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TimH

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Canadian Slaughter Capacity Caution - Beware Too Many Slaughter Plants
Source: Western Producer
Cattle analysts are beginning to wonder if the industry may be moving out of the frying pan and into the fire.
In an attempt to address a chronic shortcoming in Canadian slaughter capacity, producers and processors have hatched a long list of projects that could be steering the industry to a new kind of problem.
"There's a concern that we would have overcapacity here to the detriment of long-term viability," said Dale Engstrom, head of Alberta Agriculture's agri-processing branch.
Canfax reported a 28 percent increase in Canadian slaughter capacity in 2004 to 4.1 million head, up from 3.2 million in 2003. The agency expects a further 12 percent increase in 2005, to 4.6 million head.
A trade delegation from the U.S. National Cattlemen's Beef Association pointed out that would represent nearly a one million head increase from 2002, which it sees as a disturbing development.
"That compares to (1998-2002) average U.S. imports of Canadian fed cattle of 642,000 head and suggests that Alberta feedlots will no longer need to market nearly as many of their cattle on a live basis in the United States," the association said in a Feb. 2 summary of its fact-finding mission.
Engstrom is pleased Canada is becoming less reliant on American slaughter facilities, but he is starting to worry the industry may overcompensate for its past deficiencies.
"If the border remains closed for a couple of years, then we need cow killing capacity in particular. But if it opens in a few months, it's a different story."
The competition for animals from south of the border is expected to be fierce so Alberta Agriculture is advising plant developers to budget on cow prices in the traditional range of 45-55 cents per pound versus current prices of 20-25 cents a lb.
"Try to survive under that scenario and if you can't, boy you've got to be careful," warned Engstrom.
U.S. cattle analyst Steve Kay said Canadian plants should indeed expect stiff competition from their American counterparts once the border opens, which he believes will happen later this year. A combination of the smallest U.S. cattle herd in three decades and the absence of live cattle imports from Canada have American slaughter plants salivating for more animals.
"Pretty much all of the major packers are running at only 70 percent of capacity or less," said Kay, editor of Cattle Buyers Weekly newsletter.


"We've got a very serious situation here that is only going to be partially alleviated by the reopening of the Canadian border to live cattle."
While firms like Cargill and Tyson, which have plants on both sides of the border, will face a balancing act once trade resumes, other big players like Swift & Co. won't hesitate to siphon cattle into the U.S. market through price premiums.
"I dare say they will buy as many cattle as they can at a price that works," said Kay.
And that is exactly why Canadian developers must proceed with caution, said Gordon Cove, leader of the meat unit in Alberta Agriculture's agri-processing branch.
"If everybody builds everything (that is proposed) across the country, we're talking millions more head of capacity."
Expansions already under way at the Cargill plant in High River, Alta., the Tyson plant in Brooks, Alta., and the XL Beef plant in Moose Jaw, Sask., will add 700,000 head in annual slaughter capacity. The proposed Rancher's Beef Ltd. plant northeast of Calgary and the Ranchers Own Meat Processors Inc. plant west of Edmonton will bump the total up another 400,000 head. Both projects are well on their way to securing the necessary financing, said Cove.
Together those five projects represent 1.1 million head of additional capacity. There is easily another few million in the offing if prairie developers follow through on the dozens of business plans that are out there.
But that doesn't concern independent cattle industry consultant Christoph Weder.
“We're a long ways from having any situation where we've got a surplus of kill capacity because I still think that 90 percent of the plants that are proposed will never get off and get going," said the former Alberta Agriculture beef specialist.
Kay said with the "very real danger" of overcapacity appearing in Canada, Weder is likely correct in his assessment.
"I think some of those projects will die on the vine," said the American analyst.
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Quote- "I think some of those projects will die on the vine," said the American analyst."

More like "I HOPE some of these projects will die on the vine...."

We've upped our slaughter capacity.......Up Yours Tooo!!!! :wink:

We'll just see how the white fat, tasty,barley-fed Canucklehead beef fares, on the supermarket shelves of the WORLD ,beside the "Born, Raised and Slaughtered in the USA" yellow fat corn-fed beef. :lol:
 

Les

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TimH did you by any chance write the book called 'how to win friends and influence people;? NO? I didnt think so.
 

Mike

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Tim, I see that Cargill is buying another plant in Guelph. The "Big Boys" ain't done with you guys yet. They are moving in for the kill.
Hope we can put a steak side by side on the shelf one day. I just know they'll pick mine, cause it don't have all that "yucky" fat! :lol:
 

TimH

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Mike- "Tim, I see that Cargill is buying another plant in Guelph. The "Big Boys" ain't done with you guys yet. They are moving in for the kill. "

I'm not a fan of the "big boys" any more than anyone else is. So Cargill bought some EXISTING hook space....big deal!!
The real issue is INCREASED hook space. It really makes no difference WHO owns it when you really think about it.
Just look at your own record US cattle prices of late. High beef demand, low finished cattle supply,excess slaughter capacity...record fat prices.
Up here......high beef demand, high finished cattle supply,low slaughter capacity.....low fat prices, high packer profits.....increased slaughter capacity on the way!!!!!! It's as simple as that!! :lol: :lol:

And as far as that "yucky fat" goes......Mike........I breed Chars tooo ya know!!!!! :wink: :wink: :lol:
 

Mike

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I do hope your slaughter capacity meets the supply. What about feedyards? Got enough? Now there's something I would like to dabble in!
 

TimH

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Mike- "What about feedyards? Got enough?"

Getting cattle fed is NEVER a problem. Most of us cow/calf guys have the ability to finish our own calves, when economics dictate.
Luckily, when the price of barley gets too high(which it seldom does) we can always buy that cheap, subsid....er.. I mean "export enhanced" US corn to feed our cattle. Our own barley producers have had no luck in trying to keep this "export enhanced" USA corn out of THEIR market.
Maybe they should head to Montana for some whining lessons. :wink: :lol:
 

Manitoba_Rancher

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Way to go TimH youve said it better than I could have!!! keep up the good work!!!! Kinda got a chuckle as I read your posts :lol:
 

Murgen

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Tim, I see that Cargill is buying another plant in Guelph. The "Big Boys" ain't done with you guys yet. They are moving in for the kill.
Hope we can put a steak side by side on the shelf one day. I just know they'll pick mine, cause it don't have all that "yucky" fat!

Mike, the Ontario packer Better Beef has typically bought those CH based fats. In fact a lot of the western calves come this way to be fed. While Cargill pays on a Quality based grid in the western provinces.

I wonder if they have purchased Better Beef to be able to better supply that leaner meat with higher yields. Has Cargill bought this plant to be better positioned to supply for a specific market? Not sure, but it is a possibility.
 

Murgen

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I just wanted to add, that distance to US markets might also be a reason for this purchase, of Better Beef. Where is the closest Cargill plant to those NY, Michigan etc. markets? It might just be easier for them to kill in Canada and then ship to the closer US markets in boxes.
 

Kathy

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Amazing how our governments have no faith in our industry, or its ability to take away the slaughter market from those plants south of the border.

The American government and some cattle organizations have wheeled and dealed their way out of the anaplasmosis and blue tongue restrictions on USA cattle coming north. I expect we will see an expanding feedlot industry once the border issue is finally settled. If we build it, they will come! American's have been eyeing our desperate feedlot operations, and even some cow-calf bases. If our government will allow foreign ownership, you will see little evidence of a border in the future. Just one big happy North American family, si amigo!

Since our Alberta government has shown in the past that it is more than happy to accept the Taiwanese government ownership of Canadian soil for a massive pig operation in our natural resource blessed province, why would they stop any Americans? (the Taiwanese pork deal was run outta the province by the way, by AB farmers/citizens)

Husky oil is 61% owned by a Chinese family that wants to sell its shares to the Chinese government. Will our Canadian governments stop this foreign ownership? We already have a park just south of us that is a World Heritage Site. We have a military base called Suffield that is used by the British for free, as payment for the infamous submarines. Etc, etc.

We will all just have to wait and see how the dice roll, but the resistance of our Canadian governments and cattle organizations to building more packing capacity is just plain short-sighted and pathetic. I'm told they are the latest ones to be flip-flopping on this idea. Since when was it government's job, or ABP's mandate, to tell the people what to do? Shouldn't they be doing what the people/ranchers are telling them to do?

If I had the option of giving my check-off to Alberta Beef Producers or to Randy and Cam's (BIG) packing plant, my dollars would definitely go to BIG.
 

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