Putting producers in driver’s seat | Producers not getting benefits of rising retail price for lamb
The Saskatchewan Sheep Development Board is testing the waters to see if there is enough interest in forming a national lamb co-operative.
“There is an $18 spread of what the producer is getting and what lamb is selling for in the marketplace,” said Terry Ackerman, an Ontario-based consultant who has been hired to develop a business model for a new co-operative. “Our job is to eliminate that spread.”
Ackerman said sheep producers have become “price takers, not price setters,” and he believed a national lamb co-operative will help producers make more money.
“The reality of it is, in most markets in Canada, producers use terms like, ‘we got rid of my lambs.’ They sell lambs for maybe $2 to $2.25 a pound. The price at retail is $22 to $25 a lb.,” he said.
“In effect, what they’re doing is foregoing an incredible opportunity to make more money to increase their farm cash receipts.… While the market is doing very well in lamb, the producers’ real income hasn’t shifted that much.”
Gord Schroeder of the development board said the organization’s members asked it to investigate ways producers can add more value to their lambs.
The marketing co-op is one thing the board is investigating.
Ackerman said 200 producers raising 30,000 lambs a year would be needed to form the co-op. Meetings in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario have attracted more than 300 lamb producers, processors and retailers, he added.
The new generation co-op would include membership and production shares.
A membership share would cost $500 and would give the owner one vote in the co-op. A production share would cost the lamb producer a one-time fee of $30 for each lamb committed to the co-operative and would need a minimum of 25 production shares, or 25 percent of the number of ewes in the flock.
Ackerman said the co-op wouldn’t build its own plant. Instead, it would channel lamb production from three provinces into an existing plant and help raise the price.
“When we book plant time, the model works.”
Ackerman said the Canadian Lamb Co-operative would also establish extension services to help new producers enter the industry and existing producers expand.
Establishing a co-op would also develop a Canadian lamb brand that would help regain Canadian market share now filled by Australian and New Zealand lamb imports.
“There is virtually no marketing for Canadian lamb in the market,” he said. “The only brand is New Zealand lamb. That is the brand of Canada.”
Ackerman said he hoped to finalize incorporation plans in the next month and then present an offering statement to producers for shares. The co-op could begin purchasing lambs by this spring or summer.
“This is truly an operation that is appealing to producers across the country,” said Ackerman.
Roy Leitch isn’t one of them.
“I’m not interested in it at all in any shape or form,” said Leitch, who owns Canada’s largest sheep feedlot near Brandon.
He said he is tired of moneymaking offers from people who are not putting up any of their own funds.
“I want to see their money up front, not mine. I have seen it all before.”
Leitch said he recently had a proposal from an Ontario processor that promised an increased price to Leitch, but the proposal collapsed.
“If it is such a great idea, why don’t they put up the money? If something goes wrong, they walk away.”
Leitch isn’t sure an extra $20 a head is available to producers just by moving the marketing around. What he does know is Canada is facing its largest shortage of lamb in years.
“The shortage of lambs is unbelievable,” said Leitch, who hopes the offspring of ewe lambs kept back for breeding last year will soon be coming to market.
“We’ve got to have numbers to run a business,” said Leitch, who ships his lambs to five slaughter plants in Ontario and Quebec.
“I can’t get enough lambs.”
Albert Schemers, a sheep producer from Big Valley, Alta., said his feedlot is almost empty for the first time in years, which he blames on strong demand for lamb at auction markets.
“The price is so high I can’t even afford to feed them,” said Schermers, who believes more packing plant capacity, rather than a co-op, is needed to help boost sheep numbers.
“We had a co-op at Innisfail, but that didn’t work,” said Schermers, referring to the Alberta Lamb Co-operative plant that has been sold several times and is now operating as SunGold Specialty Meats.
The number of sheep and lambs in Canada has started to climb after years of decline. Statistics Canada reported ewe numbers increased by almost four percent from 81,000 head in January 2010 to 84,200 in January 2011.