The five-year saga of Rancher’s Choice Beef Co-operative, a proposed cattle slaughter plant in Dauphin, Man., has come to an unhappy ending for Manitoba taxpayers.
The Manitoba government invested $4.5 million in the plant, but this fall, it auctioned off the slaughterhouse’s remaining asset, its equipment and machinery, for the price of a used half-ton truck.
Diane Coble-Kendall, a communication co-ordinator for Manitoba Agriculture, said the province received $15,000 from the online auction held in early October.
Allan Preston, an assistant deputy minister for agriculture, confirmed the $15,000 figure but added it was the net return on the sale after paying the auctioneer and receiver.
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Details aside, Preston admitted the optics of turning $4.5 million into $15,000 are not great.
“That would be an understatement,” he said.
“We were disappointed in that number as well. I’m no expert on used slaughterhouse equipment but I felt the salvage value would’ve been higher.”
Hodgins Auctioneers of Melfort, Sask., handled the online auction for the Manitoba government, but a spokesperson for Hodgins said the company couldn’t reveal who bought the equipment.
The spokesperson added that all the equipment was auctioned and it was sold piece by piece, to dozens of buyers.
In 2005, the directors of Rancher’s Choice intended to build a federally inspected beef slaughter plant in Dauphin, capable of slaughtering about 300 cattle per day.
Preston said the co-op raised $1.5 to $1.6 million through a share offering and used most of that cash to purchase equipment from a shuttered slaughterhouse near Ferndale, Washington.
“The equipment cost roughly $1.1 million (US) in January of ’05,” Preston said. “By the time you added in the exchange rate, shipping and all that stuff, it was about $1.5 million by the time it got here.”
Short on cash after the purchase, the co-op attempted to raise money through a second share offering, but it wasn’t successful, Preston said.
In the meantime, the Manitoba government provided a grant of $4.5 million, which helped pay for engineering plans, environmental approval and other costs.
“I don’t have the complete breakdown in front of me,” said Preston, when asked how the provincial grant was spent.
According to Preston, the co-op was voluntarily dissolved in early 2007, which meant shareholders had lost their investment.
After discussions with the Manitoba Registrar of Co-operatives, the province decided to cover the investors’ losses, he said.
“The $1.5 to $1.6 million in shareholder equity, which had been utilized to purchase the equipment, was returned to the shareholders. In essence, backstopped by government dollars.”
After paying out the investors, the Manitoba government was the only remaining investor in the project and the province assumed ownership of the slaughter equipment.
Preston said the decision to purchase the slaughter equipment was a mistake.
“Hindsight is always 20/20, but let’s be crystal clear, Rancher’s Choice as a co-operative made the decision to purchase that equipment well in advance of having financing in place to build a plant, well in advance of having a business strategy that was mapped out as thoroughly as it could be…
“Building a plant because you thought you had excess cows on a given day, without looking at what you might do with the meat… was obviously not a very good way of setting up a business plan.”
Preston said the Manitoba government learned from the Rancher’s Choice mistake and is taking a different approach with Keystone Processors, a proposed cattle slaughter plant in Winnipeg.
“On Keystone, the government will be engaged a little more formally in the discussions through the (Manitoba) Cattle Enhancement Council,” he said.
The MCEC, which is funded by a $2 per head checkoff and matching provincial funds, has invested approximately $10 million into Keystone Processors.
Kevin Grier, a meat industry analyst for the George Morris Centre in Guelph, Ont., said competition from established packers partly explains the failure of proposed plants like Rancher’s Choice or Ranchers Beef Ltd. in Balzac, Alta.
After the U.S. border closed due to the discovery of BSE in Canada, big players like Lakeside Packers and Cargill added capacity, which squeezed out small players.
Regarding Keystone Processors, Grier reiterated that it’s difficult for small companies to succeed in the slaughter industry in North America.
However, he added, any new enterprise has a shot.
