SASKATOON – IBP Inc., the world’s largest beef packing plant, appears well on its way to taking over Canada’s second largest beef slaughterhouse.
Negotiations are under way for the Nebraska-based company to acquire Lakeside Farm Industries Ltd. of Brooks, Alta.
Both parties in the negotiations are saying little beyond confirming that talks are being held.
IBP officials recently toured the southern Alberta packing plant, 40,000-head feedlot and other businesses including feedmills, fertilizer plants and hog and broiler production units.
Lakeside plant is a slaughter-only facility. Industry officials expect IBP, the leader in the boxed beef industry, will finish the boxed beef plant. That could mean adding a second shift on the kill floor, doubling the kill capacity and increasing the demand for slaughter cattle.
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“A stronger demand means a stronger industry in Western Canada,” said Dave Plett, general manager of Western Feedlots and president of the Alberta Cattle Feeders Association.
Still, many feedlot operators worry the loss of a major buyer may lower prices bid for slaughter cattle.
“It would have been nice to have a Canadian owner of Lakeside,” said Gary Sargent, general manager of the Alberta Cattle Commission. But, he added, few Canadian companies could consider the purchase of Lakeside.
Joe Pattillo, president of XL Foods Ltd. of Calgary, disagrees. He said his company made an offer on Lakeside this year but it was rejected.
“Why would you sell 30 percent of our industry to the Americans,” Pattillo asked.
Lakeside and Vencap, a Lakeside shareholder, had a perfect opportunity to force the Americans to harmonize the two countries’ grading systems as a condition of sale, Pattillo said.
“They took taxpayers money and put a sensitive industry in a very vulnerable position. I’m disgusted.”
Small plants may be hurt
Potential losers in the takeover are smaller beef slaughtering plants such as XL Foods and Burns Meats of Lethbridge, said Steve Kay, editor of Cattle Buyers Weekly, an industry newsletter.
Smaller plants may have difficulty competing if the two largest players in Canada – Cargill, of High River, Alta., and IBP – compete in a bidding war for slaughter cattle.
“There’ll be a real competitive battle between Cargill and IBP the likes of which the Canadian cattle industry has not seen. IBP will be extremely aggressive,” said Kay.
IBP’s move makes sense in strategic terms with a trend to a single North American beef market, said Kay. Heavier cattle can be funnelled into their American plants, while lighter cattle can be directed to Brooks.
