COLUMN - Ruminating

by MCPA President, Martin Unrau

This summer has been filled with both good news and bad news stories. It seems everything I wanted to talk about this month has both a positive and a negative aspect.
From the MCPA’s perspective, sometimes we just don’t now how a scenario will play out given all the variables until all is said and done. Because our industry is so intertwined from the packing plants all the way down to the cow-calf producer, a change in one sector can dramatically affect the profitability of another.

Today I’d like to talk about the good, the bad and the optimistic aspects of the following issues:

Country of origin labelling

Good news: The Canadian Cattlemen’s association lobbied hard since COOL was proposed in the U.S. and believe we were successful by working with USDA and the American bureaucrats to get the rules in the original document relaxed to the point that the new legislation would not be devastating to our industry.
The bad news: We’ve heard there are a few U.S. plants that won’t accept Canadian cattle and we won’t know for awhile exactly how our cattle are going to be viewed by U.S. feedlots, processors, retailers and consumers.
The optimistic view: Discounts on Canadian cattle probably won’t be as high as we originally thought.

MCEC investment in plant

Good news: It looks as if Manitoba will soon have a packing plant to process and market cattle.
The bad news: Producers in the province have always been divided over whether a plant here will be a viable investment or not.
An optimistic view: This is the chance for those producers who support the idea to see it become a reality and it is a very good opportunity for producer dollars to be put towards something positive. The naysayers will lose nothing with the options available.

WTO talks

The good news: Manitoba Agriculture Minister, Rosann Wowchuk attended the WTO meetings in Geneva. Staff from the CCA told me how impressed they were by her tenacity, that she and her colleagues pushed hard for the trade dependent west, in favour of opening new global markets for beef.
The bad news: Eastern Canada is not as interested in new markets because they heavily represent supply managed industries like milk, poultry and eggs. Talks broke down when India and China could not come to an agreement with the U.S. on import tariffs.
The optimistic view: WTO isn’t dead yet. There are people working behind the scenes trying to revive it and although we may not see much happen until early in 2009, the hope still exists that Canada may be able to negotiate a trade deal that is more favourable to the beef industry in the future.

Hay crop

Good news: Many producers have had decent crops in the province and have put up enough hay this summer.
The bad news: High levels of rain in isolated parts of the province are making it near impossible for producers in those areas to get up enough hay for this winter.
And in a corner in the southwest, dry conditions have persisted since spring drying up the pastures and making it impossible to harvest hay. Some producers have been forced to start selling cows.
The optimistic view: The provincial government has offered a positive freight assistance package. I hope that producers who normally just feed hay, explore all options. Good oat straw and six pounds of barley a day will get your cows through the winter just fine. Don’t be shy to ask for professional help about balancing rations.

We’ve had discussions with a few MPs and they are working hard to see if something can be done through AgriRecovery.

Cattle prices

Good news: There are a number of positive signals in the market that cattle will be selling for a decent price this fall. Cull cattle are bringing pretty good money, the dollar is down a bit and because of erratic weather throughout the country, there may be quite more feed grain available than originally thought.
The bad news: To recoup the losses producers have seen over the last five years, we need more per pound than what most of us can reasonably expect. Recovery on each of our farms is going to take awhile.
The optimistic view: I think good, 550 wt calves will bring $1.25 - $1.30 per pound this fall. Cull cows are also a decent price and it looks like we’re climbing out of the bottom of a hole.

Cattle movement

The good news: Cow-calf producers in Manitoba should benefit with the feedlot industries in both the east and west wanting our calves.
The bad news: Cash injections into the industry that are not balanced across the country put those who do not receive cash at a disadvantage. Feedlot operators here in Manitoba may have a difficult time competing for calves against Alberta, hurting our feedlot industry. The possibility of trade action from the U.S. still exists because of the Alberta payment.
The optimistic view: Out-of-province feedlot operators are already booking pen space in Manitoba feedlots so there is opportunity for our feeders to do some backgrounding and custom work.

Cattle Sales

Over the past few weeks I’ve become concerned about a trend that is developing that may not be in the best interest of the Manitoba industry as a whole.

In an effort to save paying commission sales at the auction marts, some producers are selling direct off the farm. This is a practise that has always been around, but hearing some of the prices guys have been paid in the past has me concerned.

There is room for both the independent buyer and auction mart in Manitoba. Years ago, all we had were the drovers who went from yard to yard.

The establishment of auction barns across the province made selling and buying cattle both fair and competitive for everyone. Auction markets are the price setters and provide a vital service to our industry. It is your choice how you sell, but keep in mind that the auction marts need us as much as we need them.

And on a final note, fall District Meetings are right around the corner. This is your chance to come out and voice your opinions, both positive, negative and optimistic. The schedule is listed on the back page of this paper. We look forward to seeing you there.

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MCEC funds purchase of new Manitoba beef plant

Press Release

The Manitoba Cattle Enhancement Council announced today it has increased its investment in Natural Prairie Beef Inc. by $1.2 million, enabling the company to purchase a former meat processing plant for its plan to upgrade it as a new beef processing facility.
The investment by MCEC allowed the company to purchase the former Maple Leaf pork processing plant at 663 Marion St. It follows MCEC’s previous investment of $1.2 million, made in October 2007, bringing the council’s total investment in the company to $2.4 million. After an initial set of plant upgrades are complete this fall, Natural Prairie will begin processing premium-branded, Manitoba beef. The company expects to begin marketing its products in Manitoba through retailers and direct to consumers in 2008.

The company is ultimately planning to turn the plant into a modern, mid-sized, federally-inspected beef slaughtering and processing facility capable of marketing Manitoba beef anywhere in the world. The company is currently in the process of finalizing further financing before it proceeds with a complete plant renovation to Canadian Food Inspection Agency standards. MCEC will consider investing additional equity into the operation to help it bring Manitoba beef products to market.
Although the name implies that its all to be natural beef, the business plan is much broader, based on profitable niche markets that include natural beef, but that’s not the whole story.

“This is a major step towards the creation of a new federally-inspected processing plant in Manitoba,” said Bill Uruski, Chair of MCEC. “Over the short-term, this plant will be developing new markets for Manitoba beef. Over the long-term, the goal is to market our beef to the world and that is vital for the success of our provincial cattle industry.”

Targeting Niche Markets
“Any plant must be economically viable to be of any long term benefit for Manitoba producers,” said Kate Butler, MCEC’s Executive Director. As part of its plan for profitability, the company will target of certain niche markets that have demonstrated growing demand, including sales of Natural (hormone-free) beef and kosher beef in North America.

The plant will also accept a significant percentage of conventionally-raised Manitoba cattle, some for direct local markets. Both OTM and fats are targeted. In addition, it will include a sophisticated system to trace the animals from ‘gate-to-plate’ so customers can be assured of their quality.

By focusing on niche markets and local production for profits, Natural Prairie will avoid having to compete directly with the industry’s major commodity-driven packers. Plans call for the completed plant to have the capacity to process 250 head per day. It would be easily upgraded to handle up to 500 head per day.

“This is excellent news and a solid investment by MCEC,” said Kate Butler, MCEC’s Executive Director. “Our council will continue to work closely with Natural Prairie to help them turn their vision for this plant into a reality for the benefit of all producers.”

“We’re very pleased to have MCEC add to their initial investment,” said Kelly Penner, President and CEO of Natural Prairie Beef. “We’re nearly there. Our business plan calls for a conservative, phased-in approach. At the end of the day, we’re confident that we’ll be able to build a successful global brand for premium Manitoba beef.”

“In anticipation of future plant upgrades, we’re currently working closely with the City of Winnipeg and Manitoba Conservation to ensure the new plant meets or exceeds all environmental standards. We’re pleased to note that, when complete, the renovated plant will produce significantly less waste than it used to, and that it recently passed a tough Phase II environmental assessment,” said Penner.

The plant will employ 15-20 people starting in late 2008. The company expects the plant will employ about 100 people by 2010 once it completes renovations and ramps up production.

Protection Against Future Border Closures
Of MCEC’s total $2.4 million investment, the original $1.2 million was made up of $750,000 in short term debt and $450,000 in equity to help develop new markets. The new $1.2 million is an investment to enable the purchase the plant, secured by a full mortgage on the property.

MCEC has also negotiated the right to convert the debt to equity and suspend its dividend at its option in exchange for rights to hook space at the facility. This hook option could be of benefit in the event of a border closure or similar crisis because the hook rights are assignable by MCEC to Manitoba producers that have supported the MCEC program.

“When the BSE crisis shut the border in 2003, Manitoba producers were all but shut out of plants in Ontario and Alberta. They had no place to take their animals and it nearly ruined our beef industry. We’re very close to being able to say: never again,” said Uruski. “Our council’s mandate was to create programs that enhance our cattle industry. We’ll continue to seek out opportunities to do so.”

“We have to be as smart as we can in our approach and move forward,” said Butler. “Targeting niche markets such as local, kosher, halal and Natural beef makes sense and this plant was a good opportunity when it came on the market.

“The plant was desirable for three main reasons,” she said. “First, it will benefit from Winnipeg’s central location and its close proximity to major highways, railways and Winnipeg’s airport. The location can help minimize transportation costs for producers and Natural Prairie. Second, the company will also benefit from the city’s large and stable labour pool. And third, the plant has already passed some critical environmental assessments.”

The MCEC began operations in 2006 with a mandate to support made-in-Manitoba solutions for a long-term, viable beef industry in Manitoba. It plans to seek solutions and move forward. The council administers an investment pool that is funded by a $2 per head levy on all cattle sold by Manitoba producers. The province is matching the levy for the first three years so every $2 becomes $4. The council’s goal is to invest in initiatives that will lead to increased slaughtering and processing capacity, or that will enhance the market for value-added cattle products.

For more information on the council, please visit: WEBSITE
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