Rancher’s Beef, one of the first new packing plants to open after the BSE crisis began in 2003, has closed its doors after 13 months in operation.
An affidavit filed by Rancher’s Beef president Tony Martinez Aug. 14 in Alberta Court of Queen’s Bench said Rancher’s Beef faced a “severe liquidity crisis” and has filed for creditor protection under the Companies’ Creditors Arrangement Act.
In the affidavit, Martinez said high prices paid for cattle by U.S.-based cattle processors, cost overruns on plant construction and federal government policies that prevent testing for BSE within meat packing plants were part of the $56 million Balzac plant’s downfall.
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Martinez said a unique feature of the plant was a $10 million investment in a tracing system that allowed animals to be traced from the plant to the buyer.
“In the case of exports to Japan, for example, Rancher’s Beef has determined that BSE tested/traceable meat is worth an additional $67 per head of cattle,” he wrote.
“A change in the Government of Canada’s policies in this regard has negatively impacted Rancher’s Beef’s cash flow by approximately $3 million since the production began at the Balzac plant.”
If Rancher’s Beef had been allowed to test for BSE and sell into the Japanese market, the monthly cash flow would increase by $1 million, up from $700,000, Martinez said.
“Accordingly, while Rancher’s Beef made a significant capital expenditure, a change in government policy has rendered the investment in the tracing system to be presently of little or no value,” he wrote.
Rancher’s Beef was one of dozens of packing plants proposed across the Prairies after BSE devastated the Canadian cattle industry. When the American border was closed to Canadian cattle, prices dropped and cattle producers vowed never to become dependent on American-based packers again.
In response to the crisis, 13 initial partners came together to form Ranchers’ Beef. A feasibility study funded by the partners and the Alberta government determined there was a need for increased cattle production capacity in Canada, especially Alberta.
There are about 20,000 head of cattle in Rancher’s Beef’s feedlots. The company needs creditor protection to stave off being forced into receivership to ensure the cattle are cared for, wrote Martinez.
Art Price, Rancher’s Beef chair was unavailable for comment.
Stan Schellenberger of Rancher’s Own Meat Processing, a packing plant still under construction near Stony Plain, Alta., said it’s not an easy time for any packing plant faced with a high Canadian dollar, high labour costs, new specified risk material rules and difficulty obtaining financing for packing plants.
“You have to be very cautious on start up,” said Schellenberger. He hopes his plant, designed to kill mature cows and bulls, will open in the spring.
“It’s sad,” he said about Rancher’s Beef.
“We don’t like to see that. It’s not good for Alberta or Canada. A plant like that one and ours specifically allows ranchers and farmers to participate in the value chain. It’s very difficult without these plants for farmers to participate in the value chain. We don’t like to see that happen.”
Steve Kay, editor of Cattle Buyers Weekly said it’s not an easy time for packing plants.
“The beef processing industry in North America has been extremely tough for a long time. Operating conditions were severely exacerbated on both sides of the border by BSE,” he said.
Stuart Thiessen, a Strathmore, Alta., feedlot operator and chair of the Cattle Feeders Council, said the closing of Rancher’s Beef is disappointing for the industry.
With fewer cattle and more packing plant capacity, it wasn’t a shock that it closed, said Thiessen, a member of the Alberta Beef Producers.
“We’re not using much of the packing plant space,” said Thiessen.
“The cattle will still get killed. We just have one less bidder which hurts.”
