22.13 23.46 22.55 23.05 J 22.90 22.03 23.00 21.83 22.34 J 23.10 22.07 23.35 21.68 22.19 A 22.31 21.37 23.20 20.40 20.91 S 21.96 20.96 22. 96 19.99 20.50 0 21.27 20.23 22.33 19.85 20.36 N 20.97 19.88 21.49 19.89 20.40 D 21. 22 20.20 21.89 19.54 20.05 119 APPENDIX E (continued) Year C a l g a r y a Choice S t e e r s C a l g a r y a Good Steers F e e d l o t Fed Beef P r i c e s C a l g a r y a Good Fdr Ste e r s F e e d l o t Feeder Steer P r i c e s $/cwt $/cwt $/cwt $/cwt $/cwt 1965 J 21. 48 20.52 22. 24 18 . 97 19.48 F 22.11 21. 08 22.76 2 0.39 20.90 M 22. 31 21. 24 22.99 20.81 21.32 A 22.72 21.82 23.07 21.33 21.84 M 24.43 23.33 24.15 21.98 22.49 J 25.24 24.15 25.11 22.91 23.42 J 24.95 23.70 25.08 22.69 23.20 A 24. 27 23.33 24.66 22.48 22.99 S 23.79 22.86 23.89 .22.13 22.64 0 23.70 22.65 23.86 22.09 22.60 N 24.14 23.08 23.75 22.26 22.77 D 24.80 23.67 24.75 22.22 22.73 1966 J 26. 62 25.32 26.06 23.83 24.34 F 26.63 25.52 26.95 25.48 25.99 M 26. 20 25. 22 26.55 26.10 26.61 A 25.98 25.10 25.99 26.00 26.51 M 25.60 24.75 25.57 25.65 26.16 J 24.98 24.13 24.78 25. 09 25.60 J 24. 41 23.52 24.76 23.86 24.37 A 24. 25 23.43 24.90 23. 37 23.88 S 25.02 24.11 25. 03 24.72 25.23 0 25.22 24.22 25.49 25. 00 25.51 N 25.24 24.47 25.44 24.88 25. 39 D 26. 35 25.40 26.24 24.91 25.42 1967 J 26. 6.5 25. 61 25.85 25. 54 26.05 F 25.86 25.23 25.42 25. 39 25.90 M 25. 07 24.50 25.17 25. 82 26.33 A 24.73 24.15 25. 24 25.89 26.40 M 25.40 24.64 25.43 26.22 26.73 J 26.48 25.71 26.51 26.35 26.86 J 26.47 25.84 27.75 25.94 26.45 A 27.12 26. 21 27.88 25.98 26.49 S 28.8 8 27.78 28.96 27.12 27.63 0 28.72 27.88 28.24 27 .14 27.65 N 28.10 27.23 27.86 26.38 D 26.89 26.00 120 APPENDIX E (continued) L i v e s t o c k P r o d u c t i o n and Marketing Branch, Canada Depart-ment of A g r i c u l t u r e , Livestock ' Market Review, (Ottawa: Queens P r i n t e r , 1961-67). The f e e d l o t feeder c a t t l e p r i c e i s c a l c u l a t e d by s u b t r a c t -i n g the estimated average t r a n s p o r t a t i o n c o s t from the B r i t i s h Columbia Southern I n t e r i o r to C a l g a r y , A l b e r t a and adding the commission agent's commission and the average t r a n s p o r t a t i o n c o s t from the Southern I n t e r i o r to the f e e d l o t ; to the average monthly good feeder c a t t l e p r i c e on the Calgary Terminal Market. The t r a n s p o r t a t i o n c o s t i s c a l c u l a t e d on a net weight b a s i s . For example, the September 1961 f e e d l o t feed c a t t l e p r i c e i s 21.01 - .50 + .25 + .76 = $21.52 per cwt. GThe f e e d l o t f ed beef c a t t l e p r i c e i s based on the c a t t l e being one-half c h o i c e and one-half good grade beef s t e e r s . The p r i c e i s c a l c u l a t e d by c o n v e r t i n g the average monthly wholesale Choice and Good grade beef c a r c a s s p r i c e a t Vancouver to a l i v e -weight b a s i s and adding (or s u b t r a c t i n g ) o n e-half of the d i f f e r -e n t i a l between the Choice and Good fed beef s t e e r p r i c e s on the . Calgary Terminal Market and s u b t r a c t i n g the average t r a n s p o r t a -t i o n c o s t from the f e e d l o t t o the slaughterhouse. A d r e s s i n g percentage of 56 percent f o r Choice grade and 54 percent f o r Good grade c a r c a s s beef i s assumed. An example of the c a l c u l a -t i o n s i s g i v e n f o r the January, 1962 f e e d l o t fed beef c a t t l e p r i c e . (47.3 x .56) + .5(24.20 - 23.15) - .11 = $25.76 per cwt. APPENDIX F Estimated Number of Feeder C a t t l e Produced i n B.C. Year (t) Beef cow popu-l a t i o n (t-1) C a l f f e popu-l a t i o n H e i f e r e r e p l a c e -ments Feeder^ Steers H e i f e r s F e e d e r 6 H e i f e r s f Feeder J C a t t l e N U M B E R 0 F H E A D 1960 113,000 84,750 17,700 42,375 42,375 24,675 67,050 1961 118,000 88,500 18,700 44,250 44,250 25,550 69,800 1962 124,700 93,500 20,000 46,750 46 ,750 26,750 73,500 1963 133,500 100,150 21,600 50,075 50,075 28,475 78,550 1964 144,000 108,000 23 ,700 54,000 54,000 30,300 84,300 19 65 158,000 118,500 25,500 59,250 59,250 33,750 93,000 1966 170,000 127 ,750 25,800 63,750 63,750 37,950 101,700 1967 172,000 129,000 24,750 64,500 64,500 39,750 104,250 The number of feeder c a t t l e a v a i l a b l e i n year t depends upon the c a l f p r o d u c t i o n i n the preceding year, thus the cow p o p u l a t i o n to be used i n c a l c u l a t i n g the numbers of feeders a v a i l a b l e , as y e a r l i n g s , i s the p r i o r year's p o p u l a t i o n . Source of i n f o r m a t i o n was A g r i c u l t u r e D i v i s i o n , Dominion Bureau o f S t a t i s t i c s , Ottawa; Report on L i v e s t o c k Surveys C a t t l e - Sheep -Horses. JL The 75% c a l f crop was d e r i v e d a t by us i n g the 1965 e s t i -mated beef c a l f crop percentage of beef cow p o p u l a t i o n as i n t e r -p r e t e d from the above i n f o r m a t i o n source (60.9%) and adding an estimated 14.1% f o r the d a i r y - b e e f c r o s s f e e d e r s . I m p l i c i t i n the f i g u r e used i s a l s o a 5% c a l f crop l o s s estimate. cThe 15% replacements f o r the b a s i c herd was assumed f o r l a c k of a more o b j e c t i v e f i g u r e . The cow p o p u l a t i o n of year t was assumed to be a good b a s i s f o r e s t i m a t i n g the replacements necessary i n l i g h t of the f l u c t u a t i n g cow p o p u l a t i o n numbers between y e a r s . The number of b u l l c a l v e s kept f o r replacements i n the herd i s c o n s i d e r e d to be n e g l i g i b l e f o r the c a l c u l a t i o n s . The percentage of h e i f e r s to s t e e r s i s assumed to be 50 percent. eThe number of feeder h e i f e r s i s c a l c u l a t e d by s u b t r a c t i n g the h e i f e r replacements from the t o t a l estimated number of h e i f e r s JThe number of feeder c a t t l e ( y e a r l i n g s ) i s c a l c u l a t e d by adding the feeder h e i f e r s and the feeder s t e e r s . 122 APPENDIX G Estimated Number of Good and Choice Type Feeder C a t t l e Produced i n B.C. Percentage (Canada Av.) Number of Stnd. Number of Good Feeder\" Stnd & Comm.l & Commercial 1 & Choice Year C a t t l e Grade type animals Feeder C a t t l e 1960 67,050 13.7 9,190 57,860 1961 69 ,800 14.1 9,840 59 ,960 1962 73,500 14.6 10,730 62,770 1963 78,550 13.5 10,600 67,950 1964 84 , 300 13.2 11,130 73,170 1965 93,000 13. 12,090 80,900 1966 101,700 12.8 13,000 88,700 1967 104,250 12.8 C 13,340 90,900 See Appendix F. ^Canada Department of A g r i c u l t u r e , L i v e s t o c k P r o d u c t i o n and Marketing Branch, Vancouver, B.C., Annual Reports. The percentage of Standard and Commercial 1 Grade c a t t l e k i l l e d i n Canada i s c o n s i d e r e d a r e a l i s t i c estimate of the number of feeder c a t t l e t h a t w i l l not be brought to a c o n d i t i o n s u f f i c -i e n t f o r the Good and Choice grade because of g e n e t i c c o n s t i -t u t i o n , management or other s l a u g h t e r a l t e r n a t i v e s . ^Percentage of Standard and Commercial 1 grade c a t t l e not a v a i l a b l e at the time of w r i t i n g so the percentage was assumed to be the same as 1966. 123 APPENDIX H Number of C a t t l e and Calves Shipped to Provinces East of B r i t i s h Columbia a Canada Census D i v i s i o n Number Region cows s t e e r s h e i f e r s c a l v e s b u l l s t o t a l lb East Kootenay 1976 1917 972 2773 117 7755 2 West Kootenay 627 603 446 110 51 1837 3 Okanagan, Similkameen, Boundary 716 845 557 2370 16 4504 4 Lower Mainland 64 — - 1003 - 1067 5 Vancouver I s l a n d _ _ _ — — _ 6 Shuswap-C h i l c o t i n 4254 8716 2240 7768 36 23014 7 Lower Coast — — — - — — 8 C e n t r a l I n t e r i o r 3035 5042 1979 3900 81 14037 9 Northwestern B.C. — — — - — -10 Peace R i v e r 4650 3288 1527 4099 258 13822 T o t a l c 15322 20411 7721 22023 559 66036 Compiled by the w r i t e r from Brand C e r t i f i c a t e Invoices reviewed i n the o f f i c e of the Recorder of Brands, Department of A g r i c u l t u r e , V i c t o r i a , B.C. The a n a l y s i s i s based upon the p o i n t of i n s p e c t i o n of the c a t t l e and c a l v e s . Some of the c a t t l e w i l l not have been r a i s e d i n the r e g i o n i n which the i n s p e c t i o n o c c u r r e d . T h e r e f o r e , the a n a l y s i s o n l y approximates the shipments from each r e g i o n . cThe d i f f e r e n c e between the t o t a l c a t t l e and c a l v e s i n d i -cated i n the t a b l e and t h a t r e p o r t e d by the Recorder of Brands (67,4 37 head) i s due to the w r i t e r ' s e f f o r t s to leave out d a i r y c a t t l e from the a n a l y s i s . The above a n a l y s i s s t i l l i n c l u d e s an unknown number of d a i r y c a t t l e . 124 APPENDIX I Movement of Feed Grains i n t o Southern B r i t i s h Columbia f o r the F i s c a l Years, 1963-64 1 and 1964-65 2 Item P r a i r i e Year Peace R i v e r P r o v i n c e s T o t a l Percentage of T o t a l Wheat (tons) (tons) Percentage of T o t a l Wheat 1963- 64 36,745.2 10,540 47,285.2 1964- 65 35,753.3 9,881.8 45,635.1 1963- 64 78.0 22.0 100.0 1964- 65 78.0 22.0 100.0 33.2 28 .4 Oats (tons) (tons) Percentage of T o t a l Oats 1963- 64 18,941.8 17,950.1 36,891.9 1964- 65 18,917.6 24,544.5 43,462.1 1963- 64 51.0 49.0 100.0 1964- 65 43.0 57.0 100.0 25.8 27.0 B a r l e y (tons) (tons) Percentage' of T o t a l B a r l e y 1963- 64 48,211.9 10,557.6 58,769.5 1964- 65 63,219.5 8,574.3 71,793.8 1963- 64 82.0 18.0 100.0 1964- 65 88.0 12.0 100.0 41.0 . 44.6 T o t a l s F eedgrain 1963-64 103,898.9 39,047.7 142,946.6 19 6 4 - 65 117 , 8 9 0 . 4 4 3 , 0 0 0 . 6 160,891.0 100.0 100.0 Percentage Change 9.8 2.8 12.6 Sources: 1 Kerr,-T.C., An Economic A n a l y s i s of t h e - F e e d F r e i g h t A s s i s t a n c e P o l i c y , A g r i c u l t u r e Economics Research C o u n c i l of Canada, 1966. 2Canada L i v e s t o c k Feed Board Records, Vancouver, B.C. 125 APPENDIX J Movement of Feed Grains i n t o the Lower Mainland and Vancouver I s l a n d Regions f o r the F i s c a l Year 1964-65 (tons) Item P r a i r i e Peace R i v e r Provinces T o t a l Percentage of T o t a l B. C. Movement Wheat Percentage of t o t a l 35,319.7 9,216.4 44,536.1 79.3 20.7 100 97.6 Oats Percentage of t o t a l 17,638.1 18,454.3 36,092.4 49 51 100 83.0 Barley-Percentage of t o t a l 61,238.1 6,839.4 68,077.5 90 10 100 94.8 Source: Canada L i v e s t o c k Feed Board Records, Vancouver, B.C. 126 APPENDIX K A n a l y s i s of Gr a i n P r i c e s a t Vancouver, B.C. - 1962-67 Year G r a i n Number One Number One & Gr a i n Screening Refuse Feed Grade Feed Grade Month Screenings P e l l e t s Screenings Feed Oats B a r l e y $/ton $/ton $/ton $/ton $/ton 1962 Jan. 44. 00 19.00 58.05 55.05 Feb. 45.00 20.50 58.05 58.40 Mar. 45.00 23.00 58 .05 58.40 Apr. 45. 00 23. 00 58.05 58. 40 May 47.50 23.50 64.90.a 6 5.60 a June 52.50 23.50 64.30 a 64.10 a J u l y 55. 00 39.15 23.50 63.55 a 62.25 a Aug. 54.25 39.70 23.50 60.15 a 59.90 a Sept. 51.75 39.70 24. 00 54.50 54.20 Oct. 48. 50 39.75 25.00 49.80 54.20 Nov. 47.00 39.75 26.00 49.80 54.20 Dec. 47.00 40.85 27.00 50.60 54.20 1963 Jan. 47.00 42.15 27.00 51.45 54.20 Feb. 47.00 42.55 27.50 51.45 54.20 Mar. 47. 00 42.30 27.50 51.45 54.20 Apr. 47.00 40.80 27.50 51.45 54.20 May 47.00 39.80 26.10 51.45 54.20 June 47. 00 39.50 25.00 51.45 . 54. 20 J u l y 39.40 24. 50 51.45 54.20 Aug. 37.15 24.00 51.45 54.20 Sept. 33.75 22.50 49.60 50.30 Oct. 32.50 21. 00 47 .75 46.40 Nov. 33.50 21.50 50.20 48.00 Dec. 33.50 21.50 50.20 48 .80 1964 Jan. 45.00 35.50 21.50 51.00 50.60 Feb. 45.00 35.20 20.25 51.00 51.45 Mar. 44. 00 34. 90 18.25 51.00 51.45 Apr. 42.00 31.85 16.75 51.00 51.45 May 42.00 28.60 16.00 51.00 51.45 June 42. 00 28.70 16.00 51.00 51.45 J u l y 42.50 29. 00 16.00 51.00 51.45 Aug. 43.00 29.70 16. 00 51.00 51.45 Sept. 44.00 29.55 16.00 51.00 51.45 Oct. 45.00 30.00 17.00 51.00 51.45 Nov. 46.00 35.00 20.25 51.00 51.45 Dec. 47.00 37.15 22.50 51.00 51.45 Wheat Board P r i c e s . 127 APPENDIX K (continued) Year G r a i n Number One Number One & Gra i n Screening Refuse Feed Grade Feed Grade Month Screenings P e l l e t s Screenings Feed Oats B a r l e y $/ton $/ton $/ton $/ton $/ton 1965 Jan. 47. 25 37.55 22. 50 51.00 51.45 Feb. 47. 50 37. 55 28.25 51.00 51.45 Mar. . 47.50 41. 30 28.25 53.50 52.75 Apr. 47.50 26.60 53.50 53.00 May 47. 50 25.50 53.50 53.00 June 48.00 44 . 05 28.00 53.50 53.00 J u l y 48. 50 46.40 30.00 53.50 53.00 Aug. 48 . 50 42.00 30.00 53. 50 53.00 Sept. 48 . 50 30 . 00 53.50 52.50 Oct. 48.50 27.50 53.50 52.00 Nov. 49. 00 41.00 25.50 , 53.50 - 52.00 Dec. 49.50 41.05 26. 00 53.50 52.00 1966 Jan. 49.50 41.45 27.50 54.75 53.35 Feb. 49.50 42.00 29.00 58.00 57.05 Mar. 49. 50 42.00 28.00 60.00 • 59.40 Apr. 49.50 39.60 26.20 60.00 59.40 May 49.50 37.75 23.25 60.00 59.40 June 50.25 40.95 22.50 60.00 59.40 J u l y 50.75 44.30 24.50 60.00 59.40 Aug. 51. 00 46.25 28.00 60 . 45 59.40 Sept. 51.00 47. 50 29.00 60.90 58.05 Oct. 51.00 47.50 28.00 60.90 56.50 Nov. 51.00 47. 50 28 . 00 60.90 56.50 Dec. 51. 00 47.50 28.00 60.90 56. 50 1967 Jan. 51. 00 46.55 28.50 61.60 57.10 Feb. 51. 50 44.60 28.00 61.60 57.10 Mar. 52.00 43.50 28.00 61.60 57.10 Apr. 52.00 42.50 23.50 61.60 57.10 May 52.00 41.50 23.50 61.60 57.10 June 52.00 38.75 21.25 61.60 57.10 J u l y 52. 00 39 .75 21.25 61.60 57.10 Aug. 52.00 39.00 22.50 61.60 57.10 Sept. 52.50 38.50 22.50 61.60 57 .10 Oct. 53.00 41.75 22.50 61.60 57.10 Nov. 53.00 40.25 24.25. 61.60 57.10 Dec. 53-'00 39.50 24.50 61. 60 57 .10 2 9-0 0 2 8.0 0 2 7.0 0 2 6.0 0 2 5.0 0 2 4.0 0 \\ / \\ I \\ I V 2 3.0 0 2 2.0 0 H 2 1.0 0 2 0.0 0 \\ / i / Fed Steer P r i c e s Feeder Steer P r i c e s Negative P r i c e Margin 1 9.0 0 1 9 6 2 6 3 6 4 6 5 6 6 6 7 Years APPENDIX L PRICE MARGIN ANALYSIS 1962-67 a See Appendix E f o r p r i c e s e r i e s 2 9.0 0 APPENDIX M FEED MARGIN ANALYSIS 1962-67 to 130 APPENDIX M (continued) C a l c u l a t i o n of Average Feed Cost per Hundred Pounds of Beef Gain A. Average Feed Ra t i o n 40% No. 1 Feed B a r l e y 20% G r a i n Screening P e l l e t s 35% L o c a l Grass Hay 5% M i n e r a l s and P r o t e i n Supplement B. I t w i l l be assumed t h a t the f e e d l o t operator purchases the feed as he r e q u i r e s i t . Thus, the average g r a i n p r i c e w i l l be c a l c u l a t e d to be the average of the g r a i n p r i c e s t h a t e x i s t e d f o r the f e e d i n g p e r i o d . The m i n e r a l s and p r o t e i n supplement p r i c e s w i l l be assumed to be constant f o r the 1962-67 p e r i o d . The hay p r i c e w i l l be assumed to be constant a t $22.00 per ton from 1962-64 and $25.00 from 1965-67. The b a r l e y and g r a i n s c r e e n i n g p e l l e t p r i c e s w i l l be c a l c u l a t e d on a monthly b a s i s u s i n g a moving average. The p r i c e s e r i e s as presented i n Appendix K w i l l be used as a b a s i s of c a l c u -l a t i o n s of the average g r a i n p r i c e s . C. An average feed to beef c o n v e r s i o n r a t i o w i l l be assumed to be 10.85 pounds of a c t u a l feed to one pound g a i n i n weight. D. The c a l c u l a t i o n of the average c o s t per hundredweight of beef g a i n w i l l be d e r i v e d u s i n g the f o l l o w i n g equation. The average c o s t per hundredweight of beef g a i n f o r A p r i l , 19 67 i s presented as an example. .average r a t i o n c o s t per ton, , feed : beef , 20 c o n v e r s i o n r a t i o c o s t per hundredweight of beef g a i n (.4) (56.88-) + .2 (45.54) + .5 (100) + .35 (25) $24.75/cwt of beef g a i n 10.85 APPENDIX M (continued) C a l c u l a t i o n of Average Feed Cost per One Hundred Pounds of Beef Gain Number One Number One Feed Grade Year Feed Grade Screening Average Cost & B a r l e y P e l l e t s per Hundredweight Month Average P r i c e Average P r i c e of Gain 1962 Jan. 52.62 44.75 a 23.16 Feb. • 53.36 44.50 a 23.29 Mar. 54.94 44.50 a 23.64 Apr. . 56.40 44.50 a 23.96 May- 57.56 44.75 a 24.23 June 60.20 45.62 a 24.90 J u l y 61.62 47.50 a 25.42 Aug. 62.58 46.03 a 25.42 Sept. 62.96 4 4 . 7 l a 25.40 Oct. 60.11 42.76 a 24.57 Nov. 57.63 39.57 23.69 Dec. 55.62 39.72 23.27 1963 Jan. 54.20 40 .01 22.99 Feb. 54.20 40 . 02 23.10 Mar. 54.20 . 41.3 6 23.13 Apr. 54.20 41.96 23 . 20 May 54.20 41.95 23.20 June 54.20 41.36 23.14 J u l y 54.20 40.60 23.06 Aug. 54.20 39.87 22.97 Sept. 54. 20 38.96 22.88 Oct. 53.22 37.45 22.50 Nov. 51. 27 35.70 21.89 Dec. 49.7 2 34.22 21.39 1964 Jan. 48.00 33.31 20.92 Feb. 48.45 33.75 21.06 Mar. 49.71 34.42 21.41 Apr. 50. 57 34.77 21.63 May 51.23 34.36 21.73 June 51.45 32.63 21.60 J u l y 51.45 31.01 21.42 Aug. . 51.45 29.53 21.26 Sept. 51.45 29.00 21.20 Oct. 51.45 29.23 21.23 Nov. 51.45 29.56 21.26 Dec. 51.45 31.06 21.42 G r a i n s c r e e n i n g used s i n c e g r a i n p e l l e t s not a v a i l a b l e . APPENDIX M (continued) 132 Number One Number One Feed Grade Year Feed Grade Screening Average Cost & B a r l e y P e l l e t s per Hundredweight Month Average P r i c e Average P r i c e of Gain 1965 Jan. 51.45 32.92 22.19 Feb. 51.45 34.92 22.41 Mar. 51.45 36.81 22.62 Apr. 51.77 38.38 22.86 May- 52.16 39.42 23.05 June 52.42 40. 36 23.21 J u l y 52.81 41.98 23.47 Aug. 52.87 43.26 23.63 Sept. 52.87 43.43 23.65 Oct. 52.75 43.61 23.64 Nov. 52.50 43.10 23.53 Dec. 52.25 41.75 23.33 1966 Jan. 52.00 41.51 23.25 Feb. 52.34 41.13 23 .28 Mar. 53.60 41.38 23.58 Apr. 55.45 41.62 24.01 May 57.30 41.26 24.37 June 58.81 40.33 24.60 J u l y 59.40 40.07 24.69 Aug. 59.40 40.65 24.76 Sept. 59.40 42.31 24.94 Oct. 59. 06 44.75 25.13 Nov. 58.34 46.38 25.15 Dec. 57.61 47.18 25.08 1967 Jan. 56 .89 • 47.50 24.95 Feb. 56. 65 47.26 24.88 Mar. 56.80 46.53 24.84 Apr. 56.88 45.54 24.75 May 57.10 44.28 24.66 June 57.10 43.02 24.52 J u l y 57.10 41.56 24.36 Aug. 57.10 40.62 24.25 Sept. 57.10 39.75 24.16 Oct. Nov. Dec. APPENDIX N C a l c u l a t i o n of Summation of P r i c e and Feed Margins Year Month . • a Prxce Margin F e e d & Margin Summation of P r i c e and Feed Margin 1962 Jan. 4.24 2.60 6.84 Feb. 3.46 1.11 4.57 Mar. 1.83 - .08 1.75 Apr. 2.05 .31 2.36 May 2.56 .79 3.35 June 4.01 . 94 4.95 J u l y 3 . 68 1.18 4.86 Aug. 3.45 1.53 4.98 Sept. 3.61 2.12 5.73 Oct. 3.51 3.34 6.85 Nov. 2.79 3.77 6.56 Dec. 1.01 3.37 5.38 1963 Jan. -1.34 1.95 .61 Feb. -2.68 . 09 -2.59 Mar. -3.36 -1.06 -4.42 Apr. -2.92 - .81 -3.73 May - .81 - .12 - .93 June .02 .36 .38 J u l y 1.48 1.63 3.11 Aug. .35 2.20 2.55 Sept. .'6 9 2.43 3.12 Oct. .40 2.59 2.99 Nov. -2.32 .90 1.42 Dec. -3. 32 . 50 -2.82 1964 Jan. -2.84 .66 -2.18 Feb. -1.39 .65 - .74 Mar. .61 1.25 1.86 Apr. 2.67 2.01 4.86 May 2.63 1.73 4.36 June 1.35 1.40 2.75 J u l y .92 1.93 2.85 Aug. .29 1.94 2.23 Sept. - .09 1.76 1.67 Oct. .49 1.60 2.09 Nov. - .70 .23 - .47 Dec. .98 .47 1.45 134 APPENDIX N (continued) Summation Year _ • a. P r i c e of & Fee d D P r i c e and Month Margin Margin Feed Margin 1965 Jan. 1.74 .05 1.79 Feb. 2.40 .35 2.75 Mar. 2.59 .37 2.96 Apr. 3.02 .21 3.23 May- 4.67 1.10 5.77 June 4.21 1.90 6.11 J u l y 3.76 1. 61 5.37 Aug 2.82 1. 03 3.85 Sept. 1.40 .24 1.64 Oct. .44 .22 .66 Nov. .55 .22 .77 Dec. 1.76 1.42 3.18 1966 Jan. 3.42 2.81 6.23 Feb. 4.35 3. 67 8.02 Mar. 3 .78 2.97 6.74 Apr. 3.26 1.98 5.24 May 1.23 1. 20 2.43 June -1. 21 .18 -1.02 J u l y -1.85 .07 -1.78 Aug. -1. 61 .11 -1.50 Sept. -1.13 .09 -1.04 Oct. - .11 .36 .25 Nov. 1. 07 .29 1.36 Dec. 2.36 1.16 3.52 1967 Jan. . 62 .90 1.52 Feb. - .09 .54 .45 Mar. - .22 .33 .11 Apr. - .18 .49 .31 May - .60 .77 .17 June . 61 1.99 2.60 J u l y 1.42 3.39 4.81 Aug. 1.48 3.63 5.11 Sept. 2.23 4.80 7.03 ' APPENDIX N (continued) \" c a l c u l a t e d by s u b t r a c t i n g from the average fed beef p r i c e a t the f e e d l o t ; the feeder s t e e r f e e d l o t p r i c e which e x i s t e d four months p r e v i o u s to the date of s a l e . For example the p r i c e mar-g i n f o r January i s c a l c u l a t e d by s u b t r a c t i n g the p r e ceding October feeder s t e e r p r i c e from the January fed beef p r i c e . See Appendix E f o r p r i c e s e r i e s a t the f e e d l o t . ^ C a l c u l a t e d by s u b t r a c t i n g the average c o s t per pound of gain (Appendix M) from the fed s t e e r p r i c e (Appendix E ) . 136 APPENDIX O F e e d l o t Example One Income Statement f o r the S i x Years Ending A p r i l 30, 1967 a Year 1962 1963 1964 1965 1966 Net c a t t l e s a l e s (50 head) $ 12,553. 00 $ 11,671. 00 $ 12,154. 00 12 $ ,091. 00 $ 14,086. 00 Cost of c a t t l e s o l d feeder ' c a t t l e 7,694. 00 8,879. 00 7,529. 00 7 ,078. 00 7,963. 00 feed 4,165. 00 4,055. 00 3,766. 00 3 ,979. 00 4,253. 00 Gross Margin 694. 00 -1,263. 00 859. 00 1 ,034. 00 1,870. 00 Less. Operating expenses A/ D i r e c t cash ex-penses 225. 00 225. 00 225. 00 225. 00 225. 00 Net over d i r e c t cash ex-penses 4 69. 00 -1,4 88. 00 634. 00 809 . 00 1,645. 00 B/ A l l o c a t e d o p e r a t i n g expenses^ 422. 00 428. 00 435. 00 452. 00 470. 00 Net over o p e r a t i n g expenses 47. 00 -1,916. 00 199. 00 357. 00 1,175. 00 Other Revenue ; manure and bedding 405. 00 405. 00 405. 00 405. 00 40 5. 00 Net Cash Income befo r e Income Taxes 452. 00 -1,511 .00 604. 00 762. 00 1,580. 00 The method of c a l c u l a t i o n i s i n d i c a t e d i n Table XIV. The 19 67 a l l o c a t e d o p e r a t i n g expenses were disc o u n t e d by Composite Index P r i c e ( e x c l u d i n g c o s t of l i v i n g ) of commodities and S e r v i c e s Used by Farmers i n Western Canada. Reference, Do-minion Bureau of S t a t i s t i c s , Summary of A g r i c u l t u r a l S t a t i s t i c s , (Ottawa: Queens P r i n t e r ) . 137 APPENDIX P F e e d l o t Example Two Income Statement f o r the Six Years Ending May 31, 1967 Year 1962 1963 1964 1965 1966 1967 Net C a t t l e Sales (250 head) $ 63,735 $ .59 ,089 $ 61,031 $ 61,425 $ 68,328 $ 66,360 Cost of C a t t l e Sold feeder c a t t l e (250 head) feed 38,465 20,947 44,397 20,256 37,642 18,672 35,385 19,801 39,812 20,685 44,450 21,709 Gross Margin 4,323 -5,564 4,717 6,239 7 ,831 201 Less O p e r a t i n g expenses A/ D i r e c t cash expenses a 637 637 637 637 637 637 Net over d i r e c t cash o p e r a t i n g expenses 3,686 -6,201 4 ,080 5,602 7,194 -436 B/ A l l o c a t e d oper-a t i n g expenses^ 1,43,9 1,461 1,482 1,542 1,602 1,690 Net over Operating expenses 2,247 -7 ,662 2,598 4,060 5,592 -2,126 Other Revenue manure and bedding 1,725 1,725 1,725 1,725 1,725 1,725 Net cash income before taxes 3,972 -5,937 4,323 5,785 7 ,317 -401 The d i r e c t o p e r a t i n g expenses were c a l c u l a t e d on the b a s i s of c o s t of bedding $2.00 per animal, v e t e r i n a r y and medi-c i n e s $.30 per animal and gas and o i l expense $.25 per animal f o r a t o t a l d i r e c t o p e r a t i n g expense of $2.55 per animal. The a l l o c a t e d o p e r a t i n g expenses were c a l c u l a t e d on the b a s i s of a 1967 c o s t of $20.00 per acre f o r b u i l d i n g and land taxes (2 acres x $20.00) $40.00, la b o r expense of $750.00; ( b u i l d i n g r e p a i r s , b u i l d i n g and l i v e s t o c k insurance, e l e c t r i c i t y and telephone expenses) of $400.00 and a c a t t l e l o s s p r o v i s i o n of $500.00 to t o t a l $1690 i n 1967. The a l l o c a t e d o p e r a t i n g expenses f o r years p r i o r to 1967 were c a l c u l a t e d by d e f l a t i n g the 1967 expense by the Composite Index P r i c e of Commodities and S e r v i c e s Used by Farmers i n Western Canada., op. c i t . ^Manure and bedding recovery estimated a t .55 tons per animal per month a t a value of $2.50 per ton to pr o v i d e a revenue of $6.90 per animal. APPENDIX P (continued) Summary of Income Statements 1962-67 f o r F e e d l o t Example Two Year Gross Margin Net Cash Income Before Tax C a p i t a l \" Cost Allow-ance Net Income Before Tax Income Tax Net Income A f t e r Tax Net Cash Income A f t e r Tax C a t t l e I n v e s t -ment Cost Net Cash Flow $ $ $ $ $ $ $ $ $ 1962 4,323 3,972 750 3,222 -664 2,578 3,328 1,615 1,713 1963 -5,564 -5,937 750 -6,687 + 664 -6,043 -5,293 1,865 -7,158 1964 4,717 4,323 750 3,573 -22 3 ,551 4,301 1,581 2,720 1965 6,239 5,785 750 5,035 -1,007 4,028 4,778 1,486 3,292 1966 7,831 7,317 750 6,567 -1,313 5,254 6,004 1,672 4,332 1967 201 -401 750 -1,151 +230 -922 -172 1,867 -2,039 C a p i t a l Cost Allowance c a l c u l a t e d on assumption of 1961 c o n s t r u c t i o n c o s t of $20,000 f o r b u i l d i n g s w i t h a salvage value of $5,000 i n 20 y e a r s . S t r a i g h t l i n e method of c a l c u l a t i o n used i n c a l c u l a t i o n s . Income tax p r o v i s i o n f o r carryback and c a r r y f o r w a r d of income l o s s u t i l i z e d i n c a l c u l a t i o n s . Reference: Department of N a t i o n a l Revenue, T a x a t i o n ; Farmers' and Fishermans 1 Income Tax Guide, (Ottawa: Queens P r i n t e r , 19 67) P. 13. APPENDIX Q F e e d l o t Example Three Income Statement f o r the Six Years Ending October 31, 1967 Year 1962 $ 1963 $ 1964 $ 1965. $ 1966 $ 1967 $ Net C a t t l e S a l e s (100 head) 28,833 26,449 24,150 25,347 26,397 29,778 Cost of C a t t l e Sold feeder c a t t l e (100 head) f e e d a 11,665 8,175 13,885 7,775 13,445 7,000 10,855 8 ,200 12,245 8,850 14,570 8,500 Gross Margin 8, 993 4,789 3,705 6,292 5,302 6,708 Less Operating expenses , A/ D i r e c t cash expenses Net over d i r e c t cash expenses B/ A l l o c a t e d expenses' 3 865 8,128 1,975 865 3,924 2,005 865 2,840 2,036 865 5,427 2,116 865 4 ,437 2,198 865 5,843 2,320 Net over o p e r a t i n g expenses 6,153 1,919 804 3,311 2,238 3,523 Other Revenue , manure and bedding 500 500 500 500 500 500 Net cash income before income tax 6,653 2,419 1,304 3,811 2,738 4,023 The feed c o s t was c a l c u l a t e d on an estimated average feed c o s t o f $17.00 per cwt of beef g a i n i n the 1966-67 o p e r a t i n g year. The feed c o s t f o r years p r i o r to 1967 were c a l c u l a t e d by d e f l a t i n g the 1967 average feed c o s t by the d i f f e r e n c e i n feed i n g r e d i e n t c o s t s . The feed c o s t does not i n c l u d e pasture o p e r a t i n g expenses. D i r e c t cash expenses i n c l u d e c o s t o f bedding at $3.00 per head, v e t e r i n a r y and medicines $.65 per head, and equipment o p e r a t i n g expenses of $5.00 per head to t o t a l $8.65 per head. c A l l o c a t e d expenses i n c l u d e : taxes f o r one acre of land f o r f e e d l o t ($20.00) p l u s taxes f o r 50 acres o f land a t $15.00 per acre (pasture use i s estimated to be 2 animals per acre f o r 5 months); l a b o r expense of $1200, a d m i n i s t r a t i o n expense of $150 and a APPENDIX Q (continued) c a t t l e l o s s p r o v i s i o n of $200 to t o t a l $232 0 f o r 1967 . The expense f o r years p r i o r t o 1967 were c a l c u l a t e d i n the same manner as d e s c r i b e d i n Appendix P. ^Manure and bedding recovered from the f e e d l o t i s estimated a t 2.0 tons per animal and a value of $2.50 per ton. o APPENDIX Q (continued) Summary of Income Statements 1962-67 f o r F e e d l o t Example Three Net Net Cash C a p i t a l 1 2 Net Net Cash C a t t l e Income Cost Income Income Income In v e s t - Net Gross Before Allow- Before Income A f t e r A f t e r ment Cash Year Margin Tax ance Tax Tax Tax Tax Cost Flow $ $ $ $ $ $ $ $ $ 1962 8,993 6,653 250 6,403 1,280 5,123 5,373 1,050 4 ,323 1963 4,789 2,419 250 2,169 433 1,736 1,986 1,250 736 1964 3,705 1,304 250 1,054 211 843 1,093 1,210 -117 1965 6,292 3,811 250 3,561 712 2,849 3,099 977 2,122 1966 5,302 2,738 250 2,488 498 1,990 2,240 1,102 1,138 1967 6,708 4, 023 250 3,773 755 3,018 3,268 1,311 1,957 C a p i t a l c o s t allowance based, on 1961 b u i l d i n g v alue of $5000 and no salvage value i n 20 years and s t r a i g h t l i n e method of c a l c u l a t i o n . Income tax p r o v i s i o n f o r carryback and c a r r y f o r w a r d of income l o s s u t i l i z e d i n c a l c u l a t i o n s . Reference: Department of N a t i o n a l Revenue, T a x a t i o n ; Farmers' and Fishermans',Income Tax Guide, (Ottawa: Queens P r i n t e r , 19 67) P. 13. APPENDIX R F e e d l o t Example Four Income Statement f o r the S i x Years Ending November 30, 1967 Year 1962 1963 1964 1965 1966 1967 $ $ ' $ $ $ $ Net C a t t l e Sales (100 head) 26,248 23,180 21,147 22,638 24 ,054 26,932 Cost of C a t t l e Sold feeder c a t t l e (100 head) f e e d a 11,605 6,907 12,005 6,547 11,335 5,850 10,790 6,930 13,280 7 ,515 13,180 7 ,200 Gross Margin 7,736 4,628 3,962 4,918 3 ,259 6,552 Less Operating Expenses ^ A/ D i r e c t cash expenses Net over d i r e c t cash expenses B/ A l l o c a t e d expenses' 3 575 7,161 1,251. 575 4,053 1,271 575. 3,387 1,290 575 4,343 1,341 575 2,684 1,393 575 5,977 1,470 Net over o p e r a t i n g expenses 5,910 2,782 2,097 3,002 1,291 4,507 Other Revenue , manure and bedding 150 150 150 150 150 150 Net cash income be f o r e taxes 6,060 2,932 2,247 3,152 1,441 4,657 Average feed c o s t estimated to be $16.00 per cwt of beef g a i n i n 1966-67 opera-t i n g year. P r i o r years feed c o s t c a l c u l a t e d by d e f l a t i n g the 1967 feed c o s t by the d i f f e r e n c e i n feed i n g r e d i e n t c o s t s . D i r e c t o p e r a t i n g expenses i n c l u d e c o s t of bedding at $.50 per head, v e t e r i n a r y and medicines a t $.50 per head and equipment and o p e r a t i n g expenses at $4.75 per head to t o t a l $5.75 per head. A l l o c a t e d expenses i n c l u d e taxes of $770 (same land area as i n F e e d l o t Example Three); l a b o r expense of $400, a d m i n i s t r a t i o n expense of $100 and a c a t t l e l o s s pro-v i s i o n of $200 to t o t a l $1470 i n 1967. P r i o r years expenses c a l c u l a t e d a c c o r d i n g to procedure d e s c r i b e d i n F e e d l o t Example One. APPENDIX R (continued) Manure and bedding recovered from the f e e d l o t i s estimated to be .6 tons per animal w i t h a market value of $2.50 per ton. APPENDIX R (continued) Summary of Income Statements 1962-67 f o r F e e d l o t Example Four Year Gross Margin Net Cash Income Before Tax C a p i t a l 1 2 Cost Allow-ance Net Income Before Tax Income^ Tax Net Income A f t e r Tax Net Cash Income A f t e r Tax C a t t l e I n v e s t -ment Cost Net Cash Flow $ $ $ $ $ $ $ $ $ 1962 7,736 6,060 250 5,810 1,162 4,648 4 ,898 661 4,237 1963 4,628 2,932 250 2,682 536 2,146 2 ,396 684 1,712 1964 3,962 2,247 250 1,997 399 1,598 1,848 646 1,202 1965 4,918 3,152 250 2,902 580 2,322 2,572 615 1,957 1966. 3,259 1,441 250 1,191.\" 238 953 1,203 757 446 1967 6,552 4,657 250 4,407 881 3,526 3,776 751 3,025 See Appendix Q f o r i n f o r m a t i o n . Income tax p r o v i s i o n f o r carryback and c a r r y f o r w a r d of income l o s s u t i l i z e d i n c a l c u l a t i o n s . Reference: Department of N a t i o n a l Revenue, T a x a t i o n ; Farmers' and Fishermans' Income Tax Guide, (Ottawa: Queens P r i n t e r , 19 67) P. 13. APPENDIX S F e e d l o t Example F i v e Income Statement f o r the S i x Years Ending May 31, 1967 Year 1962 1963 1964 1965 1966 1967 $ $ $ $ $ $ Net C a t t l e Sales (500 head) 127,470 118,177 122,062 122 ,850 136,657 132,720 Cost of c a t t l e Sold (500 head) feeder c a t t l e f e e d a 76,930 41,895 88,795 38,762 75,285 35,595 70,770 37,852 79,625 39,620 88,900 41,667 Gross Margin 8,645 -9 ,380 11,182 14 ,228 17 ,412 2,153 Less o p e r a t i n g expenses ^ A/ D i r e c t cash expenses Net over cash expenses B/ A l l o c a t e d expenses' 3 1,075 7,570 3,291 1,075 -10,455 3,343 1,075 10,107 3,393 1,075 13,153 3,527 1,075 16,337 3,665 1,075 1,078 3/865 Net over o p e r a t i n g expenses 4,279 -13,798 6,714 9,626 12,672 -2,787 Other Revenue , manure and bedding 2,050 2,050 2,050 2,050 2,050 2,050 Net cash income before taxes 6,329 -11,748 8,764 11,676 14 ,722 -737 The average feed c o s t per cwt beef g a i n i s estimated t o be $23.81 per cwt i n the 1967 f e e d i n g p e r i o d . The p r i o r years feed c o s t was c a l c u l a t e d by d e f l a t i n g the 1967 feed c o s t by the d i f f e r e n t i a l i n feed i n g r e d i e n t p r i c e s . The d i r e c t cash expenses were c a l c u l a t e d on the assumption of c o s t of bedding $1.75 per head, v e t e r i n a r y and medicines $.15 per head, and gas and o i l expense of $.25 per head f o r a t o t a l expense of $2.15 per head. c The a l l o c a t e d expenses were c a l c u l a t e d on the b a s i s of a 1967 c o s t of b u i l d i n g taxes $95.00, land taxes $20.00 (2 acres a t $10.00 per a c r e ) , l a b o r expense of $2000, a d m i n i s t r a t i o n expense of $750 and a c a t t l e l o s s p r o v i s i o n of $1000 f o r a t o t a l of $3865. APPENDIX S (continued) ^Manure and bedding value estimated on the b a s i s of .55 tons per head per month f o r f i v e months and a value of $1.50 per ton. APPENDIX S (continued) Summary of Income Statements 1962-67 f o r F e e d l o t Example F i v e Net C a p i t a l a - Net Cash Net Net Cash C a t t l e Income Cost Income •u Income Income Inv e s t - Net • Gross Before Allow- Before Income A f t e r A f t e r ment Cash Year Margin Tax ance Tax Tax Tax Tax Cost Flow $ $ $ $ $ $ $ $ $ 1962 8,645 6,329 2000 4,329 -866 3,463 5 ,463 3,231 2 ,232 1963 -9,380 -11,748 2000 -13,748 +866 -12,882 -10,882 3,729 -14,611 1964 11,182 8,764 2000 6,764 0 6,764 8,764 3,162 5,602 1965 14,228 11,676 2000 9,676 -1,404 8 ,272 10,272 2,972 7,300 1966 17,412 14,722 2000 12,722 -2,544 10,178 12,172 3,344 8 ,828 1967 2,153 -737 2000 -2,737 +547 -2,190 -190 3,734 -3,3924 C a p i t a l c o s t allowance c a l c u l a t e d on a 1961 c o n s t r u c t i o n c o s t of $50,000 f o r b u i l d i n g s and a salvage v a l u e of $10,000 i n 20 ye a r s . S t r a i g h t l i n e method of c a l c u -l a t i o n used i n the a n a l y s i s . Income tax p r o v i s i o n f o r carryback and c a r r y f o r w a r d of income l o s s u t i l i z e d i n c a l c u l a t i o n s . Reference: Department of N a t i o n a l Revenue, T a x a t i o n ; Farmers' and Fishermans 1 Income Tax Guide, (Ottawa: Queens P r i n t e r , 1967) P. 13. APPENDIX T Fe e d l o t Example S i x Income Statement f o r the Six Years Ending November 30, 1967 Year 1962 1963 1964 1965 1966 1967 $ $ $ $ $ $ Net C a t t l e Sales (500 head) 131,245 115,900 105,735 113,192 120,270 134,662 Cost of C a t t l e Sold feeder c a t t l e (500 head) f e e d a 63,827 28,700 66,027 27,100 62,342 24,000 59,345 28,800 73,040 31,400 72,490 30,000 Gross Margin 38,718 22,773 19,393 25,047 15,830 32,172 Less o p e r a t i n g expenses A/ D i r e c t cash expenses^ Net over cash expenses 2,575 36,143 2,575 20,198 2 ,575 16,818 2,575 22,472 2,575 13,255 2,575 29,597 B/ A l l o c a t e d expenses 0 4,249 4,316 4,381 4,555 4 ,732 4,990 Net over o p e r a t i n g expenses 31,894 15,882 12,437 17,917 8,523 24 ,607 Other Revenue , manure and bedding 450 4 50 450 450 450 450 Net cash income before taxes 32,344 16,332 12,887 18,367 8 ,973 25,057 Feed c o s t c a l c u l a t e d on the b a s i s of an average feed c o s t per cwt of beef g a i n of $15.00 per cwt i n the 1967 o p e r a t i n g p e r i o d . The p r i o r years feed c o s t was c a l c u -l a t e d by d e f l a t i n g the 1967 feed c o s t by the d i f f e r e n t i a l i n feed i n g r e d i e n t s c o s t s . The d i r e c t cash expenses were c a l c u l a t e d on the b a s i s of c o s t of bedding $.50 per head, v e t e r i n a r y and medicines $.15 per head and equipment and o p e r a t i n g expenses of $4.50 per head to t o t a l $5.15 per head. o The a l l o c a t e d expenses were c a l c u l a t e d on the b a s i s of $95.00 taxes f o r the b u i l d i n g s , $2520 tax expense f o r pasture and f e e d l o t land expense (252 a c r e s ) , l a b o r expense - $1000, a d m i n i s t r a t i o n expense - $375 and a c a t t l e l o s s p r o v i s i o n of $1000 to t o t a l $4990. P r i o r years expense c a l c u l a t e d a c c o r d i n g to procedure o u t l i n e d i n F e e d l o t Example One. APPENDIX T (continued) Value of manure and bedding c o l l e c t e d from the f e e d l o t i s based upon a recover y tons per head per month f o r one month and has a value of $1.50 per ton. APPENDIX T (continued) Summary of Income Statements 1962-67 f o r F e e d l o t Example S i x Year Gross Margin Net Cash Income Before Tax C a p i t a l 1 3 Cost Allow-ance Net Income Before Tax Income^ tax Net Income A f t e r Tax Net Cash Income A f t e r Tax C a t t l e I n v e s t -ment Cost Net Cash Flow $ $ $ $ $ $ $ $ $ 1962 38,718 32,344 2000 30,344 6,609 24 ,275 26,275 3 ,638 22,637 1963 22,773 16,332 2000 14,332 2 ,867 11,465 13 ,465 3,763 9,702 1964 19,393 12,887 2000 10,887 2 ,177 8 ,710 10,710 3,553 7 ,157 1965 25,047 18,367 2000 16,367 3 ,273 13,094 15,094 3,383 11,711 1966 15,830 8,973 2000 6,973 1,395 5,578 7,578 4,163 3 ,415 1967 32,172 25,057 2000 23,057 4 ,611 18,446 20,446 4 ,132 16,314 C a p i t a l c o s t allowance c a l c u l a t e d on a 1961 c o n s t r u c t i o n c o s t of $50,000 f o r b u i l d i n g s and a salvage value of $10,000 i n 20 ye a r s . S t r a i g h t l i n e method of c a l c u -l a t i o n , used i n the a n a l y s i s . Income tax p r o v i s i o n f o r carryback and c a r r y f o r w a r d o f income l o s s u t i l i z e d i n c a l c u l a t i o n s . Reference: Department of N a t i o n a l Revenue, T a x a t i o n ; Farmers' and Fishermans' Income Tax Guide, (Ottawa: Queens P r i n t e r , 1967) P. 13. APPENDIX U F e e d l o t Example Seven Income Statement f o r the Six Years Ending November 30, 1967 Year 1962 1963 1964 1965 1966 1967 Net C a t t l e Sales (1000 h e a d ) a 258,715 234,077 227,797 236,042 256 ,927 267,382 Cost of C a t t l e Sold feeder c a t t l e (1000 head)\" f e e d a 140,757 70,595 154,822 65,862 137,627 59 ,595 130,115 66,652 152,665 71,020 161,390 71,667 Gross Margin 47,363 13,393 30,575 39,275 33,242 34,325 Less o p e r a t i n g expenses A/ D i r e c t cash expenses\" Net over cash expenses, B/ A l l o c a t e d expenses 3,650 43,713 7,445 3,650 9,743 7,561 3,650 26,925 7,676 3,650 35,625 7,979 3,650 29,592 8 ,290 3,650 30,675 8,740 Net over o p e r a t i n g expenses 36,268 2 ,182 19,249 27,646 21,302 21,935 Other Revenue manure and bedding\" 2,500 2,500 2,500 2,500 2,500 2,500 Net cash income before taxes 38,768 4,682 21,749 30,146 23 ,802 24,435 C a l c u l a t e d by adding the parameters from F e e d l o t Examples F i v e and S i x . A l l o c a t e d expenses were c a l c u l a t e d on the b a s i s o f land and b u i l d i n g taxes -$2615, l a b o r expense - $3000, a d m i n i s t r a t i o n expense - $1125 and a c a t t l e l o s s pro-v i s i o n o f $2000 to t o t a l $8740 i n 1967. APPENDIX U (continued) Summary o f Income Statements 1962-67 f o r F e e d l o t Example Seven Year Gross Margin Net Cash Income Before Tax C a p i t a l a Cost Allow-ance Net Income Before Tax Income Tax Net Income A f t e r Tax Net Cash Income A f t e r Tax C a t t l e I n v e s t -ment Cost Net Cash Flow $ $ $ $ $ $ $ $ $ 1962 47,363 38,768 2000 36,768 7,354 29,414 31,414 6,869 24 ,545 1963 13,393 4,682 2000 2,682 536 2,146 4,146 7,492 -3 ,346 1964 30,575 21,749 2000 19,749 3 ,950 15,799 17 ,799 6,715 11,084 1965 39,275 30,146 2000 28,146 5,629 22,517 24,517 6 ,355 18,162 1966 33,242 23,802 2000 21,802 4 ,360 17,442 19,442 7 ,507 11,935 1967 34,325 24,435 2000 22,435 4 ,487 17 ,948 19,948 7,866 12,082 C a p i t a l c o s t allowance c a l c u l a t e d on a 1961 c o n s t r u c t i o n c o s t , o f $50,000 f o r b u i l d i n g s and a salvage value of $10,000 i n 20 y e a r s . S t r a i g h t l i n e method of c a l c u -l a t i o n used i n the a n a l y s i s . Income tax p r o v i s i o n f o r carryback and c a r r y f o r w a r d of income l o s s e s u t i l i z e d i n c a l c u l a t i o n s . Reference: Department of N a t i o n a l Revenue, Taxation; Farmers' and Fishermans' Income Tax Guide, (Ottawa: Queens P r i n t e r , 1967) P. 13. APPENDIX V F e e d l o t Example E i g h t Income Statement f o r the Six Years Ending J u l y 31, 1967 Year 1962 1963 1964 1965 1966 1967 $ $ $ $ $ $ Net C a t t l e Sales 1500 head\" 1500 headb 369,750 387,150 373,800 356,400 325,800 349,050 334,500 371,700 388,800 375,600 387,600 398,400 Net Sales 756,900 730,200 674,850 706,200 764,400 786,000 Cost of C a t t l e Sold feeder c a t t l e \" (1500 head) feeder c a t t l e 6 (1500 head) f e e d e 240,750 255,937 143,925 290,925 268,200 140,175 260,887 251,212 129,825 229,725 240,187 137,625 255,037 296,662 144,150 285,525 294,862 150,000 Gross Margin 116,288 30,900 32,926 98 ,663 68,551 55,613 Less Operating Expenses^ 31,254 31,740 32,220 33,500 34,800 36,700 Net Over Operating Expenses 85,034 -840 706 65,163 33,751 18,913 Other Revenue manure and bedding 5,400 5,400 5,400 5,400 5,400 5,400 Net Cash Income before income tax 90,434 4,560 6,106 70,563 39,151 24,313 C a t t l e purchased and s o l d according to p o l i c y 8a i n Table X I I I . C a t t l e purchased and s o l d a c c o r d i n g to p o l i c y 8b i n Table X I I I . ^Average feed c o s t i n 1967 i s assumed to be $20.00 per cwt of net beef g a i n . The p r i o r years p r i c e s were c a l c u l a t e d by d e f l a t i n g the 1967 feed c o s t by the d i f f e r e n t i a l i n feed i n g r e d i e n t p r i c e s . APPENDIX V (continued) d 1967 o p e r a t i n g expenses i n c l u d e : bedding at $1.75 per head = 5,250 v e t e r i n a r y and medicines a t $.35 per head = 1,050 a d m i n i s t r a t i o n , b u i l d i n g r e p a i r s and insuran c e , c a t t l e i n s u r a n c e , e t c . = 10,500 gas and o i l expenses and machinery r e p a i r s = 1,500 la b o r = 10,000 land and b u i l d i n g taxes = 2,400 c a t t l e l o s s p r o v i s i o n = 6,000 $36,700 The p r i o r years o p e r a t i n g expenses were c a l c u l a t e d a c c o r d i n g to the procedure d e s c r i b e d i n Appendix O. Manure and bedding recovered from the f e e d l o t i s estimated to be 0.60 tons per head per month, and the value i s estimated to be $1.00 per ton. APPENDIX V (continued) Summary of Income Statements 1962-67 f o r F e e d l o t Example E i g h t Net C a p i t a l 1 2 Net Cash Net Net Cash C a t t l e Income Cost Income Income Income Inv e s t - Net Gross Before Allow- Before Income A f t e r A f t e r ment Cash, Year Margin Tax ance Tax Tax Tax Tax Cost Flow $ $ $ $ $ $ $ $ $ 1962 116,288 90,434 5500 84,934 -42,467 42,467 47,967 13,410 34,557 1963 30,900 4,560 5500 -940 +470 -470 5,030 15,096 -10,066 1964 32,926 6,106 5500 660 -330 330 5,830 13,827 -7 ,997 1965 98,663 70,562 5500 65,062 -32,531 32,531 38,031 12,688 25,343 1966 68,551 39,150 5500 33,650 -16,825 16,825 22,325 14,895 7,430 1967 55,613 24,312 5500 18 ,812 -9,406 9,406 14,906 15,670 -764 C a p i t a l c o s t allowance c a l c u l a t e d on assumption of a 1961 c o s t o f $80,000 f o r b u i l d i n g s and $20,000 f o r machinery and equipment. Salvage value o f b u i l d i n g s i s estimated t o be $10,000 and no salvage v a l u e f o r machinery. M a r g i n a l income tax r a t e assumed t o be 50 percent. "@en ; edm:hasType "Thesis/Dissertation"@en ; edm:isShownAt "10.14288/1.0102407"@en ; dcterms:language "eng"@en ; ns0:degreeDiscipline "Business Administration"@en ; edm:provider "Vancouver : University of British Columbia Library"@en ; dcterms:publisher "University of British Columbia"@en ; dcterms:rights "For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use."@en ; ns0:scholarLevel "Graduate"@en ; dcterms:title "An analysis of the fed beef industry in the Fraser Valley region of British Columbia"@en ; dcterms:type "Text"@en ; ns0:identifierURI "http://hdl.handle.net/2429/36181"@en .