Chief Executive Officer, Beretta Organic Farms
Thank you for this opportunity to come. It's my first time. My wife and I are organic farmers north of Toronto in Ontario. We've been asked to come and speak a bit to the organic and natural side of the supply chain. So, more specifically, I'll talk with regard to beef. That's what we know best and we raise a cattle herd at home.
Our business has evolved into covering all the meat species, but primarily beef, which has taken us right across the country. Our supply chain involves four provinces: Alberta, Saskatchewan, Manitoba, and Ontario. We raise beef under two brands, Beretta Organic, which is a certified organic brand of beef, as well as Beretta Ranch, which is a natural version of the organic.
I'll give a little background history. The natural beef is raised without the use of antibiotics, hormone implants, or steroids. It's vegetable and grain fed, and all our cattle are born and raised in Canada. Our business has evolved over the years. We're in our twentieth year now and what started out as a home delivery business has evolved to the degree where we now supply large retailers such as Loblaws, American companies like Whole Foods, Longo's, and the Chipotle restaurant chain.
Both our organic and natural meat sales, as I said, began with home delivery and have evolved into a much larger scale. So most of the challenges we're facing now are around how we ramp up that scale and try to put a supply chain together that's sustainable both from a profitable standpoint and also from a logistical one.
I'll try to pinpoint a few of the challenges I thought would be most relevant to a group like this. Growing the cattle supply presently is the most challenging. The intricacies of the cattle industry are such that there's a long timeframe involved, and most of the supply chain is broken up into three key areas, which are cow-calf, backgrounding, and feedlot. Those three segments of the industry tend to be somewhat disjointed and are very rarely shared by the same farmer.
Growing the cattle supply tends to be our number one issue, and closely linked to this is the funding of that supply. So on a branded program such as ours, which involves both the organic certification and the natural, we're challenged with having to fund cattle right through that pipeline, because more and more of the smaller farmers are not able to maintain their inventory longer than they need and they tend to have to sell to maintain their cash flow. So we've been put into a situation now where we're trying to build a supply chain on a larger level and finding that the funding tends to be one of the most critical components.
Third would be the Canadian geography. The way the cattle industry is set up, the markets are here in Ontario and Quebec, and most of the cattle are out west. So trying to figure that out, especially when we're competing against a lot of American companies that are moving up here, is quite challenging.
The last one in terms of a challenge, which I do see as an opportunity, is that most of the larger retailers we deal with do their buying based on USDA cutouts, which is a formula based on packer sales in the U.S.. By law, they all have to be entered in and then the USDA publishes a daily cutout. So the Canadian retailers continually put pressure on us to build our pricing models on a USDA-based one, which is not relevant at all to our costs of production or the Canadian beef industry.
In terms of opportunities—and you probably hear this day in and day out—the marketplace needs to be more balanced. I think Canada has an opportunity to develop a USDA equivalent that's relative to our cost of production in Canada and that takes into consideration things like Canadian geography and our costs. I think there needs to be some incentives to support more of the smaller Canadian farmers, something such as a loan guarantee, that would allow them to retain ownership longer in the cattle supply side.
I think there needs to be some incentives to help more of the cattle supply move east. In our situation, we tend to purchase young cattle from out west and then gradually move them across the country until they're finished in Ontario. One of the reasons we've done that on a more gradual scale is to take into consideration animal welfare. It's a huge country and a two- to three-day truck ride with cattle is not something consumers are going to want to hear about in terms of animal welfare.
I think there also needs to be an incentive for Canadian retailers to look at buying more Canadian. I think because of the constant pressures put on by U.S. meat companies and the supply up here, they're very reluctant to celebrate the fact that we do have great Canadian beef. And it should be celebrated, and it should be marketed as such.
Finally, on more of a personal note, I think there's a difficult but not insurmountable challenge, and it has to do with the average age of the Canadian beef farmer. I attend beef meetings—Ontario Cattlemen's, Canadian Cattlemen's—and the average age, as you probably read recently, is well into the fifties. I'd say that's very conservative. I don't recall the last beef meeting that wasn't all grey hairs. We need to try to generate some kind of incentive that will capture the interest of younger people to get into this industry. That's an opportunity as much as it is a challenge.
Thank you for your time.