Construction is going ahead on a new Alberta packing plant despite a 25 percent increase in building costs.
Since announcing the $40 million project one year ago, construction costs for the 800-head-a-day Ranchers Meats packing plant outside Edmonton have increased dramatically.
“Construction in Alberta is an experience you never want to have,” said president Stan Schellenberger.
Company officials put the packing plant on hold for several months while they raised more money and nailed down construction bids. Alberta’s heated economy has pushed up costs for all construction projects in the province.
Read Also
Agriculture ministers agree to AgriStability changes
federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
“Compared to other provinces it’s more difficult in Alberta,” said Schellenberger.
Directors halted the project, made design changes and raised another $4 million before the project resumed. Work has begun on the foundation and Schellenberger hopes the building’s walls and ceiling will be up by Christmas so the plant can be operating by the spring of 2007.
The packing plant was one of many announced across the Prairies after BSE closed borders around the world to Canadian cattle in 2003, creating a glut of slaughter cattle. Before BSE, most of the cattle were slaughtered in the United States.
The glut eased when borders reopened to cattle younger than 30 months, but prices were still depressed for older animals.
More than 600 cattle producers bought shares in Ranchers Own, the new generation co-op that is the majority shareholder of Ranchers Meats. It wasn’t easy to get farmers to spend $5,000 a share to help build the plant and guarantee a slaughter space for their low-priced older animals.
“The co-operative wasn’t as successful as we hoped it would be. Now, that’s changing and we’re getting more members now that we’re under construction,” said Schellenberger.
About $5.5 million was raised from farmers and ranchers through a share offering, including an investment from Border Beef, a group of 500 farmers and ranchers from eastern Alberta and western Saskatchewan.
“I don’t see anything holding us back right now.”
Increased capacity
Since the border closed, slaughter capacity in Canada has increased by 25 percent at federal and provincial packing plants. That extra packing capacity has made Ranchers Meats’ thin financial margins even slimmer.
“Packing plants never traditionally (are) highly profitable. As directors we have to be very precise in how we operate the plant to make sure that everything we do finds its niche and hopefully can be profitable,” he said.
The directors are hoping the plant’s location in north-central Alberta, where most of the province’s cattle are located, will be an important draw for the plant. They also hope cattle producers support the new plant.
“We anticipate our owners will be loyal to their plant and deliver their cattle to their own plant.”
