Agriville Vote on Producer Ownership

[rkaiser]

Sounds like a lot of support for producer ownership on this board. Are we the oddballs or is this a true representation of grassroots producers.

Looks likely that Ranchers Beef will be up for sale by receivers in the near future. One step in the BIG C proposal was to build a plant. Now it is built and will be sold for less than what it cost to build. Should we stand back and watch Cargill or maybe the Nillsen boys with their Johnny Tyson money buy the plant, or should we revive the BIG C proposal to take a checkoff from all animals sold (maybe even part of the checkoff going to ABP/CCA) and pay back loan from the government to buy the plant.

We'll count up the votes in a week, and maybe someone from the ABP office could keep track as well. We know that you are keeping an eye on the happenings here on Agriville.

[perfecho]

I definitely would be in , as long as it was not too complicated….(when I wanted to sign up for the Acheson Plant, there was a pile of paper 2” thick that needed to be signed, which I could not do without reading or having my lawyer read, which was detrimental to the whole process). Although I am a seed stock producer, and hopefully do not have to process too many of our animals, I see the need for the rest of the industry to be healthy and in positive margins to buy my product….
As a sidebar, I certainly would like to see hormone free, locally grown and even cow calf producers finishing cattle, so they would not have to double herds to make a profit, but would profit both themselves and society by having a ( I believe) better product. And herein lies the problem……..many will not feel this way…..Good luck!

[grassfarmer]

While I support the idea of a producer owned plant we must look at what happened to Ranchers first. The people behind it are no fools, they are hard headed businessmen with experience in the processing sector who must have got stung big time if the rumored sale is true. Before we jump into producer ownership of the same plant(and likely the same fate)we would need some protection in place. I'm talking about Government intervention to implement and uphold proper anti-competition laws which do not exist at the moment. Without that we would be dead in the water. I am no socialist so don't even go there, but to compete with the players you would be dealing with we need the same advantages they have - the multi million dollar Government aid packages and the ear of (or control over) the politicians. To proceed naively without these advantages would be suicidal.

[farmers_son]

I certainly support the concept of producers owning their own packing plants. And I appreciate that we might not get to choose the timing of when that happens.

Ranchers Beef up for sale? That might be rumour not fact.

I am wondering what we are voting for here? Is it the concept of producer owned packing plants, I would have no problem with that. Are we voting to buy Ranchers Beef from the receiver? That is a bit of a different story even if the plant were indeed about to come up for sale (which I doubt). The only suggested detail is that it would cost less to buy from the receiver than it cost to build, how much less is not provided. How such a plant would be financed and operated is still a matter of considerable debate.

We are at an interesting place right now in our beef industry. If we waited a little while we might be able to buy either Lakeside or Cargill at High River as we cannot ignore the possibility of one of them closing depending upon how Canada is affected by COOL and the new reality of bio fuels affecting where cattle are fed. They would not have a receiver sale however and are more likely to move their infrastructure elsewhere.

I think Grassfarmer and Perfecho have made good comments. I would add that Canadian cattle producers need to be fairly paid for their production and this will require a functioning marketplace that sees the consumers beef dollar equitably distributed throughout the supply chain. It is naïve to think this is happening now.

I am not convinced the best way to finance a producer owned packing plant is a producer check off deducted from a live cattle price. I would suggest the price of live cattle in this country is a fabrication, an illusion that is created by Tyson and Cargill working in concert. They can manipulate the live cattle price as they see fit. I think that to be successful a producer packing plant needs to function on the basis of producers desiring to diversify up the value chain to sell a branded beef product, not live cattle, and as such they would get paid by the value of the resulting beef product. Producers would never really care about what their cattle brought live as the goal is the return earned for the beef product. It would be an entirely different focus. Such a system would reduce Cargill’s and Tyson’s ability to break the plant financially although markets would still need to be found for the beef or the freezers would fill up fast.

[rkaiser]

It may be a rumor that ranchers will go down, but by the time it is no longer a rumor - it will be bought by someone else. If you guys don't think that Cargill and Tyson and Nillsen Bros have no plan in place to move you are living in a dream world.

As for you other dream of Tyson or Cargill moving on. Not until they have smacked our industry down so far that that we have no one left to lead us up again. Anyone watching the cow numbers drop in Canada? Amazing. Should we give up and watch, and then try to buy an over priced grandfathered plant that even our government will stop us from running.

If there is any initiative for producer ownership, we need to start thinking ahead and preparing to move, or we might as well just post forever on Agriville, and then complain again after the fact.

If a checkoff is not the way farmer_son; then how? What would be wrong with a checkoff? You have to admit that ownership on this scale would stop the games that you admit are happening with Cargill and Tyson.

I don't disagree with retained ownership, and even ABP will tell you that it is happening more and more each year. Less transfers of animals and less checkoff dollars because of it available each year.

The big boys will likely not support a producer owned plant any more than they supported their own plant at Balzac (the reason I feel they are failing) but there are thousands more who see things like we do and want change.

Your view of these "so called industry leaders" who owned the Balzac plant is amazing grassfarmer. I do not see them as any more than a group of humans with money who got jealous of each other and failed to work together as a group. There is no reason why that plant could not succeed. Even with the power of Cargill and Tyson, the owners themselves had more than enough cattle to keep that plant running ( and please don't use the labor excuse - that one is saved for Tyson)and yes there are markets that would take the beef at good pricing if we were to cater even a little bit to their needs. Too many cattle was probably the problem at Ranchers. Still a need to cater to Cargill or Tyson while trying to out shoulder one another at the new plant.

As far as markets, there are lots of them. BSE testing would open the world to our beef. Hormone free would open the E.U. to our beef. The only reason these two things are not happening is because they would screw with the nice little captive market that Cargill and Tyson enjoy. You know it and I know it, and instead of talking about it for another 4 years, we need to do something about it.

You are right farmer_son the question for the vote was not clear. Do we need producer ownership - of course you agree. But tell us then farmer_son - if not a checkoff to pay for the darn thing then how. Whether you believe the rumor about Ranchers or not, we need to prepare if it does come up. Or build something else - like Cory has suggested.

[kato]

Manitoba implemented just such a checkoff, specifically to enlarge Manitoba slaughter capacity, and so far as I have heard haven't spent a cent of it. Go figure. They've got all kinds of money in the fund, and refused to give a cent to Rancher's Choice, preferring to let it go under before it even got started.

Until we see them actually doing something with the money we will request our money back. If it was going into something like what Randy is proposing we would leave it there.

When they held meetings over this checkoff they were pretty rowdy and there were a lot of opinions tossed around. One opinion that was voiced was that in order for a producer owned plant to succeed it would have to fly under the radar so to speak. Sell a product that the big boys either didn't have the time or will to produce. If a producer plant was to attempt to directly compete with Cargill and friends it would be quickly blown out of the water. Outbid on the cattle until it went broke, and then things could get back to normal. This is exactly how Cargill demolished the formerly profitable Manitoba packing business that existed before they were lured to Alberta.

We simply don't have the resources to take these guys on head to head. In fact there are governments who don't have that kind of resources. To succeed we've got to go around them instead. Branded specialized beef, EU export capability and such.

As for COOL causing the big boys to leave Canada, I think it's going to have the opposite effect. It will be so much easier to kill here and ship in labelled boxes than try and segregate live cattle at a U.S. plant. If anything they'll get stronger here. It's the live cattle exports that will suffer, and with them, the live cattle prices, which will make it even more profitable for them to be killed here. And less profitable for us, since we'll be back to a captive supply situation.

On a brighter note, COOL could actually help a Canadian producer owned plant if they were smart enough to market well in the U.S. There are opportunities to be had for those who are willing to go after them.

[smcgrath76]

Bit of a different take on this from me.
As someone who is investing their own hard earned money in at least one plant I have a couple of thoughts...
I am reasonably certain (> 75%) that the problem with new plants is not financing to build the plant, it is operating cash. It takes a lot of money to keep 800 head a day coming through the door on the rapid payment plan, while marketing product out the door on the net 30 day plan.
Secondly, anyone who thinks the packing sector is concentrated, should take a look at the retail sector. To capture $ from the food chain requires a savvy and achievable marketing plan.
Thirdly and here is where I may appear somewhat contradictory. I strongly support producer owned plants, however they require an extremley strong governance structure to keep producers informed but completely out of the operational side.
I question the ability of producers to act quickly enough to take advantage of the opportunities. It takes time to raise capital if you are a producer group. I doubt that existing businesses such as XL or Cargill have such a challenge, and anyone selling a business certainly benefits to some degree from transaction speed.
Fourthly, I think the checkoff idea has some merit, however I think if I invest enough of my own money to be a significant player in a business I am much more likely to be a strong supporter and strategic thinker for that business. It is important to provide opportunities for producers who WANT TO invest up to chain to be able to, however it is also important to seperate the wheat and the chaff.

[grassfarmer]

rkaiser, I never called the owners of Ranchers Beef "industry leaders". I know nothing about what has happened there or why they may have potentially gone bust. I knew by name some of the main guys setting it up and that was my reference to them being hard headed businessmen. Particularly I'm thinking of Ray Price and Cor Van Raay.
I had understood the problems they were facing were due to the existing packer cartel forcing them out both on the buying and selling ends.

[wd40]

Well I'm sorry I missed this vote mentioned here. Although I'm not a producer I lost my ag-business due to "mad cow".
With all the wisdom that floats around here on this worn out topic, let me suggest that the first thing one should due prior to flapping ones jaws is examine, go down, to Kansas, visit some of the folks that started "US Priemum Beef".
Guess what someone else has "walked a mile in our shoes" and decided to bury the industry distrust amongst producer groups and collectively solve their problem ON THEIR OWN. They are exceddenly sucessful and growing. Now let me warn you you will have to take what they say with a grain of salt, and read betwseen the lines. Several years ago when I last talked to one of their principals he commented as to how "difficult the packing industry" is to function whilest just a few months prior they had bought out Brawley Beef in Califorinia - a new state of the art plant for hugh dollars. My conclusion is that when ever a packer open his mouth just call him a liar. It's ALWAYS conflict of interest.
Here are some absolute requirements of a future sucessful Producer Owned Packing Plant.
1. A will to take responsibility and ownership of our future industry health.
2. Has to have a large enough base of producers that the Govt. will sit up and take notice, and come to us (not us going to them) for direction. Gov't listen ONLY to NUMBERS, NEVER TO DOLLARS. Therefore you need to make entry fee low enough so anyone can participate. Say $1,000. Imagine what would happen if 50,000 people across the 4 western provinces gave $1,000 each. My math says that would be $50,000,000. Here is what that would do. (In order of priority)
a. Break CCA - because now we would be the voice of the producer.
b. Break ABP - and get the small town politicians out of their ivory tower of oak, glass, and brass offices, and break it too.
c. You would be invited to the house of Govt. cause now you have some political clout.
d. You'd have enough cash cold hard cash to build and opperate a plant.
c. You would have a captive supply chain which would starve out the 2 bullies who take out of our country way more money than they put in. Guess where they would move to.
d. Producers would get paid far more for their quality beef than you would ever dream. (check out US Premium Beef)
e. Producers would get paid the real value of their product.
f. You would be big enough to be strong enough.
g.
h.
you can fill in the rest!

Just incase you think that 50,000 stake holders is too hard to gather, ABP was once 30,000 strong. Most producers are at least husband and wife. (of course you would have to demminish that number by the diplomates in the ivory tower):-)

On a side note. Was Ranchers Beef designed to suceed. They bought used obsolete old equipment for too high of dollars.
When asked in 03-04 how they were going to opperate the answer given was "if we have our freezers full of beef (inventory), we think the bank will give us opperating capital on inventory".

We had an opportunity a few years ago to get this done, and we squandered it away. It was "hurt" motivated, and now the retoric is "hurt" motivated, that's the wrong motive. We need to do it because it's the right thing to do.
I hear what you are saying Shawn, however commitment dosn't come with investment, that's been proven many times.
Commitment only comes when we believ in something!!!

[smcgrath76]

How do you generate committment when the cost to get in is too low?
Just wondering as I think you are on to something with the numbers issue.
That is what I struggle with.

[wd40]

Like I said - Committment comes when and only when you truly believe in something.

Ask the fascious leaders of the world.
The commitment you are talking about will come when producers get paid what their product is finally worth!

When you capture supply chains with a purpose and a belief you will have committment and-and stay of the radar screen.

Let me add I still have a bussiness plan for 2000 hd/day. It will blow your mind and open it to the highway robbery we have grown to be happy with.

We have a serious case of "hostage syndrom" happy to marry our captors!

[redcountry]

FOR SALE
New beef plant, complete with $30 million debt,
Only two years old, hardly used.
apply ATLANTIC BEEF PRODUCTS P.E.I.

The gov has given until first of sept and than the plug is pulled!
anyone want to buy some shares cheep?
regards redcountry

[kato]

Oh.... what went wrong?

[grassfarmer]

A couple of points I'd query WD40 - You mention getting 50,000 producers to sign up at $1000 a time. According to the 2006 census there are only around 44,000 cattle farm, ranch and feedlot operations in the 4 western provinces in total.
Secondly you say numbers count more than money as far as Government is concerned which makes some sense but money talks too. $50 million would not make us a big players in this respect. 2004 figures indicate that the Tyson foods group had $34 billion revenue and $524 million profit. Cargill Foods posted $92 billion revenue and $2.75 billion profit. Now these are total group figures not only beef processing but it shows that we would still only be minnows in comparison. How does a producer owned plant compete when these guys decide to dump meat in front of our customers for cents on the dollar in an attempt to run us out of town? I do not believe we can succeed without some form of Government intervention to break the packer cartel.

[perfecho]

I believe with a lot of hard work, and the key to the whole endeavor, would be marketing. Marketing the fact of buying brand X, is helping your local farmers, brand X is hormone free, no antibiotics fed…show pictures of Cargill’s feedlot and pics of local farm families and their cows…….it can be done!
I just happened to read the last Safeway flyer…..don’t normally, but this one surprised me. It showed farmers/families, some co-ops and what they grew organically. It made the point of Canadian grown, for Canadians, etc. I do believe people are heading this way, and with the right marketing campaign, you could bust the big boy’s balls! It could be fun! Grab onto someone with a like vision, like a Safeway that wants to go down this road and team up for a start……the times are a changing and we can be leaders or followers…but we have to work together.
Look what is happening with CWB…split and conquer, everyone arguing about who is right or wrong, prices down because of CWB if you are against them, and prices down because of corn glut if you are for them…bottom line, prices are down.
I have been dreaming of doing something along this idea for a long time, but unfortunately believe that it won’t work because of producers….producers that say “it won’t work”, producers that are tired and don’t have the “piss and vinegar” to see it through. When you think it through, producers should have the ultimate control…they have the product, the product that many others make a good living on…but enough rambling…..it’s at least nice to daydream for awhile.