Sunterra

[cowman]

On QR77 yesterday they had Doug Price from Sunterra on talking about the new plant they intend to build in NE Calgary. They had a hard look at the old CP plant in Red Deer in January but decided a new plant was the way to go.
They have a bunch of investors lined up but still need some more. They have $13 million committed and need $22 million.
The intention of this plant is to provide more packing capacity. It is not a new gen co-op but a traditional packing plant. The investors would be paid a dividend out of the profits but get just market price for their cattle.The meat would basically be sold into the traditional market except for a small amount that would be sold through Sunterra stores.
Price went on to say the Alberta Government was backing this deal and providing government guarenteed loans to investors! OOPS...I smell another government boondoggle!
What happens when this plant goes head to head with Cargill/IBP and loses its shirt? Does this mean the Alberta tax payer gets stuck with the bill? We had this sort of garbage 30 years ago with XL and Lakeside Packers?
I suspect this is a very good deal for Sunterra! I suspect it is a very good deal for some big feedlots! I doubt it is a good deal for the small cow/calf guy or the Alberta tax payer! What do you think?

[magpie]

I’m not one for government involvement, with equity disappearing, I feel government might have to be involved with assured loans. What I think should be given some thought; is since this border closure hits everyone’s back yard, we should be sitting down with our assoc and ag ministers and figure out a game plan to a lengthy closed border. Do we have bunch of small packing plants across landscape? Will they compete? Are they able to give the consumers what they ask for ?Maybe a plant should be built with the capabilities of going head on with cargail and IBP.A plant that will open markets for Canadians, provide profit for Canadians and assurances for consumers within and abroad .One that will allow the producer to be higher up the food chain. I don’t know ,but the amount off tax money wasted in government would have built state of the art with tax payers knowing where it went

[rsomer]

Doug Price intends to do more than that. The proposal is for Rancher’s Beef Ltd. is to purchase Sunterra’s two feedlots at Acme and Czar as well as build the packing plant. Only $28,000,000 is required to build a packing plant, the remainder, $18,000,000 is slated for the company, Rancher’s Beef Ltd, to purchase Sunterra’s feedlots.
Last December there was a resolution brought before the Alberta Beef Producers (ABP) by four separate zones to the effect that the ABP conduct a feasibility study to see if a new generation co-op packing plant with wide province wide producer ownership would be a viable option for Alberta beef producers. This resolution was defeated in favour of supporting a mid sized plant such as Doug Price and Sunterra through Rancher's Beef Ltd. are proposing. Instead of an opportunity for a new generation coop with wide producer ownership and participation from producers throughout the province we see instead this proposal which will serve its 40 or so wealthy investors. Given that a number of the investors in Rancher’s Beef Ltd. are also delegates to the ABP it should not surprise Alberta producers that the resolution supporting a new generation co-op that would be owned by average producers did not pass even though the resolution had a lot of producer support at the fall meetings.
cowman: you asked what happens when this plant goes head to head with Cargill/IBP. The proposal specifically intends to avoid competing with Cargill and Tyson Foods as Rancher’s Beef Ltd. intends to buy live cattle at the market prices established by these two major industry players. Profits come from the ownership of the company not from ownership of the cattle. This plant will not help Alberta producers at large. Only the investors of Rancher’s Beef Ltd. who intend to capture their share of the lucrative meat packing industry profits will realize any benefits.

[kato]

Buy live cattle at the prices set by Cargill? Boy..there's a lot of potential!

Sounds like the same old same old..a packer who owns a feedlot.

[jebbesen]

I have read the proposal from Doug Price and Sunterra, and it bears merit in that it does offer a method (in theory) of moving cattle through the feedlots, thereby offering further opportunity for the average producer to sell to those feed lots. At a $100,000 base line investment and approx. 800 head per year, this is not a venture for the average producer.
What I wonder is, are we missing the point altogether?
What if we work backwards in the business model rather than battle with what to do from producer forward?
What if, instead, we realize who the major users/distributers are, such as Centennial Foods, restaurants, Costco, Safeway, hotels, food banks and build a system through a cooperative that fills that niche? Manage contracts systematically through a cooperative of Alberta farmers and ranchers?
Instead of trying to market to the masses, why not do the homework to find out what it takes to create these contracts, and build a system that works toward that end?
I delivered beef this weekend with my sister-in-law, and I can tell you, no farmer wants to make a living delivering hamburger door to door. Not to mention, selling meat door to door does not touch upon the problem of certified healthy beef.
It has to be systemised and made profitable for the average farmer. I do not want to see mass producers manage our food in the future, and this may be the opportunity to change the tide on the future of food production in Canada

[rusty1]

Very interesting.
For 1, I believe that the provincial Govt. has flushed down the toilet billions of the Heritage Trust Fund into Easten Canada in un-secured loans. They have given billions to industry in the way of incentives (private enterprise) so why should we not expect them to (not quarantee loans) but make a cold hard investment in a Alberta built, but owned by stakeholders from across the prairies (you and me and every truck driver, implentent dealers mechanic etc.) to build a packing system big enough to put the run of the big two. If the shares were $1000 a piece over 2 years through construction we would probably find enough stakeholder to build something significant.

By the way I think you can find that Tyson lost their class action suite today to the tune of 1.7 Billion for price fixing.

[rusty1]

Sorry 1.28 Billion
BILLINGS, MT (February 17, 2004) R-CALF United Stockgrowers of America (R-CALF USA) heralded the jury verdict in the landmark Pickett vs. IBP class action cattle competition lawsuit. Today the jury awarded $1.28 billion to the cattlemen suing Tyson/IBP for using captive supplies to negatively manipulate live cattle prices.

[cowman]

So from what I understand Ranchers Beef inc. is just another packing plant then? So why should the province put up any money/loan guarentees? I thought Ralph said no more business boondoggles? Isn't this just exactly what the government did with Cargill when they built in the 80s? And Lakeside and XL?
This Ranchers Beef Inc. might say they will just buy at market price, but what happens when the border opens and the packers south of the line come calling? Then there would be a shortage of slaughter cattle? And guess who will have to be competing? Price also said Ranchers Beef will for the most part be competing in the wholesale market and that puts them in direct competition with Cargill and IBP. Now both of these companies have a long history of using predatory business practices to squeeze out the competition so why would that be any different here?
I would suggest a likely scenario would be the Alberta government puts up the money, or backs the loans, for Ranchers inc. Cargill/IBP tolerates them as long as there is lots of beef to go around. When the time comes the Dynamic Duo puts the squeeze on and bankrupt Ranchers Inc. The province loses millions and Cargill/IBP pick up a state of the art plant for peanuts!

[grassmarketeer]

My understanding is that Sunterra's money is the first money to be given the opportunity to be taken out of the investment. I guess that would be when we would be left holding the bag, and I bet there would be some pretty big tears in it. It would definitely be a good bale-out pkg. for Sunterra.
The trouble is that somehow, the average Joe Cattleman with 200 cows has got to find a way to achieve some of this integration that is happening in the Cattle industry. This is the only way to slow the progression to large scale corporate farming as well as Hutterite colony ownership of the praires.

[rusty1]

cowman - I'm cool with the Govt. not putting anything into Santera because of what it is. But I don't see anything wrong with Heritage Trust Fund going into a "Stakeholder" owned packing facility. If 50,000 stakeholders (from the prairies) put in (say) $1000 each for a share over 2 years during construction. I don't hink Ralph could spend HTF monies any better in Canada!

[greybeard]

I to am not usually a supporter of Government involvement. It often seems to be like the kiss of death .But the fact is the government is very involved in the beef industry today .King Ralf has already anted up hundreds of millions with debatable results. More is being called for. The $ 22 million for this plant is what, $10 per animal in Alberta?
It could easily push the price that much due to added competition in the market. One more bidder.
Jebbesen’s comments on contracts / alliances with major user’s interests me. I think this is the way it went in Britain. Grassfarmer may be able to comment.
As I understand New Zealand also has gone with joint ownership of plants by retail / wholesalers and producers, with the producers supplying to the spec required. Niche marketing I guess.
We are a long way from worrying about predatory pricing at this stage of the game. I indeed do hope the big boys do run the price of cattle up so much no one else can afford to buy any. I suspect we are a little smarter and won’t be as quick to go for it. When competition comes back in the big two will have to anti up extra just to get people to hold their nose and deal with them. This is supposed to be a reputation business and they have certainly built one that will stick with them for a long while.

[jebbesen]

The CP plant in Red Deer is still available for an operation, is that correct?

[cropduster]

Hey ,Rusty maybe that HTF money would be better spent buying SK.??????????

[cowman]

jebbesen: I said their was a lot of activity around the CP plant in Red Deer in early January. Now I assume it was the Sunterra group having a look? So I further assume they decided they didn't want it, from what Price said on the Rutherford show. So if you are interested have at her! It was a fairly decent old plant built around 1970! CP kept it right up to date until it closed about1990? They had installed a pasteurizing unit and an electro shock system in the later days. It had a cow boning line that was capable of handling up to 140 head a day and the kill was around 700-750/day when it shut the doors. This plant did not close because it was unprofitable! It closed because CP sold to people who were not interested in meat packing.
In fact it was a very profitable plant that paid the total cost of itself in three years when it first opened!
I suspect the equipment left in it could be a little shaky but the fact is the building is well made, the barns and pens were fir, the boilers should be alright. It is a good solid well built plant and if you know anyone who is interested it might be worth a look?

[jebbesen]

When consumers, primarily those in the cities, support Alberta/Canadian beef, these consumers are not thinking of large corporate feedlots.
The majority of beef consumers have never touched a cow, never mind know the political and econimical issues involved in the real business of agriculture.
The majority of consumers already believe that by supporting Canadian beef sales, they are supporting the small, local producer. I see this as a market advantage for the average producer...