no more packing capacity

[cowman]

Rsomer: I can agree with the idea of investing in packing facilities if there is a reasonable expectation of profit. Especially for the younger farmer who intends to be in business for quite a few years. I will add,however, it needs to have a solid realistic business plan that considers all the likely scenarios...the bad as well as the good? The chances of failure are very real!!! No one should go into this thing wearing rose colored glasses?
I truly doubt that any group will convince cattlemen to invest money out of their own pockets(in a meaningful way). And I get antsy when any group suggests we use a mandatory checkoff to pay for it? Is this still a free country or not? Now if it was a deal like Red Country, in PEI, got I think it could fly? $20 up front, "forgivable loan" for the other $40, for each animal hook? Why is it a province like PEI can swing a deal like that but out here we require $200 or better just to get a study done? Something isn't quite right here? Maybe we need to go down to PEI and hire those boys to come out here and set something up for us out here? Because they sure seem to have the answer?

[greybeard]

I know guys that have $30,000 stock trailers and $120,000 loader tractors .Did they need a solid business plan for that? Rsomer,your right on.
Consider if instead of the stock trailer the money was in a boxed beef plant today.

[rusty1]

"There is simply no long term future in continuing to feed fat cattle to sell to Cargill and Tyson Foods."
Bang on rsomer
I don't understand what's so hard to figure out cowman.
Someone told me not long ago that a cow/calf's capital requirments are $3000 per head. The feedlot capital requirments is $300 per head and I know our capital cost is going to be under $200 per head.
The targeted Return On Investment (ROI) pre BSE has been between $30 and $40 per head. That's a return of between 15% and 20%. I'll just bet that's better than you're cows are bring you and alot better than the money you've got in RRSP or on savings.
And that says nothing of the benefits to you to have another buyer at the ring for you're fats. Or the benefits of the premiums you should be getting paid for you're quality cattle.
Now we may as well quite pinning over the fact that we need a plant "right now". We all know that can't happen. So lets put some energy into making it happen ASAP.
The BIGGER issue is that if we (producers) don't, the multi-0nationals will. Then you might as well sell out and go get some R&R time or become a "surf" of theirs. We will lose our birth right.

[cowman]

I was never arguing that we don't need a plant. But somehow or other we do need to get some darned cows killed this fall? Whether that means giving one of the existing packers a sweetheart deal or putting them in the pit doesn't really matter?
And maybe the idea of a $200/animal investment is a bargain, but how come they can do it in PEI for $60? Or maybe it's only $20?
I think if any group could swing a deal like PEI has, they would have no problem getting people signed up? I just don't understand how there can be such a price difference? It's like I go down to PEI and buy a new truck for $5,000 and then I come out here and the same darned truck costs me $50,000! How can that be? Is this the Alberta Advantage?
If PEI can do this(apparently no federal money involved) then why the hell can't Alberta, Sask, and Manitoba? Maybe we need to be asking Ralph, Lorne and Gary that question?

[rsomer]

I agree with the concerns cowman raises about packing plants and he is correct to point out that there are issues that need to be addressed. I clearly see the need for the plants but I also clearly see the challenges that come with producers owning their own processing facility and marketing their beef in competition with entrenched global players like Tyson and Cargill.

Obviously others have concerns as well or else we would see at least some ground being broke somewhere in western Canada where the numbers of cattle are.

However I think we as producers need to realize that it is possible to compete with these large companies. The larger these companies grow the more opportunity there is for a new upstart to enter the marketplace. If these companies are pirates and threaten a competitor then the new upstart can turn that threat into an opportunity because there will be markets out there that do not want to deal with a pirate.

The big players are a lot weaker than most would believe. I do not see any customer loyalty to Tyson Foods or Cargill, either from the producer or the beef customer. Yes, profits can be made by acting like a pirate but you do not win many friends. The big companies can be easily beat on quality, on image, yes even on marketing. A producer owned plant with the right management is a force to be reckoned with.

So why aren’t more plants being built especially when producers are loosing more than enough cash to build a plant with each and every animal they sell into the present market. First there is huge uncertainty in the beef industry right now. BSE yes, but also COOL. But those things are there in our future in any event and we will have to deal with them as an industry. Our cattle industry is not going to disappear the only question is how profitable is it going to be and who is going to get that profit.

Second there is the fear that the plant will fail. It could fail but really so what. We are loosing that money right now on each and every animal we sell. But I guess there is a difference... CAIS makes up 60-70% of our losses when we sell an animal at a loss, CAIS won’t make up our loss if our investment in a packing plant doesn’t pan out. Is that the reason why we don’t see plants going up because it is easier to collect the cheque from CAIS? If so then it is a darn poor reason because CAIS is going to run out for all of us as our reference margins disappear. Still it appears that government is more comfortable subsidizing producers losses than to step up to the plate and help create a profitable beef industry. If that is the case than government has effectively trapped producers in a perpetual loss situation by subsidizing losses but not offering assistance to stop the cycle of loss. And that is a scary situation.

[grassfarmer]

rsomer raises a good point there about customer loyalty. I have spoken to many Albertan urban consumers and they know about the BSE compensation ripoff and do not like the packers one bit. If we had a plant built we could use this consumer dissatisfaction to our advantage by promoting the new producer owned packing plant as the farmers friend - get them to ask at the stores where the meat was killed and that would ensure the plants sucess - at least with the domestic demand.

[kato]

That is so true. Look at the support we have had from our consumers over the last year. I don't think it's a far step to see if they would prefer to buy direct (as possible) from Canadian producers. I bet they would prefer it.
I know I would.

Perhaps we should pay attention to those who are saying there is no future in producer owned packing plants. By attention, I mean find out "where they are coming from". Do these individuals have something to lose if the current situation does not continue? We have to know where our information is coming from in order to make wise decisions.

As far as I am concerned, there never has been and never will be a better time to make a move out from underneath the thumbs of these big packers. When will we ever be more motivated?

As they were saying on Country Canada this weekend, when Cargill and Tyson moved into Canada, we allowed the two biggest predators in the global food industry right into our back yards. First they bought out our cattle industry, now they control it, and the next step is to destroy it.

It's now or never for independent Canadian cattle producers.

[cakadu]

There is great opportunity out there and I for one hope that we can capture it. There does seem to be a part of the equation out there that seems to be missing and that is where is the meat going to go once the animal is killed? Getting it processed can be a timely proposition these days, but that isn't the biggest problem.

If the borders of other countries remain closed to our beef, that will not increase the price of beef, or cull cows for that matter, because there is no place for it to go once it is dead.

The Canadian consumer has been fantastic and support for locally grown and knowing where your "beef" is coming from is on the rise and I am truly grateful that the consumer has remained on side. Having said that though, there isn't too much more that they can eat in terms of per capita consumption, so while having more packing plants is something that we need to change, we also need to be working simultaneously - or even before the meat is available for sale - on markets.

Even for those that are going to be doing more direct marketing, this is an absolute necessity. You need to know who your market is going to be, how much they will pay, what they want to see in cuts, who is going to be your direct and indirect competition and how often they want it.

Direct marketing is not for the faint of heart. It takes a lot of work, doing your homework and forever being one step ahead of your competition. The benefits are great, but they don't come easy.

[cakadu]

Another thing that will have to grow alongside the packing capacity is storage capacity - both short and long term.

We'll need short term capacity for aging and for holding fresh meat that will go to customers almost right away. The long term capacity will have to come in freezer space as the meat will likely have to be frozen. Does anyone have any idea how much storage capacity is out there, how much is available and what level it is at i.e. provincial or federal? To my knowledge you can't store things at Versa Cold unless they have been federally killed and inspected as they are a federal facility. Does anyone know whether this is the case or not?

[rusty1]

rsomer,grassfarmer, kato, cakadu. Your comments are like music to my ears. If it's going to be it's up to me. I've put my last bit of resources into this initiative, because I belive so totally that Western Canada needs to build our own - owned by us - packing plant. The benefits are huge, and can be beneficial to all producers who make a committment to get involved. And it can suceed. I have gone from a 3 man and a secutary opperation with 3 new F-350 quad cabs pre BSE to one car for my wife and I since BSE. And am giving all I have left to see this go.

And if we all give a little we will turn the current direction of the beef industry around.

But it will take you and I focused of a long term goal to do it.

The cure and opportunity in in your pants !

[cowman]

I am sure you are trying hard Rusty but the fact is the system is plugged up right now and I don't see any cats out working? In fact even the little abbatoires are booked up solid? The only plant coming on line, that I know of is the one in PEI?
The meat roundtable in Calgary just came out with a statement that packing capacity is up 20% since 2003...I assume that means the big boys are running double shifts? They also stated very clearly that testing is not in the cards and would actually be detrimental!
So I guess so much for that idea?
The politicians continue to dither, with vague promises of doing something but no action! All the cattle guys holding tight while the wolf pounds on the door!

[rsomer]

Rusty1: I would say the cure is in our hearts and the question is have producers had enough pain to actually cause change to happen.

Cowman said "The politicians continue to dither, with vague promises of doing something but no action!" I don’t think politicians are getting a clear signal from producers here. You mention the Beef Industry Round Table. This is the group that is talking to government and has government’s ear but when you realize that Cargill and the Canadian Meat Council sits at this table the message that is likely to come out is yes, we need more packing plant capacity but that that extra capacity should be built by existing members of the CMC.

The need is there but right now the challenge is how to galvanize producers into action to seize the opportunity before it is grabbed by another big packer? I have not seen any support from our industry leaders for a major producer owned packing plant capable of providing some real competition and opportunity for our producers. How a minority federal government is going to act in the upcoming months is uncertain. Maybe more dithering is what we will see unless the grassroots producers can get the message out to government themselves that producers need to have at least the option to sell their cattle to a packing plant they own themselves to ensure fairness and competition is in the marketplace.

I think government would offer help but that is all, government is not going to do it for producers. BIG C had producers attention. In my view BIG C could have focused more on a packing plant and less on controversial issues such as testing and Asian markets. I haven’t heard anything from them since the Ponoka meeting.