Lakeside Sells to Nilsson Bros. For $107M

[DiamondSCattleCo]

By the way, nice scare tactics F_S: "If they didn't sell it,
they would have closed it".

Horseshit.

Rod

[farmers_son]

The fact of the matter is I am trying to make a living by raising cattle so perhaps I do need my head examined. At the best all I am offering here is my opinion for what it is worth, probably not much.

Without question, packer consolidation is a concern. For instance one company Brazilian JBS taking over Swifts, Smithfield and National. That will have more impact on our live cattle bids than the change of ownership at Brooks, again however that is just my opinion.

If you do not believe Tyson will close a plant check out these news items:

http://www.tyson.com/Corporate/PressRoom/Default.aspx

Tyson Plant Consolidation to Improve Efficiency (York Nebraska Plant Closes)
Tyson Finalizes Plans for Restructured Operations at Emporia (Discontinuing Beef Slaughter, Emporia Kansas)
Tyson to Consolidate Beef Plants to Boost Efficiency (Boise Idaho Plant Closes, Pasco Washington plant scaled back).

Horseshit or no horseshit, Tyson is scaling back operations under the leadership of its new CEO Richard L. Bond. I also notice there have been a lot of changes in the directors and executive of Tyson since Bond took over the leadership of the company. If you read the link I provided earlier in this thread you would see that Tyson had lost $96 million on beef segment sales in just one half year and a significant amount of that loss was due to the Lakeside operation. Maybe you connect the dots differently than I do but I think we could have had a very different announcement on June 26. Of course that is speculation on my part but what we do know is Nilsson Bros. did purchase the plant, by all indications the plant will operate as it did before and I am very sure Nilssons did not purchase the plant in order to close it. To me that is a good thing.

[DiamondSCattleCo]

Those US side plant closures were done because
those plants had been continuously losing money
for years. I also understand the equipment in those
plants is getting tired.

Tyson's Canadian side has only lost money for a
couple years (if indeed they've lost any at all, which
I doubt). Even though North American firms don't
take a long term view like the Japanese, even they
take a longer term view than a couple years,
especially given how much money they made
during the BSE years. That plant would not have
closed, and this whole cheap sell to Nillson has all
the signs of something behind the scenes having
went on.

[farmers_son]

I agree, there is something behind the scenes going on. No doubt about it. In fact there are a quite a few things going on behind the scenes. They are:

• There is a credit crisis in the United States, very comparable to the late 1990s with shades of comparison to the late 1920s
• Last week Tyson’s bond rating was downgraded from investment grade to junk bond status.
• SRM removal costs are higher in Canada than in the U.S.
• Labour costs are much higher in Canada/Alberta than in the U.S.
• The Canadian dollar is par with the U.S. dollar.
• High feed costs and ethanol production are changing the cattle feeding industry.
• Oil hit $146 a barrel today.

See:
http://en.wikipedia.org/wiki/Subprime_mortgage_crisis

We are living in interesting times and Tyson is taking a strategic decision to reduce debt, close plants, consolidate and refocus on profitable areas like alternative fuels. They may be right, time will tell.

[DiamondSCattleCo]

Right or wrong, virtually every cattle producer I talk to
is against this sale. Since the ABP is supposedly a
democratic organization where every producer gets a
vote, what is their response?

Rod

[farmers_son]

DiamondSCattleCo: I definitely was under the impression that you were from Saskatchewan. In fact you said in another thread “Unfortunately, our Ag minister here
in Sask is a blazing idiot.”

See:
https://www.agriville.com/cgi-bin/forums/viewThread.cgi?1213714607

I think your concerns would be more correctly directed to your provincial cattle association in Saskatchewan.
However it is possible you pay check off in Alberta and you certainly can talk to the ABP people in Calgary or your zone representatives, they would be glad to hear your concerns.

I think the sale is what it is, and there are pros and cons. I know I preferred it when Lakeside was owned by Canadians, but it got sold and then it was owned by IBP and then it was owned by Tyson and now it is owned by Canadians again. Each of those different owners had different strengths and the price of cattle went up and it went down through all those years. Just imagine what the cattle producers in the States whose nearby packing plant is now owned by Brazilian JBS are wondering. But the real kick in the pants is when your nearby packing plant closes and that did not happen here.

[greybeard]

Unfortunately this is just a symptom of an industry that can’t function on the amount of money going around presently. The pots too small and there isn’t room for everybody to fit .Costs have risen all the way through the system, and consolidation has occurred, top to bottom. Big changes have to occur, and some of us won’t be here to see them.
As someone else said, multinationals have no patients. Profits have to be produced in order to drive share prices. Higher share prices make for multi-million dollar bonuses.
Cargill and N B are both family held and may be willing to wait for opportunities to cream off on an occasional windfall. Cargill is doing it now in fertilizer. They bought when no one else wanted it. I feel they look at everything in a longer term.
We have to hope for more money to come from retail to make the pot bigger.That does appear to be happening now as the retailers are stocking up because the expect higher prices ahead. That’s a big turn around from waiting for it to get cheaper.
N B may not be the choice of all, but a dark plant in a location where they haven’t been able to fully staff for years doesn’t appeal to me. 50 dollars a head or 3.5 cents a pound on fats isn’t going to save my operation. Good for them if they can get it.

[DiamondSCattleCo]

I am from Saskatchewan, unfortunately due to the
horrible organization of the CCA, our voice is
completely lost in the background to the ABP. So if
want to have a voice, we have to approach the ABP.

Besides, Alberta producers are just as much against
this as Saskatchewan producers, and I see you
didn't answer my question: Given how many
producers are against this sale, and that the ABP is
supposed to democratically represent producers,
what is the ABP response to this sale?

[per]

It doesn't matter whether N B or Tyson owns Lakeside. It is important that someone operates it. I would prefer it to be producer owned. We were just issued enough cash to buy it. My big concern is the complete vertical integration that has occurred here. N B is involved in a large portion of our auction markets, feedlots and packing plants. It is time for our industry groups to step up to the plate to lobby for no or limited packer owned and controlled fed supply. It is more important now than ever before. As far a the ABP standing up for or against the sale. It appears there are folks on both sides of this argument. What ever stand they take on this one they can't get it right because there isn't a clear cut right answer other than the obvious; it is better operating than shut.

[wilagro]

Why do you think that the AB gov't is GIVING you money?

Is it so that you will shut up about that troublesome "packer owned and controlled fed supply"? The gov't doesn't want to face that problem and perhaps it would just as soon aweep it into a dark corner.

I have heard my neighbour say that in his opinion, "packer owned and controlled fed supply" played little part in what we get for our calves or our cull cows. Who is right on this? Should there be a limit on what percentage of "packer owned and/or controlled fed supply" enters the market?...and who would monitor this? Who would pay for this extra cost?

I am sure that any competitiveness in the Alberta meat packing industry has been in the past and still is, only illusionary for the most part. Pretty hard to be seen as being competetive when your dealing with your own vertically integrated supply much of the time and by doing so, in effect, tempering the market. When the main packers all do this...there must be an advantage for them or they wouldn't do it.

[spudchucker]

I notice that grassfarmer makes mention the Nisson bought it with the "expectation of making a profit" as if that was a bad thing. I am always out to make a profit. Why shouldn't anyone else?

[per]

Sure Willagrow, but we could take our new found income and use it to circumvent that issue. I guess if the we were the vertical integrated ones I wouldn't have as much problem with it. Kind of novel the producers controlling the industry. Most probably just a pipe dream though.