Canadian plants needed | Border closures showed that overdependence on one market is a bad idea, say cattle producers
The pitfalls of relying on one major market became painfully evident in May 2003 when the United States closed its borders to Canadian cattle.
News of Canada’s BSE case sparked the closure of virtually all export markets for live cattle and beef, which was a crisis because the country exported 60 percent of its annual beef and cattle production, mainly to the U.S.
As prices plunged and cull cattle accumulated, plans sprung up to build Canadian slaughter plants to handle the cattle that could no longer be exported.
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At least 21 federal plant expansions or new facilities were proposed by 2005, with the U.S. border still closed to all live animals and to beef from animals older than 30 months.
Few of the projects got off the drawing board, fewer still ever opened and of those that did, few are still operating.
Yet many people once involved in plant proposals believe the need remains for more competition in the Canadian meat packing industry.
What kept those many earlier plans from fruition?
Stan Schellenberger, former chair of the ill-fated Ranchers Own Meats slaughter plant in Edmonton, said it was money.
The plant had bricks, mortar and equipment in place but never opened to do the job it was intended to do — slaughter 800 cows and bulls per day under federal inspection.
“We all listened to experts because we didn’t think we were smart enough to do it ourselves. That was a major error. And the second was financing,” said Schellenberger.
He and colleagues signed about 1,000 members to the Ranchers Own Meats co-operative in British Columbia, Alberta and Saskatchewan. With several million dollars from members, plus another $30 to $40 million from private sector groups, Schellenberger was optimistic and undeterred by the failure of several other plant ventures.
Cattle supply and markets were in place and the American packing industry was ready to buy trim, he said.
“But when we went to the banks to get some debt financing, we were the last. All our other buddies had gone into receivership, and the banks said, ‘well, why would we finance you?’ ”
As a result, the plan failed after it was 75 percent built.
Schellenberger said experts ad-vised his group to expand capacity to 500 head per day from the original 200-head plan.
“With a 200 a day plant and the $15 million we’d raised, we would have been in production and we’d probably still be in production,” he said.
Schellenberger remains in touch with one of the success stories from those days.
Canadian Premium Meats, a federal plant in Lacombe, Alta., opened in fall 2005 and continues to slaughter cattle, bison and horses at a capacity of 120 head per day.
Next door to the plant, BioRefinex is expected to soon install a bioreactor that will derive plant fertilizer and biogas from the specified risk material that must now be removed from beef carcasses.
Lack of money was also a problem for the $40 million Ranchers Beef plant at Balzac, Alta., which operated for only 14 months before financing issues forced its closure in 2006.
The plant’s capacity was 800 head per day, focusing on young cattle.
Doug Price, one of the 50 investors, said timing was also an enemy. The original plan was to build it in Calgary and take advantage of low cattle prices, high meat prices and borders slowly opening to beef from younger cattle.
However, opposition to the city location led to an alternative site in Balzac, delaying construction for a year.
“If we could have had that plant earlier, then we would have had some of that profitability of low cattle prices and high retail (beef) prices,” said Price. “We raised $23 million from the producers, from 50 people, so it was quite a bit of money, but we needed more.”
Price said lenders wouldn’t take the risk, and efforts to raise money from other sources were unsuccessful.
“We still believe that we could have done it if we’d had more of a slush fund. It just takes a lot of money to start a plant up. I think the opportunity is still there, and I’m sure that most of the shareholders or all of the shareholders still think it was the right idea and the right thing.”
Neil Peacock of Sexsmith, Alta., hasn’t given up on plans sparked by the BSE crisis to get a slaughter plant in northern Alberta. He said the need is greater than ever.
“We were not able to get funding, but we’re not dead,” he said of the proposal once called Peace Country Tender Beef.
“Everybody thinks we’re dead and I like that … because then they leave us alone.”
Peacock said Canadian financing proved impossible to obtain, but European investors are now the target.
“I believe we’ll get them eventually. I’m not going to say we’re going to get them tomorrow or anything like that, but my commitment has been to get a producer-owned packing plant for northern Alberta, and I won’t stop until I do.”
The Tender Beef concept involved a producer-owned co-operative that would own a federally inspected plant and service niche markets rather than compete with processing giants Cargill and Tyson.
Peacock said government help for the plant looked possible at one point, but co-operatives fell out of favour when the Conservatives beat the Liberals in the 2006 federal election.
Banks and the provincial government were no help either, he added.
“I was told … that if I want any help from the Alberta government, I’d better start thinking and acting like a Conservative, and co-operative ventures are not a Conservative way of doing business.”
Cam Ostercamp of Cayley, Alta., said he regrets the time he spent as leader of the Beef Information Group, which tried to gain support for producer-owned packing plants following the BSE crisis.
“Had I known what opening my mouth was going to do for me, I’d have kept my mouth shut. I about drove myself nuts trying to do something good,” he said.
The BIG group held meetings across the West and although support for the concept seemed strong, few producers contributed money.
“I guess what I learned was that that idea was probably 30 or 40 years ahead of its time. The need is greater today than it was then and I think that the cattle industry today is more vulnerable than it was then.”
He is critical of the “overpowering oligopoly” of the Canadian processing industry, dominated in the West by the Cargill Meat Solutions plant in High River, Alta., and the Lakeside plant in Brooks, Alta., recently sold to JBS, the giant Brazilian meat packing company.
A cow-calf producer, Ostercamp said the future is gloomy for his sector because power is held elsewhere in the chain.
“There’s so many fatal flaws in the business plan that the cow-calf guy works under,” he said.
“He has absolutely no way of setting his price unless he wants to ignore the entire conventional industry and finish his own beef and kill it in a provincial plant and try to sell it. Most of them don’t realize what dire straits they’re in.”
Other federal plant plans that operated and eventually folded include Blue Mountain Packers in Salmon Arm, B.C., and Natural Valley Farms in Neudorf, Sask.
