Producer owned Packing House

[rusty1]

I heard there is some talk of a producer owned (new Gen Co-op) for cattle under 30 months of age. It would provide complete carcass data back to the producers, and buy cattle based on merit not discount. Do you think it would fly in Western Canada?

[cakadu]

Rusty - do you know what area it is in? There are at least 6 or so that are being talked about in BC, Sask, Man and AB. There is one in the Peace country here in AB that has been getting some press lately, as has one or more down in southern Alberta.

Here is a partial listing that I know of:

Ranchers Beef (AB)
Ranchers Own (AB)
Blue Mountain (BC)
Ranchers Choice (MB)
DMB (SK)
Natural Valley (SK)

It is anticipated that at least one of these will make it all the way to the plant functioning, which will help with the cull cows.

Those entering into the new gen co-ops have to be there for the long haul and not just until the borders and markets open up again. That is going to be one of the harder aspects of keeping the co-op going, but with planning and good management they should be able to overcome.

[ValueChainFX]

Rusty the Alberta Value Chain Cooperative, is well on schedule to build a plant this year. The plant will process diversified livestock, cull cows and younger animals as well. For more information on this plant you can contact Klaus Kuelken at 1-780-584-2407.

[cakadu]

How necessary is it to re-invent the wheel by building yet another packing plant? In order to see the success of these new gen co-ops grow, wouldn't it be more prudent to have the core group work together and iron out any kinks, ensure that the group will function well and then worry about expansion into building new plants etc.? It seems like such a costly step and it might be better to work with an existing plant that can get you the products in the way you need them to satisfy customer demand before going down such a high risk path.

It is true the higher the risk, the higher the reward.

Seems to me that you could accomplish many of the same goals working with a processor that you can trust at the start and then move on to bigger and better. Sometimes you have to go slow in order to go fast.

[rusty1]

Well one reason is that we are the only country in the world that exports live cattle, and hires someone else to cut and wrap it?

[ValueChainFX]

Another reason is that if there was a packer that was Federal / EU and willing to work with a group this may work. The risk management, studies and evaluations have taken three years of planning and 12 years of research. As you know many farm gate folks and even some that have got more involved than farm gate have tried working in the present system. It is not working for the producers.

[ivbinconned]

Is this a possible reason for building a producer owned packing house.

Here is the info on the history of Tyson Foods stock splits.

2 for 1 on Sep 28/68
4 for 1 on Nov 15/78
2 for 1 on Apr 15/83
5 for 2 on Apr 15/85
2 for 1 on Apr 15/86
3 for 2 on Apr 15/87
2 for 1 on Apr 15/91
3 for 2 on Feb 15/97

Therefore If you would have bought 100 shares prior to Sept 1968, and didn't buy any more, you would now have 36,000 shares.

If you had 100 shares in 1968 those 36,000 shares today are worth about $855,000 CDN!

When they put their arm around you, it’s to put one hand in you’re pocket.

[cowman]

I believe that it is a waste of time to build a major packing house unless the federal government reins these pirates in. Otherwise Cargill/IBP will just break the new guy when that border opens? They have done it everywhere that they operate, so why would it be any different this time? Why were some of these moth balled plants sitting in the first place? I would suggest because the big boys squashed them like bugs? Neilsons were allowed to operate only because they were basically "niche" and had a gathering system through their marts?

[grassfarmer]

Cowman, I fear you are correct. Look at the way the Packers broke the Organised Marketing Initiative by the feedlots last fall. They bought cattle in Ontario at a considerable short term loss to themselves to break the cartel in Alberta. It's highly likely they would do this to any major new packing plant set up - and remember how deep these guys pockets are!

[ValueChainFX]

Keep in mind Packers plan years into the future. They also deal in volume or commodity! What they consider niche markets are markets that they cannot or don't want to be in. I agree a large plant for Alberta would be a "Prime" target but smaller plants through out Canada build infrastructure back into rural communities and can deliver a product the large plants can't or don't want to deliver.
As producers, I believe we know we need to plan into our futures as well, how this industry plan becomes a strategy is going to be determined by the cooperation and participation of those producers interested in how they are going to build a foundation for their future. Those that feel mainstream and being a price taker is the way to go can plan their future with that in mind. Those that want to set their own margins and become a part of a long term strategy need to plan that into their long term future. The choice is always in your hands.

[rusty1]

Lets remember that 1 million head plus are shipped across the border, we pay them to market our beef and do the labor of cutting and wrapping. da
If we built a producer owned ifrastructure to go a bang up job on for our western Canadian consumer, thats all we need to take care of. We can let the multi-national play their commodity beef just as they have always been doing.

[rusty1]

another thought - If we could design a packing plant commited to vertically passing back the carcass value to the producer, we could make huge genetic improvments in our domestic herd. I see average daily gains in any group of cattle from 1.5 ADG to 6 . And I am sure that the same groups have individaul values ranging from a -$200 to a $300. That's a huge range. But without knowing which ones they are I can't do anything at the ranch. If we designed a Western Canadian solution our own (grass roots owned) I think we could survive.

Right now our system is like a hour glass - With the Retailer(consumer) at the top and us the producers at the bottom, and the packer (3) in the middle. Therefore they are able to get their "pound of flesh" out of who ever they want. When they take it out of the consumer, we lose, when they take it out of our hides we lose. It's time to take back control of our industry!!

[ValueChainFX]

Rusty both the above comments are right on the money! Your money, your future and with cooperation in your pocket. The retails have already been looking at the same picture and some are totally open to making the change.

[rsomer]

rusty1: Canada is not the only country in the world that exports live cattle and as you say hire someone else to cut and wrap it. Canada is the world’s second largest exporter of live cattle, France is number one.

I am a staunch supporter of producer owned packing plants. And I would go one step further and say that producer owned packing plants can compete head on, one on one, with the big packers. Producers could effectively develop a superior brand image and capitalize on the producer image of quality and integrity. Cargill and Tyson Foods cannot compete with producers when it comes to a clean, desireable brand image. For instance right now the RancHers brand image is being used to market beef for Cargill and IBP. Producers would benefit 100 fold more if that producer brand image was marketing their own product. A successful brand image is more important than organization size when it comes to retail marketing.

And I have long advocated passing down information from the packer to the producers. Although I think the real advantage of a producer owned packing plant is price stability not necessarily profitability or information sharing. If gaining further profits were the only reason for a producer to build a packing plant the producer might realize a greater profit from investing directly in Tyson Foods or IBP as ivbinconned has illustrated.

[grassfarmer]

I like the idea of using the RancHers image to promote Alberta beef and hence actual beef producers bottom line. It could be difficult to persuade ABP that the check-off $ they collect not go to directly benefitting their masters, Tyson and Cargill though.