the rich get richer

[kpb]

I see that Cargill has bought an Ontario beef processing company--Better Beef Ltd. of Guelph--for an undisclosed amount of money. The Saturday Globe and Mail business section said that Better Beef was one of the leading beef processors in Canada.

kpb

[blackjack]

... so much for competition...sometimes doesn't it seem this added slaughtering capacity is just somewhat a snowjob...I wonder even if the Sunterra boys will be able to play the game...though Nilsson brothers have ran underneath the radar pretty well...

[farmers_son]

I do not know where the comment “... so much for competition” comes from. There is absolultely no suggestion that Better Beef Ltd. sold to Cargill because they were in any financial distress. There would be little doubt that Better Beef Ltd. or for that matter any packer in this country would be realizing record profits and cashflows at least since September 2003.

I checked out Better Beef’s web site at http://www.betterbeef.ca/english/index.html. This company may have sold for many reasons, but not lack of profits, at least in the present environment. As a private family business they may have faced challenges with intergenerational transfers such as we saw McCains go through and simply decided this was the time to cash in. Whatever the situation, it is my impression that this was a successful business.

Better Beef was started in 1952 as a family business. And while I have no idea of the selling price, I think it is a fair guess that they received more for their packing plant than if they had started farming in 1952 and sold the farm in 2005. I think it is a narrow view to only consider the competition that exists in the beef industry and ignore the possibilities. From small beginnings the two brothers grew Better Beef to presently it owns a large beef processing plant and has integrated to include Watson Foods and Klunski Transport as well as in 1998 opening a full time sales office in Tokyo. Somewhere along the line, someone was making a fairly good profit butchering beef.

And while producers shrink from competition because they are not used to dealing in that environment, they need to consider how much longer they can consider operating as they are. Given the realities of ever shrinking returns on each unit of production, it is only a matter of short years until the primary producer realizes insufficient contribution from the cattle and grain that leaves his farm gate to cover increasing fixed costs. The only way agriculture can capture more of the consumers food dollar, other than increasing government subsidies through taxation, is to move closer to the consumer. For me, the challenge is not competition but finding the best way for widely dispersed producers to come together to pool their respective resources so they can capture needed economies of scale when they inevitably do integrate further up the food value chain. It really is not a matter of if producers integrate closer to the consumer, it is a matter of do we do it now or do we wait until things get worse.

[blackjack]

...I guess farmers_son my comment was just being sarcastic since there is no competition... I agree with your insightful comments but it seems sometimes disheartening ranchers sat back and let status quo dictate the terms...

[intr3est]

There is talk here in Ontario of any matching funds from the province in the future going to a producer owned packing plant. I'm sure Better Beef would have been one they looked at buying, but it seems Cargill beat them to the punch.

Could it be that Cargill was also looking to slaughter closer to their eastern US market. In some ways this might be good for the Ont. producer in being paid on quality etc. There has been no grid here in the past.

[rookie]

I thought cargill took a stabb at better beef 4 or 5 years ago . apparently it will work now. Can't blame the old owners though... I'd sell too for that kind of money...