We lose....or we don't lose......?

[perfecho]

Ottawa, February 27, 2009 - The Competition Bureau announced today that it will not at this time challenge the acquisition by XL Foods Inc. of the beef packing plant operated by Lakeside, the Canadian subsidiary of Tyson Foods, Inc.

However, the Bureau intends to closely monitor the industry and will reassess the competitive impact of the transaction once the outcome of U.S. labelling measures, and the U.S. packers’ response to these measures, are clear. The U.S. initiative could inhibit Canadian cattle producers’ ability to sell into the U.S. market.

The Bureau’s investigation of the transaction included interviews with over 50 industry participants in western Canada. In addition, the Bureau obtained investigatory orders requiring the production of documents and information from all major industry participants.

Significantly, the primary concerns raised by industry participants were not related to the transaction, but rather related to the possibility that the Lakeside plant, in Brooks, Alberta, would close if the transaction did not proceed, and to recent U.S. mandatory country-of-origin labelling legislation ("mCOOL"). Industry participants confirmed that U.S. packers purchased substantial volumes of slaughter cattle but they were concerned that U.S. packers may adopt more rigorous labelling requirements for beef products.

Industry participants anticipate that the final rule of mCOOL could enable U.S. packers to increase purchases of Canadian slaughter cattle. However, should U.S. buyers adopt more rigorous country-of-origin labelling practices for beef products, this could inhibit the sale of Canadian slaughter cattle to the U.S.

The Bureau will not hesitate to take appropriate remedial action should the Bureau’s assessment reveal that the transaction has resulted or is likely to result in a substantial lessening or prevention of competition.

The Competition Bureau is an independent agency that contributes to the prosperity of Canadians by protecting and promoting competitive markets and enabling informed consumer choice.

--------------------------------------------------------------------------------

For media enquiries, please contact:
Pamela Wong
Communications Advisor
External Relations and Public Affairs Branch
819-953-7734

[smcgrath76]

I was just going to post this.
http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03012.html
So we are down to two.

[per]

That gives XL over 50% of Canada's killing capacity. We lose. Our best hope was for us producers to step up to the plate and do with the help of all levels of gov what we need, to own this thing. Of course it would take all of us to pull together including our industry leaders who promote nothing but status quo and feel good windbreaks. And before anyone jumps on me for not doing my part, I have like many of you, stepped up to the plate and evaporated money on a failed packing facility. It is still what we need but until some of the roadblocks are removed I am afraid it is not going to happen. Frustrated about sums it up.

[grassfarmer]

Very disappointing especially as there has been quite a campaign in the last two or three days by some producers to prevent this - supposidly encouraged by the competition bureau who wanted more input, almost hinting they were having a tough job deciding.

On the other hand I had an interesting talk last night with someone who reckoned it didn't really matter who got the plant - Nilssons or JBS Swift. Either outfit will be sheisters and not offer much hope for producers. His argument was that there will always be this lowest cost commodity processing capacity but that is not the real future. The smart money in future will develop along the lines of Highland feeders - build a bio digester for waste at a feedlot then add an ethanol plant to run the grain through first and finally add a smaller scale custom kill plant that will kill for dedicated producer groups like your Prairie Heritage etc. The beauty of this would be that the SRM can be fed back into the bio digester.
Instead of a small kill plant making it's profit from hides like they do now these new type plants will make their money selling clean fuel (ethanol) and clean power (electric. Quite an interesting concept.

[perfecho]

I do tend to agree, we continue to lose. My fears are, as more producers exit the industry, there will eventually not be adequate numbers for even both plants to operate. When one decides to head to South America where they can increase profits, we will be left with one packer......and subsequently too much of a supply for just one major. This will then trend prices lower, again, until more producers exit the industry. And low and behold, the remaining plant also exits with the further lack of supply, except their coffers will be bulging due to the very cheap prices they paid due to the huge exit.
Could be full of it....and I hope I am....but I can also see this scenario playing out;-( In the mean time, (I will start another post) we have a plant that could be operating in less than a year, but will most likely used for file storage for Alberta Infrastructure.

[Sawbones]

Go for it Perfecho..there's still some of us who are willing to help but too bruised to take the lead...kind of like the front goose in the V

[wilagro]

Yes, the Competition Bureau will closely monitor the situation...what a laugh. I imagine the rancher/farmer will monitor it closely too, sas he gets royally ripped off.

Total BS.

[smcgrath76]

If the deal is closed and XL owns the plant and associated feedyard, what is the bureau to do? It is too late. the division of the company means it is still owned by the same players.
I suspect NB will sell the Calgary real estate and use the cash to pay off the entire (and then some) debt incurred on the Lakeside purchase. Then there is no possibility of someone coming in and buying an operating plant. This would fit the modus operandi from some of their other ventures (anyone remember a retrofit to a pork plant in northern AB?).
The challenge is growing independent capacity and generating enough cooperation between interested producers to create a critical mass for value oriented marketing. In other words, I don't care who processes it, as long as it is done right and I can keep the portion I feel I deserve. That said, without competition the fee for service arrangement can become untenable.
(actually now that I recall, I own shares in a plant right now - LOL).

[kato]

perfecho, you are absolutely right.

As for monitoring the situation, they're monitoring the situation regarding MCOOL too.

I guess we've got all the time in the world to wait for the situations to be monitored eh? There's no hurry eh?

geezzzz................

Lets just have an election and get it over with already.