PLANS TO develop a larger, more diversified and profitable domestic cattle slaughter industry are farther away than ever following the closure of the Rancher’s Beef packing plant in Balzac, Alta.
The plant operated for 13 months before closing its doors last week, citing a severe liquidity crisis.
Rancher’s Beef was one of about 21 federally inspected plants that were on the drawing board for construction or expansion in Western Canada after closure of the U.S. border due to BSE showed the vulnerability of Canadian cattle markets.
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It was one of few that got fully off the drawing board and one of several that launched and subsequently failed or branched into alternative livestock slaughter, mostly on a smaller scale.
None of the plans for a high-capacity plant to rival those of the big three got off the drawing board due to difficulties in obtaining financing.
The upshot is that the big three packers – Cargill, Tysons and XL Foods – expanded and improved the strength of their positions and the industry remains as dependent upon them as it ever was.
Why? Economics.
When the border opened to younger cattle in July 2005, smaller Canadian plants couldn’t match prices offered in the U.S. because of higher operating costs, labour shortages and the rising Canadian dollar. As of last month, they also had to bear additional costs related to SRM removal.
Looming on the horizon is the worry of how American country-of-origin labelling, expected to be implemented in fall 2008, will affect both costs and markets for Canadian product.
Even the big three are operating at only about 60 percent capacity now, as the industry goes through one of its not infrequent slumps and awaits the complete reopening of the U.S. border to cattle of all ages. But those three can run leaner, meaner operations with their economies of sale and deep pockets, particularly the two multinationals.
If any plant could have defied all these odds, it would have been Rancher’s Beef. It had state-of-the-art technology, complete traceability, federal licensing and approvals, prime location and arguably some of the most savvy people in the Alberta beef industry as investors and advisers.
Yet the obstacles proved insurmountable and neither cattle producers nor feedlots can afford to ignore the enticements of higher prices offered in the United States when industry margins are so narrow.
And so the dream of a larger domestic cattle processing industry is certainly on hiatus, perhaps not forever but at least until the economics make it feasible.
Or, heaven forbid, until another animal health issue or trade dispute again leaves the cattle industry without its most important market.
Then the plans will start anew.
Bruce Dyck, Terry Fries, Barb Glen, D’Arce McMillan and Ken Zacharias collaborate in the writing of Western Producer editorials.
