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The $5 million advantage of local processing

(Excerpts from the latest Manitoba Cattle Enhancement Council newsletter)

Alberta cattle fetch more at auction than Manitoba cattle. A lot more.

“One of the main reasons why Manitoba’s prices are lower is because they are the furthest distance away from any federally inspected slaughter plants,” said Canfax market analyst Brian Perillat.

The simple fact is that Alberta producers have beef plants close to home, while Manitoba producers get prices that reflect costs including transportation, handling and various markups along the way.

MCEC along with the management team behind the proposed new Winnipeg-based beef plant crunched the numbers and discovered that Manitoba producers are losing out on more than $5 million a year compared to their Alberta counterparts.

The analysis shows the average price differential over the first 10 months of 2011 between Alberta and Manitoba on fed steers was $10.16/100 lbs. On an average fed steer of 1,300 lbs., that works out to about $130 per animal. We also know that the minimum price differential on other cattle is $50/head for transportation alone.

That’s the reality that Manitoba producers have put up with for a long time. And it’s one of the things that MCEC is aiming to change by having a federally inspected beef plant here at home.

“If you feel like your animals aren’t worth what they should be in today’s market, then you’re right,”said Doug Cooper, CEO of the management team seeking to build a new beef plant in Winnipeg. “Our plan calls for us to pay Alberta prices for Manitoba cattle.”

“When somebody asks what we’re getting for our voluntary refundable $2-per-head MCEC levy, I tell them that I might just be getting $130 per head more,” said Chuck Gall, MCEC member and cattle producer from Moosehorn, Manitoba. “As a producer, it’s in my best interest to support building a new plant here at home.”

Most industry watchers predict transportation costs will only rise alongside input costs such as feed. That means the interprovincial price differential will only get worse.

By investing in a local plant, MCEC is trying to level that playing field and give Manitoba producers a better chance at long-term profitability and sustainability.

MCEC administers an investment fund that is fed by a refundable $2-per-head levy on every head of cattle sold in the province. That money is then matched by the province turning every $2 into $4. MCEC’s mandate is to use that fund to invest in projects to strengthen the Manitoba beef industry, with a special focus on bringing federally inspected beef slaughter and processing capacity back to the province.

Federally inspected slaughter plants are permitted to export beef outside of Manitoba, which makes them eligible to sell to large domestic supermarket chains as well as into foreign markets.

Fully 85 per cent, or 7,400 out of 8,700, of Manitoba’s cattle farms decided on their own against applying for a refund in 2010.

“We talk to producers all the time and they tell us that they know the risk to our industry if we don’t get new federally inspected beef plant capacity back in the province,” said Gaylene Dutchyshen, vice-chair of MCEC.

“It’s a positive sign that so many cattle producers are voting with their wallets on this very important issue.”

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