XL closes beef packing plant Sask 'til september

[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.

[smcgrath76]

I don't think XL is too worried about cash flowing the new purchase. There were quite a few funds from the ALMA program that would have gone their way. As well, take the three big plants in AB running at 60%, and close one, sell the real estate and viola you have paid for the new aquisition.
Debt free, no competition (at least in the OTM trade) and away you go.

[grassfarmer]

So is the Calgary plant closed down already? I guessed that would be their intent but hadn't heard if it was proceeding yet.
Per was informing me that they do have a competitor on OTM kill with Cargill having been killing cows one day a week all winter. That was news to me and an interesting development.

[smcgrath76]

Still killing in Calgary. Actually since the purchase of Brooks, the tyson plant in NW USA has been bidding on cattle and driven the price up some.
As for the debt load, $100,000,000 even over 5 years is only $20,000,000 a year. If the plant only operates 46 weeks a year that is 435,000 a week. $72,500 a day or $18 a head at 4000 a day. They will be open more than that and can probably increase volume if other plants shut down. Plus they get the feedlot included in that price, and probably financed over 10 years at a very low interest rate.

[smcgrath76]

Still killing in Calgary. Actually since the purchase of Brooks, the tyson plant in NW USA has been bidding on cattle and driven the price up some.
As for the debt load, $100,000,000 even over 5 years is only $20,000,000 a year. If the plant only operates 46 weeks a year that is 435,000 a week. $72,500 a day or $18 a head at 4000 a day. They will be open more than that and can probably increase volume if other plants shut down. Plus they get the feedlot included in that price, and probably financed over 10 years at a very low interest rate.

[Sawbones]

The real cost Sean is operational. At 4500/day at Brooks, that's over $4.5 million per day. $90 million per month. XL Moose Jaw was less than 1/2 that. I'm sure they're scrambling for markets. It's all about cash flow and market share.

[smcgrath76]

I agree Sawbones. Basically we all
stagger at the $100,000,000 price tag
but that is peanuts when we look at the
volume the plant can do. A new plant
to do 500 a day is around $20,000,000
(I know I own one).
By consolidating the price pressure on
inputs (cows) can offset market
development costs.
The packing plant is not the challenge,
it is the operation and marketing.

[SimplyCanadian]

As per usual, your industry leadership directs the governments actions and inactions on the beef industry in Canada. Those producers that are and have allowed this to happen had ample opportunity to bid into their own destiny however choose to let the opportunity to shorten the supply chain pass. Your Buddies at XL and Cargill are just doing business and making money any way they can even at your expense.
The food industry across Canada is falling apart, one sector at a time!