The sale of Tyson Foods’ Lakeside packing plant to Canadian-based XL Foods is the best thing that’s happened lately to the Alberta cattle industry, said one of the province’s largest feedlot operators.
Cor van Raay said the American owners of the Lakeside plant were close to closing the money-losing operation and that would have devastated the provincial cattle feeding industry.
“Now, there’s going to be cows here for a long time. If the plant were to close down, it would have meant a significant loss to Alberta,” said van Raay, who operates feedlots near Iron Springs, Alta.
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Tyson Foods signed a letter of intent June 25 to sell the packing, feedyard and fertilizer assets of Lakeside Farm Industries and its subsidiary, Lakeside Packers, to XL Foods.
Patrick Bieleny, chief financial officer for XL Foods, declined to be interviewed.
Steve Kay, analyst with Cattle Buyers Weekly, said the sale is potentially good news for Canadian cattle producers. The Canadian-owned company would now become, along with Cargill, one of the largest beef packers in Canada.
Between XL’s existing Calgary packing plant and the Lakeside plant in Brooks, Alta., the company has the potential to slaughter 6,500 head a day.
“It makes a player in Canada stronger,” said Kay.
Financial troubles in the American and Canadian packing industry had Tyson looking for ways to rationalize its business and Lakeside was the next likely candidate for divestiture, said Kay, who believes the Brooks plant never fully recovered from a bitter four-week strike in 2005.
Jack de Boer, feedlot operator and chair of the Alberta Cattle Feeders Association, said there has long been a worry Tyson would pull out of its Lakeside plant or shut it down. The sale means the plant will continue to operate.
De Boer said it’s good to see the packing plant, originally started by Canadian Garnet Altwasser, is back in Canadian hands and that the profits will stay in Canada.
“As long as the border is open we’ll have enough competition that it won’t affect prices,” said de Boer.
Van Raay said the demand for Canadian cattle by Tyson isn’t going to drop with the sale. The company will still need Canadian cattle to fill its plant in Pasco, Washington.
“They’ll still want Canadian cattle down there. The competition is still there. As long as the border is still open, I don’t think it will have an impact on prices,” he said.
Libby Lawson, vice-president of public relations with Tyson Foods, confirmed the company plans to buy Canadian cattle for its northern U.S. plants.
“For Tyson’s Pasco plant, we will continue to be in the marketplace there when it makes sense to do so, so no real change in that regard,” said Lawson.
Erik Butters, chair of the Alberta Beef Producers, said there is concern about the merging of two Canadian-based packing plants, but the purchase guarantees Lakeside will remain open. With packers operating at 65 percent capacity, potential closure of the plant was a real concern.
“It’s good to hear it’s open and it is Canadian,” said Butters, who doesn’t expect XL Foods will pay extra for Canadian cattle.
“They’ve got to survive in the extremely competitive industry. I don’t think there’s going to be any favours granted.”
Dave Plett, chief executive officer of Western Feedlots, also saw the purchase as a good move.
“Nilssons have had a long history of success being dynamic, different and creative in the cattle industry …. The one that wants out is leaving and we now have a Canadian owned and controlled entity. The potential is very good. What they do with that potential is yet to be seen.
“We knew Tyson, by virtue of its global moves, for some time had been shifting chairs around and the president had stated that packing capacity in North America was overstated and it just made sense, with shifts occurring state side, that we would see something of similar vein up here.”
Van Raay believes there will be grumbling from producers about XL Foods owner Nilsson Brothers owning everything from cattle to auction markets to packing plants.
“It’s one thing not liking it and talk about it that you don’t like it, but if their auction markets pay $2 more for their calves because they’re backing the auction market, where do you think your calves are going to go? Where there’s more money.”
Van Raay said emotion shouldn’t factor into the livestock business. Cattle from his southern Alberta feedlots go to buyers in the United States and to all the Canadian packing plants.
“Whoever is the high bidder for that week gets the cattle. Some weeks they go all across the line, some weeks they all stay here. It’s no secret. It’s just a matter of working your calculator.”
XL Foods is part of the Nilsson Bros. Group, which is involved in all aspects of beef and cattle production with facilities in Alberta, Saskatchewan, Nebraska and Idaho.
