How many Canuck producers would support this?

[DiamondSCattleCo]

Just out of curiosity, if there were a producer owned packing plant, run on co-operative principles, would you support this to the exclusion of others? This plant would offer reasonable purchase prices and grids, competitive with other plants, however at the end of the year, instead of the profits getting sucked up into shareholders pockets, it would go back to every producer who shipped to the Co-op? Say its pricing was off by a cent or two until the startup loans were paid off, would you still support it until it was able to become competitive?

Rod

 

[greg]

I know I would.I beleive that is what needs to be done.We have created our own problems by not doing that sooner.

 

[Jason]

I think in principle every producer would support that idea. However, what about the middlemen, feeders? Many would like the idea but could they compete against other feedlots that are getting the 1-2 cents more?

There is always the risk of just lowering the price straight across the board, as markets tend to seek level.

I would rather see a well run plant with producer support that seeks markets for the beef that will allow it to compete at the top prices paid.

One problem I have seen with some producer packing plants is the attitude one Lethbridge cattle person put forward; 'just kill the cattle the beef will just sell.'

 

[greg]

Jason makes some good points.But we do need to do something or we will be in same spot again

 

[Jason]

There are some ventures that are up and running or will be shortly.

Those that finish their own cattle have the right to sell to any plant at any price offered.

I don't know what the exact market share of each plant will be, but if producer owned plants have a garanteed supply of cattle no matter what the economics, they will pay what they need to make a profit on the other end, it could possibly result in producers absorbing the losses that occur in the packing industry in a more direct way.

 

[DiamondSCattleCo]

I guess I took "well run plant" as a given.

So Jason, by "well run plant with producer support" do you mean a publicly traded company with no co-operative aspect and producer support?

I didn't really consider large feeders at the start of this equation. I was thinking more along the lines of cow/calf guys who fed their animals out and smaller co-operative feedlots. What I would envision is a complete co-operative effort from the time a calf dropped to the time it found its way onto a consumer plate. No stockholders to siphon off profits. After re-captilization every last nickel of net profit would make its way back to the producer.

Edit: I just re-read some of the posts. There would be no captive supply to the co-op. If producers/feeders felt they could get better pricing elsewhere, they'd be free to go.

Rod

 

[rkaiser]

How many Canuck producers would support this?

Over 90% of close to 10,000 producers asked at close to 30 BIG C meetings conducted in 04 -05.

Big C has stopped future plant plans however, since we have overcapacity once again with an open border and miraculously companies with 85% of the packing capacity in Canada.

Support the plants that have turned sod. God knows they will need it. Retained ownership will be the only way, along with creative marketing.

Have to chuckle at Jasons remark about profit creating competition. Excessive profit for 2 years had lots of entrepreneurs thinking they could compete. Too bad packing plants could not have been built in two months rather than three years eh?

The difference between producer owned and mutinational is that mutinational plants have no goal other than to profit for themselves or shareholders (fine), but producers are always only PRODUCERS in this scheme. Never a long term plan to help producers, only produce profit. Producer owned packing plants would always be looking for ways to change the situation to better the producer, I would hope. Search out new markets and try to find ways to have customers coming to them rather than control the market to simply keep the profits level at say $3.88 cents per head. :lol: :lol: :lol: :lol:

 

[DiamondSCattleCo]

Support the plants that have turned sod. God knows they will need it. Retained ownership will be the only way, along with creative marketing.

Randy, do you have a list of packing plants who are privately held? Or know where a producer can get this information?

Rod

 

[Jason]

Rod, maybe you haven't seen the number of plants looking for investor money with no business plan, no idea of enviromental regulations, no idea how or where they would sell the beef, or with no idea of what the actual costs of building a plant are.

Building a plant that needs 500 workers in a town of 3000 isn't likely to work. What are the chances there is a town with 16.6% unemployment? And if there is a town like that what are the chances those 16.6% are interested in working anyway?

I ran some numbers for an average plant some time ago, and it would take a lot more producers than most think to finance it, and if the investment was kept reasonable, they would control far more cattle than the plant could ever process.

It would lead to problems with who gets which cattle, will producers be able to sell to other plants if they own one? Would you buy bulls from another breeder if you have your own?

The only viable way for any plant to survive is one that is top of the industry in terms of management and expertise. The co-op idea isn't a plus or minus because if there were more profits than expenses the profits are still going somewhere, co-op members are shareholders.

A public traded company could have debt repayment terms specified in the charter, so investors know there would be no dividends until the plant was paid for. Would that make investors back away? Some I am sure.

The only benefit of a co-op type investment is that the most likely investors (cattle people) would own shares in the plant and possibly make their money back.

The real benefit is that we would be less dependant on the US to process live cattle. There is no garantee that prices will climb with more plant capacity. It just means if there is more space than cattle, the least efficient will close.

I know part of the idea is for small producers having a place to sell a few fats. To make a plant have to deal with small lots puts it where it needs more staff, pens, paperwork etc. reducing profits all other things being equal. Not necesarily bad just a fact.

 

[DiamondSCattleCo]

Rod, maybe you haven't seen the number of plants looking for investor money with no business plan, no idea of enviromental regulations, no idea how or where they would sell the beef, or with no idea of what the actual costs of building a plant are.

Oh certainly, I didn't mean it like that. The reason I said I took it as a given is because I wouldn't expect anyone to support a poorly-run outfit.

And if there is a town like that what are the chances those 16.6% are interested in working anyway?

Field of dreams comes to mind: If you build it, they will come. When the Francois/Finlay dam was being build, the town of Nipawin went from 4900 people to around 6000 workers. But, I never suggested the plant be built close to a small town anyway. Location is getting into a little more detail than needs to be discussed.

It would lead to problems with who gets which cattle, will producers be able to sell to other plants if they own one? Would you buy bulls from another breeder if you have your own?

My edit didn't make it in time. No captive supplies. Producers/Feeders could sell anywhere they wanted. However, it would be hoped that producers would support the co-operative venture, since the profits would be channeled back to the producer, not to a suit and tie sitting at the stock market.

industry in terms of management and expertise. The co-op idea isn't a plus or minus because if there were more profits than expenses the profits are still going somewhere, co-op members are shareholders.

The co-op idea is a plus for producers. Currently, any profits go back to shareholders who do not have a stake in the livestock. They simply own chunks of paper that entitle them to X% of the profits.

The only benefit of a co-op type investment is that the most likely investors (cattle people) would own shares in the plant and possibly make their money back.

No shares based on investments into the co-op. That completely defeats the purpose of the co-op and no longer makes it a co-op. If the plant is built, it would be funded with bank money and hopefully government could be convinced to guarantee the loans. After that, "shares in profit" are only dispersed to those who ship their cattle to the co-op. If you ship 40,000 lbs of beef to the co-op in 2005, and after the books are done, its discovered that 1 penny of profit was made per pound of beef, you get your $400. If the co-op makes a buck a pound, you get $40,000. You get the idea. Part of the gross profits would end up having to go into capital accounts, just in case there was a loss on the year.

Rod

 

[Bill]

Rod, are you close to the proposed NESCO Meats plant and if so what do your think of that proposal?

 

[DiamondSCattleCo]

Unfortunately Bill, I haven't heard much about this other than it being mentioned in passing a time or two. Would you have links to information?

Rod

 

[cowsense]

Rod: Phone or drop into your regional govt. ag services branch and ask for a copy of the "Saskatchewan Prefeasibility Beef Business Analysis" prepared by Mallot Creek Strategies INC.. This is an excellent study prepared last winter showing the recquirements for building and running various sizes of slaughter plants and the various forms of ownership structure that can be used. We went through the process last winter and it clearly showed us that our local group's plans were unviable. A slaughter plant recquires a huge investment to meet operational standards, health and environmental standards and to "compete" for animals or product to process as well as to develop a successful marketing plan that will allow the company to survive in an intensely competive marketplace!! The raising of large amounts of core financing from producers is an extremely difficult process in todays depressed ag markets!

 

[rkaiser]

Could not agree with you more cowsense. In fact the fact that ivestment from producers would be difficult was obvious from the start. Tons of ideas came froward, with most being of the co-op plus investor variety. Entepreneurs who saw opportunity. In fact, I don't beleive that one truly producer funded Co op idea is moving ahead. Except maybe the Atlantic Beef Project.

With producers as major investors however, the idea of changing the exisisting structure of the industry is there. The current buyer and seller split that we deal with with the likes of Cargill and Tyson allows produers nothing but sales. With partial investor, partial producer ownership, opportunity is there for those who choose a retention route. Eventually we all sell, but obtaining value further up the chain is an option that I personally choose. No choice with Cargill and Tyson other than SELLING on their grid. Do you know of anyone custom killing with Cargill or Tyson?

Back to the investment by producers thing for just a moment cowsense. The potential was certainly there for major investment through a levy as was the original BIG C proposal. If the plan would have ever gotten even a glance from CCA or ABP rather than constant ridicule, producer ownership through to retail could have been reality.

No use looking back now, I know, but why discuss producer ownership of plants now either. Ain't gonna happen, and the plants that have started are going to struggle and mostly fail without some help, considering the war chest built by Cargill and Tyson through two years of excessive profits.

 

[DiamondSCattleCo]

Cowsense, I understand what you're saying and in no shape or form deny that startup of a packing venture would be extremely difficult. However, it is beyond the scope of my question. Thank you for telling me about that document, though. I will be looking at it.

I'm not even certain that producer ownership is the route that should even be looked at. Some early co-operatives were formed through non-profit organizations, and initially funded through government guaranteed loans. Once the organizations were on their feet, further expansion was fueled through re-capitalization earmarked profits or non-secured loans. Boards of directors were elected by the members of the co-op, and these directors then hired the necessary people (who were likely not members) to make the organization work.

I'm only curious if producers would be willing to ship to something like this. Perhaps the "initial payment" would be 1 or 2 cents lower than that days market, but it would on the idea that the profit at the end of the year, once distributed, would more than make up for the loss. Think of a sort of Wheat Board for slaughter beef.

Rod

 

[Northern Rancher]

Just curious as to what happens in these scenarios if the plant drops a million in a years time-it can happen in a heartbeat-or if a settlement cheque doesn't clear-co-operative ventures make us feel warm and fuzzy inside I know but the meat packing business is not for the faint of heart-as for me-maybe as producers we should be skipping the packing plant and investing in a chain of producer owned meat shops-as for investing in a plant where I'm not allowed to sell anywhere else to quote a famous Albertan 'No chancey Mr. Whelan'.

 

[rkaiser]

as for me-maybe as producers we should be skipping the packing plant and investing in a chain of producer owned meat shops-

Probably the best plan NR. You still have to find a place to kill your beef though. Do you think Cargill will do a custom kill for you? You can stay small and use a provincial plant, but the economy of scale will mean your prices will have to be higher in your meat shop etc. etc.

Like I say, my dreams of packing plants have now become little short nightmares.

 

[JD6320]

Just out of curiosity, if there were a producer owned packing plant, run on co-operative principles, would you support this to the exclusion of others? This plant would offer reasonable purchase prices and grids, competitive with other plants, however at the end of the year, instead of the profits getting sucked up into shareholders pockets, it would go back to every producer who shipped to the Co-op? Say its pricing was off by a cent or two until the startup loans were paid off, would you still support it until it was able to become competitive?

Rod

Rod,
As producers, we seem to just look at getting our beef killed,processed will solve all our problems, the real money is in value adding to the varied meats, and if these co-op plants are to suceed in the long run,they will have to expand into these areas to be successful. A good example of this is the danish hog industry. All hogs are marketed through basically 2-3 large co-ops. These co-ops have expanded to operate everything from the processing line to exporting companies that peddle the meat worldwide. Danish Crown one of the co-ops is the 3rd largest pork processer in the world, so it is possible to achieve this here.

Pricing for cattle should be grid based and dividends paid at the end of the years that reflect the profit captured from value added meat cuts and high end export markets.

 

[blackjack]

randyk...did your bigc group ever have a chance to talk to any groups from japan or asia that might be interested in building a plant here in canada... i agree with you having just two large packers is not enough competetion ...


...good luck on your bullsale...

 

[Northern Rancher]

What about getting some of those mobile abbatoirs up and running-killing for several meat shops. I quite honestly think to compete with the big guys you have to fly under their radar. Find a niche they aren't interested in and exploit it-Highland was getting their Natural Beef custom killed at a plant but I'm not sure which one. Thhose parking lot meat sales seemed to work good during the darkest days of 2003. Maybe we need to explore that-have a major reefer meat sale every so often at all the big centres.