XL closes beef packing plant Sask 'til september

[Kathy]

I just read an article that said that XL Beef is closing down its Moose Jaw beef packing plant until September 2009, and has given these employees their pink slips. The article claimed that XL was doing so because of a shortage of cull cows and fats.

Sorry I don't have the news article handy, but if you search for it, I'm sure you'll find it.

XL beef could get all the cows it wants, and fats, if it put the price at the right amount to entice farmers out of their tractors, seeding.

[kato]

http://www.discovermoosejaw.com/index.php?option=com_content&task=view&id=8005&Ite mid=403

Is there a shortage of cows? Or is there a shortage of 35 cent a pound cows? A shortage of cattle should mean higher prices, finally, but will it also mean even less options to sell, and therefore no higher prices?

Now that's the million dollar question.

Anybody here who didn't see this coming? Put up your hand. Nobody? I didn't think so.

[grassfarmer]

Oh, I think there are a few guys over in the back corner with their hands up ever so slightly - and they are all wearing CCA/ABP hats. These would be the folks that had no opposition to the XL takeover of the Brooks plant. They seemingly haven't yet learnt the basic lesson that corporate concentration reduces competition and thus producer prices.

[farmers_son]

Now, now Grassfarmer....everyone saw this coming. It was just a matter of when. What Grassfarmer conveniently forgets is to the best of my knowledge there were no other buyers for the Lakeside plant.

The question has been asked if the NFU were so concerned about the sale of Lakeside why did they not go out into the financial markets, raise the money and run the plant themselves?

There were no end of concerns over XL buying Lakeside but the bottomline was either XL bought the plant or the plant closed its doors. It is well known in these pages that I support producer packing plants but Lakeside would have been a lot to bite off at once. Not to mention all the producer type plants were closing their doors, one after another.

In my view, Tyson made a brilliant move, even if an unethical one (but apparently ethics do not really matter in the packing plant busines) by selling the Lakeside plant and skipping the country. If anyone saw the financial crisis coming Tyson did. The cash they got and will get from the Lakeside sale will do them well this year and in the years to come.

XL will have to generate profits to cash flow that sale somehow and we are just seeing one way they are trying to do that. I say trying to do that because I suspect XL will not be able to swing the deal unless COOL remains in place long enough. COOL is raising the profits of Canadian packing plants by at least $90 a head. That is not to say the Canadian packers are making $90 a head, but they are making $90 a head more than if there were no COOL and if they had to compete directly with the U.S. for our live cattle.

I suspect we have seen nothing yet. Just wait a year or so until ALMA bails out XL to the tune of hundreds of millions of dollars to keep XL from closing Lakeside or going belly up.

I have never understood Grassfarmers support for ALMA unless it is because the ABP has concerns over some of the directions ALMA is taking regarding mandatory participation in ALMAs strategies and Grassfarmers distaste for ABP is upfront and very clear.

Clearly ALMA's policies are directed towards supporting the big packers and squeezing out the average to small producer for example mandatory age verification which means all the benefits of age verification stop at the packer level and those benefits will never again make it to the actual producer who raised the calf.

The ALMA board was in place when XL bought Lakeside, I never heard a peep about it from Kee Jim and his cohorts sitting on the ALMA board. Just part of the grand scheme.

[grassfarmer]

There may have been no other obvious buyer for the Lakeside plant but there were still options. Options to force Nilssons to divest their auction interests so they couldn't be both buyers and sellers, options to make sure if they got the Lakeside plant they didn't get the feedlot as well to make their captive supply arrangements more difficult. These were all issues raised by the NFU with the competition bureau - did ABP/CCA even object the planned takeover?

My support for ALMA stems from a realization that it offers a very slim chance of creating the circumstances whereby an independent processor may be able to get beef bought, killed and exported off this continent without going through the hands of XL or Cargill which is the only thing that will potentially improve producers returns. It is a slim chance but it is more attractive to me than F_S or ABPs choice which is to sit back and do nothing whilst frittering away how many million $ a year of producer levy money?

[dfarms11]

here's a thought, maybe when they do come crying to the gov't for a cash bailout, maybe the gov't should let them close their doors and give the "cash bailout" to the farmers in this country to buy them out instead. Wait a minute, that would entail that the Canadian Gov't is actually thinking about it's producers, what was I thinking?

[per]

I think we discussed right here how to buy Lakeside with the money that everyone seems to be whining about receiving. There weren't too many takers to the discussion though. I am curious if your voice was heard or on a list of concerned objectors to the sale at the Competition Bureau f_s and alternative thoughts offered. Mine was.

[farmers_son]

Grassfarmer: I am in favour of a producer packing plant too. But we need to be real. This Government is never ever going to see that happen. They have been steadfast in their support of the big packers and the big feedlots. The ALMA board made up of elitist big shots for instance Kee Jim and others like him will never ever do anything to help out the average producer. To the ALMA board and Gorgeous George average producers like you and me are expendable and at best a nuisance to be ignored and discarded. I doubt if you could disagree with that.

I realize you have your issues with ABP and any organization is not going to please everyone all the time. I am sure mistakes have been made, the only way not to make mistakes is to do nothing. But the ABP delegates are average producers with shit on their shoes just like all of us and at least they were elected. The ALMA board is appointed. There are no easy answers and ALMA, including Gorgeous George Groeneveld, is maybe starting to appreciate that.

Getting back to the topic, the proof that ALMA cannot run our industry is clear in that they could not even manage the AFRP II payout. A total gong show.

[farmers_son]

Per: I have always considered the Competition Bureau to be a joke. A pretense at best and at worst a mechanism for the government to award monopolies to their friends and election fund supporters.

And the Alberta Government has been in complete support of the big packers and big business, big feedlots all the way. I am willing to bet good money that the Alberta Government helped fund the XL purchase of Lakeside, either directly or indirectly. And maybe that had to happen if it meant the plant did not go dark.

But no one should then turn around and think Gorgeous George and friends are going to somehow support producer packing plants. This Government may give money to their big shot friends to own a plant so their friends can rip us off too but any such plant will never be a widely held producer owned plant where producers share in the profits. This government has nothing but contempt for the most of us and if you are not on the ALMA board you do not count for two cents. Just my opinion.

[grassfarmer]

Per, I think the answer you were seeking from F_S would be NO. NO - he didn't object to the takeover - If I remember right he posted on here that it was good for Canada as we were actually gaining an extra buyer (ie Tyson would still be buying for their US plants as well as having XL run the Lakeside plant)
NO would also seem to be the answer offered on behalf of his friends ABP/CCA - to my knowledge neither outfit opposed the takeover... but I'll let f_s correct me if I'm wrong.

[per]

The answer I was expecting was no. When I first found this sit f_s was thoughtful and respectful in his posts. Now it is just bitter resentment. Snap out of it f_s, honey goes smoother than vinegar.

[Sawbones]

Just to add a little fuel to the fire, CCA and ABP are supporting the bailout of Nilsson and Cargill already by proposing that the $50 million that the feds have earmarked for packing plants be given to the major packers for SRM removal costs. On a similar note, despite the motion being passed at a local zone meeting and then one of the few resolutions passed at the general ABP meeting, the executive of ABP decided in their wisdom that a feasibility study was not justified on re-opening the Balzac plant. I guess GF you were once again correct on your comments regarding ABP. Contrary to your opinion FS, there are potential buyers for Lakeside and some of the other plants. We just need a review of the market situation. If you were buying a vehicle, wouldn't you want an independent mechanical check??
Closing the Moose Jaw plant is the tip of the iceberg. There will be more to come to control the cattle prices.

[grassfarmer]

Per I think that was a bit unfair - I don't think F_S's post are any less respectful than anyone elses on here. I certainly don't consider them less respectful than mine. I don't often agree with F_S but I do appreciate his postings here - without them there would be no voice for ABP.

[per]

I stand corrected. Sorry f_s.

[kato]

I think the bottom line is that we all saw it coming. And there's more to come that we can all probably see as well.

Things like.... Ten years from now, XL and High River as well will be ready for some major upgrading. Will this be paid for by said corporations? Bet not. Bet the plants are held up for ransom with a demand for govt. money, probably making use of the GM and Chrysler precedent. Anything not contributed by taxpayers will be topped off by lowering prices paid, while using the threat of shutdowns against producers. We can all see this coming, and no one should be surprised by it.

As well, small upstarts will continue to be shot out of the water as quickly as they have the gall to try and compete. They, on the other hand, will receive no bailouts, since they are not big enough to affect a sufficient number of voters. We can all see this coming, and no one should be surprised by it.

But in the long run, I don't think the "bigger is better" business model is sustainable. History will look back on it, and people will wonder "What were we thinking?"

Sooner probably than later, energy costs will soar even higher than the last run up. Food safety issues and antibiotic resistance issues will become more and more important. Encouraging a business model where a food safety recall involves millions of consumers in multiple countries is soon not going to be politically correct. Consumers are already starting to demand this, and it's only a matter of time before politicians pick up on it.

Until then, we can look forward to more and more maneuvering like we're seeing now.