New Gen Co-op?

[cowman]

My uncle feeds some cattle every year in a custom lot. He recently got an offer to participate in a cow co-op. Apparently you need to make a pledge that you will put up a minimum of $5000 which gets you the right to have 25 cows killed and processed per year. You get market price for the cow and of course you get a dividend from the plant if they make a profit. The plant is somewhere in BC and is mothballed but they say it can be up and running in a short time. You have to deliver to the plant!
I guess the info he had was a little vague because he didn't know what would happen if the plant ran in the red or if you were obligated to send your 25 cows every year. He figured it wasn't a very good deal at all! If the last guys couldn't make it go why would this new bunch?

[rsomer]

I couldn’t help notice that the Sunterra topic has gotten a flurry of replies yet this topic on New Gen Coop has not. It seems that people are more interested when it is someone else that is doing the investing in packing plants than when there is an opportunity for they themselves to invest.

Reading between the lines I see the motivating factor behind the Sunterra proposal is to provide a means of selling their feedlots to a group of investors rather than providing additional packing plant capacity in Alberta. Still the point that producers need to invest further up the value chain so they are selling a branded beef product rather than a live cattle commodity is underlined.

I don’t like the Sunterra proposal because of the feedlot ownership and because the investment required is too large for me and many producers like me. I can’t fill that many hook spaces at $120 per hook for a total $100,000 investment. The $100,000 required investment is supposedly to get around the rules governing private corporations being limited to 50 shareholders. The New Gen Coops would not have this limitation and could attract a larger number of smaller investors.

Cowman: The example you have provided is sized about right for many producers. I think many of us could still invest, even during these times, between $5000 and $10,000 and deliver 25 or so head. That is realistic for thousands of producers in Alberta, Saskatchewan and B.C. It is unrealistic to think someone else like Sunterra is going to invest in the industry so as to increase the profitability of the beef industry for the average producer. Sunterra's goals will be to increase their profitability not ours. If average producers wish to share in the profits that are there by selling a branded beef product they will have to develop their own proposal based on a New Gen Coop that fits their own situation.

[jebbesen]

This seems to make more sense to me, and I had heard about this plan in BC. I am certainly no "in the know" on the topic, but I don't understand why this inititive can not be pursued in every province?

[ebby7]

Sunterra has generated the response because Doug Price is doing something but it is outside of the realm of the average producer and may be getting funds for it. Hard to fault anyone who is being proactive, even if I don't agree with every aspect of the plan. Obviously the average producer isn't the target for their venture. My personal opinion is to look at what is being done by Sunterra and other groups like the one in BC and figure out what can be done, if anything, for the average producer, and do it better.

[ValueChainFX]

The new gen coop model is something that can work for producers if done right! For the producer it must be able to put money in each of the individual producers jeans. There are lots of ways to make something like this work and lots of ways that can hurt the producer as well! Ask the hard questions at any meetings you may go toas there are several groups trying to put tjis concept together now. I believe we have a program that works for the producer and are open to share that with them!

[ebby7]

Do you know of some of the groups, and who might be a contact person involved in Gen Coop plan in central Alberta?

[BCR]

The plant is located in salmon arm bc, a contact is Judy Fenton in Irma Ab. i have heard a bit about it, $5000 investment guaurntees you (i think) 25 head slaughter, and they expect to return dividends in the 2nd or 3rd year.

[ValueChainFX]

Contact for Alberta Value Chain Cooperative Klaus Kuelken 780-584-2307

[ebby7]

If I look at the Sunterra thread, I understand that there is a plant in Red Deer that might be an option... have Gen Coop looked at that, do you know?

[ValueChainFX]

Yes this plant has been looked at. There are several challenges with the plant. Bringing it up to standards is costly. To meet the new regs and build into a new plant some of the components that we know will be upon us soon is less expensive and will provide the foundation for a more long term solution.

If a producer plant is to be built there must be components that are able to protect the producer investment and allow the producer to make money through an extension into the value chain (supply chain) We have this presently working in a small way in a small fabrication operation and are now ready to expand. We are not working with the government in any major capacity but the door has been left open. We have been able to add value to products that have traditionally been showed low returns. Most of the plans have so far indicated that product will be purchased at "Market Value". We all know that market value is very low today and will not cut it. A good example is a 7 year old bull that had a value of about $160.00 at the sale and was turned into products that returned over $2000.00.

The new gen coops give you the opportunity to have choices if they are written into the articles. Most new gen coops follow the old model that don't offer a producer much. It is one thing to call yourself a new gen coop and another thing to have a business model that is well thought out and provides a balance for the coop and the members! Even the "So-called" value vhain specialists are way behind what the new gen coop and value chain models can do for you!

[rsomer]

"A good example is a 7 year old bull that had a value of about $160.00 at the sale and was turned into products that returned over $2000.00."

Are you talking $2000 gross or $2000 net after costs. What are the costs?

[cowman]

One of the problems of a new gen co-op is how is the management? That is definitely the most important factor in the profit/loss equation?
An example: When I was young and worked in the deboning operation at CP, we had a very competent manager. Knew the business like the back of his hand as he had spent his whole life in the butchering trade. Tight as a Scotchman!
But he ran a good profitable operation. Anyway we had this green college boy selling the product. He tried but he just wasn't getting the job done. So this old manager skidded him and brought in a new/old salesman from Toronto. Now this guy was something else! He knew every deli owner from Vancouver to Halifax and he could have sold ice to the Eskimoes! Business boomed to say the least. In fact it was a struggle to get out enough product to fill all the contracts! We all made a whole pile of money...the workers(because we had an incentive program based on piece work) the salesman(commission) and the whole plant! Unfortunately the salesman got cancer and died, the manager retired and was replaced by another college boy! The whole thing got pretty sad(the plant closed a few years later)!
So the whole idea of investing in a new gen co-op might be tempting but I think you need to be able to make sure the management can make a profit, or else you will lose your money?

[ValueChainFX]

Good point cowman, in fact a major challenge for not only a plant but for the supply chain in general. We have found that the industry itself is very fractured and there is a loud cry for more unity in pulling many of the components together. The total plan not only has a focus on management but also on training and marketing groups that are linked from the start to the end. The foundations have been laid and are being developed more tightly as things move ahead.

The $2,000.00 is the net amount, there were kill charges (it had to be inspected) and package charges. We paid the producer for his time what all producers have learned to expect (nothing LOL, in other words we didn't charge out labor) but he did get the profits from the bull!

[ebby7]

Klaus' number : 780 584 - 2307 is not in service. Is there another contact number, or a website where I can research this plan in more detail?

[ValueChainFX]

I'm sorry the number is 780-584-2407.