Here's one to ponder

[cakadu]

Let us presume for the sake of argument that BIG-C and a couple of the other proposed producer packing plants do prevail and we see them come to fruition. How do you think that will affect the overall price paid to producers for their animals?

I know it is a fact that the current 3 packers need competition in order to push the price of beef animals up, but how much more will be paid if there are more players in the game, but no more markets for the finished products to go to?

Is the increased packing capacity going to be there in order to sell more to the US or will there be a concerted effort to find new markets so that we no longer have to rely on one market?

There are many pieces to the puzzle and some must be put together before we have these plants up and running. How do you see it?

[jensend]

prices would be higher if the increased number of buyers were servicing more markets. the big thing is that the downside from here is a lot worse if there isn't more competition. if we had to pay a moderate checkoff just to keep one or two more players in the market it could well be cheaper than having the monopoly/oligopoly situation we have now. kind of like the cost of testing versus the loss of markets. to me one apparent problem is keeping a producer owned or partially funded plant as efficient as possible to provide the competition the market needs.

[kato]

I understood that at the moment the only thing slowing our beef exports is the fact that the packers can't keep up. Having the capacity increase by making the current players larger won't do a thing for the prices..there's still only a couple of bidders.

The Big C proposed plant is for cows, anyway. We will need a place to kill them for quite some time to come, I would think.

Also, has anyone given any thought to the scenario of the border opening to fats and feeders, but not to feeder heifers? I think that idea is built into the price of feeder heifers already. Look at the discounts. They are huge! When they are finished there is little if any discount at all.

I think there is going to be a lot of heifers fed out here, and having another bidder on them would also be a good thing.

[cakadu]

That is a good question, kato - are there any other markets that have opened up to taking our beef or is it the US that is taking boned beef only?

To my mind we are really getting hurt by the fact that we look to one major market to buy everything from us. There is nothing wrong with having a steady customer, but wouldn't the plural i.e. customers be much better? It spreads around the risk so that we don't get hurt like this again.

Concurrently with the additional packing capacity, we need to be looking at ways to capture more of the value in what we produce - whether that be quick and easy meals, sausage, meat pies - whatever you can think of so that we are getting more for what we produce. Even looking for those customers that will take specific cuts and plenty of them would be better than trying to sell the whole cow somewhere.

[grassfarmer]

Presumably if we had the slaughter capacity available now - with competition - our price for fats would be closer to the US price. Presumably the US would buy all our available exportable surplus if we could get it killed and it would only drop the US averages slightly. Instead of the miserable mid 60c/lb we should be up around a $/lb. There is absolutely no reason it should be any less than that. I note the US current price mirrors the British price - the global marketplace at work. I agree this is the time to get building plants and looking for other export markets - this was the agenda before BSE was it not? - to reduce dependence on the US by a certain percentage over a few years.

[rusty1]

Here are some ways that another plant for UTM’s will benefit us.
1. The Canadian/ US dollar difference used to give us a 30% to 35% margin for just going across the border with finished product.
2. When shipping live animals across for slaughter, we paid the freight to say Greely CO,
3. We paid the shrink which is significant.
4. Our AAA and AA boxed here sells there as No-Roll, so guess who gets the Premium.
5. Our commodity beef bought here sells as US choice there so guess who gets the premium.
6. If you have Premium calves here in your own packing plant you’ll get paid based on their MERIT not the pen average.
7. Over weight discounts charged here now, and cost us producers probably $75Million per year, will be non-existent in your own packing plant.
8. There is often a $500 range in the real value between the best and the worst in any given pen of cattle under the current commodity system. With your own packing plant you’ll soon very soon find out which animals CAN’T make you any money and YOU will identify the cows that should be culled and bulls which should be cut. If you could identify early the bottom 10% early enough you could increase the profit of the rest by 50%.

This is just a start.

Check into www.cowboylogic.biz

[rusty1]

Better yet.
First check out http://www.uspremiumbeef.com/

That is a producer owned operation with 2 - plants and the biggest sucess story in the beef industry. Check out their Quarterly Newsletter, The testimonies of the seed stock producers and feedlots on the system.
But do it in the morning els you won't sleep too good.

That's what the Northwest Cattleman's Alliance is modeling after.

[bombay_43]

Has anyone here invested in Rancher Own? Check out www.rancherown.ca.

You have to be willing to invest $5000.00, and you agree to sell a certain number of culls at market price each year to them.

It is my understanding that they still need to sell almost 2/3 more shares, as they already have sold, in order to get up and running.

Anyone have any further news on this plant?

[cakadu]

Okay, let's throw human resources into the mix. One of the biggest problems that the other packing plants have is finding SKILLED workers. Are there enough people around that are willing to do this kind of work? You'll not only need people in the plant, but people to do marketing, run the place, direct the operations etc.

Human resources is a huge concern for everyone going into the future. How will this be taken care of?

I don't for a second doubt that we will capture more of the value here if we do many of the things that are proposed and what rusty has stated. The premiums should be here and more importantly stay here.

[rusty1]

cakadu - I stopped by at Lakeside a few days ago. If I had a plant ready for employees, I could have hired a whole plant load there. IBP's modes apperendia is very poor labor relations (North America wide) The moral there is in the tank. We plan on offering our employees a share in the plant and will have a profit share program with matching dollars to invest in shares.
We also have another plan up our proverbial sleeve to bring in more skilled labour. Labor moves quite easily. The biggest challenge will be housing.

[grassfarmer]

Bombay-43, I sent a cheque off to Ranchers Own in June and am interested in their progress. They want a cheque for $500 initially which isn't cashed until (or if) they start building. The remaining $4500 they will take in kind when we send cows there. I spoke to them recently and as you say they haven't sold all the shares they wanted to. They had planned to break soil in August and be killing by next April but they are now talking of going in September instead. They were looking to access funds from another source to get them going (I don't know who). The guy was frustrated that many producers were taking the wait and see approach hoping to join it once the scheme was up and running. I can understand that people are short of money but still... this is short termism of the worst kind. After all that has happened and all the talk of helping ourselves when it comes down to it - it seems it is only talk. Many seem content to stumble along blindly, not supporting initiatives like this and hope that they will wake up one morning and find cull cows are worth 50 cents/lb again - and we'll all be happy loading them on trucks to the good old USA.
I certainly had no great desire to own a stake in a slaughter plant before this all began but what have we got to lose? - with what cows are worth now and for the foreseeable future isn't it a fair gamble to send them to these guys that are trying hard to get a plant up and running?

[kato]

To see if labour is possible, here's an example.

The town of Carberry Manitoba is a small place. It is about 30 minutes east of Brandon. It is the home to Midwest Foods. This company processes potatoes. They employ about 700 people, and have an extremely low employee turnover. For a town that size this is a huge place.

If you've eaten french fries at any McDonalds in western Canada, and some parts of the States, they have come from this plant. It is consistently in the top ranks as far as quality control as well, so the calibre of the employess is high. They work some brutal hours, too, with rotating shifts as well. There are other large employers in the area, such as Maple Leaf and Simplot in Brandon to compete for employees.

These people have a union, but also have a 'no strike' clause in their agreement.

So how do they do it? They take care of their employees. Wages are very good, they have benefits, and pensions. Then there are things like this....The whole plant gets time and a half on the day of the local fair, if they have to work and miss the fair. I've never heard of anything like that!

Moral is good. The employees are kept informed of the company's plans and progresses.

If a business is run properly, and the employess are happy, anything can be done.

[cakadu]

Grassfarmer, sadly that is the way it usually is. Many adopt a "wait and see" attitude, even though it may very well be in their best interests to become involved at the early stages. I'm not sure how to appeal to people on an individual basis so that they can see "what's in it for me" and commit some resources - whether it be time, money or some sort of expertise. Everyone has their own reasons for getting involved in something and finding a balance to meet all those needs is often quite difficult.

Treating employees well - and it often doesn't mean well paid - so that they feel that they are a part of something is critical for high morale and low turnover. Working in a meat plant is likely not easy - particularly on the kill floor. Cutting and wrapping may be somewhat easier, although I couldn't really say because I haven't done anything like that (with the exception of wrapping wild meat and/or doing chickens at home).

Many of the processing industries have great difficulty in finding workers here in Alberta because we have the oil patch, which pays great wages for any level of education. How does a meat plant or a potato chip factory compete for labor when the oil and gas industry pays very well for even someone coming out of high school?

Attracting human resources to any part of agri-business is a challenge.

[rusty1]

grassfarmer said - "isn't it a fair gamble to send them to these guys that are trying hard to get a plant up and running?" I want to encourage you with a change of mind set. These plants if properly planned and focuses should become something were we can say "I sent them old cow to OUR PLANT!. These innitiatives are the opportunity for us to become "Price Makers" instead of ......... what we've been for far to long.
There is oportunity for us to put alot back into our industry is we all put our shoulders to the right plow.

Can you tell me what the capital cost of their plant will be on a per head basis. That's crritical. Divide the capital cost by the number of head per year.

Our plant will be around $200 per head maybe less.

[grassfarmer]

If I remember correctly they talked of needing $15 million to build a plant with 45,000 head annual minimum capacity - about $333 capital cost per head. Unfortunately all these numbers and schemes are academic unless producers and investors get behind them.
Rusty1, with your plan I note you talk of killing UTMs as well as OTMs - how likely do you think it will be that you can kill both in the one plant within say the next 5 years?