Manitoba Pool Elevators announced $4.3 million in net earnings, its biggest profit since 1986, following a 25 per cent increase in grain handle from the previous year. But reflecting the same conditions for the Burns closure, the Pool livestock division reported a $154,000 loss.

There were also losses at CSP Foods, the oilseed-crushing operations owned by the three Prairie Pools, and the Manitoba Pool annual meeting was told that a closure of one of the three CSP plants was being considered because a combination of excess capacity and government policy on freight rates was hurting industry profits. However, Western Co-operative Fertilizers, also owned by the Pools, reported a profit of $7.6 million.

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“I’ve been saying ‘two weeks’ for a long time,” he said during a recent tour by the Manitoba Beef Background and Feedlot School at October’s end, joking he’s considered wearing a T-shirt emblazoned with the words.

“But I think it’s very, very close now,” he said.

The Canadian Food Inspection Agency officials tells him their paperwork — a document in excess of 3,000 pages — is now basically complete.

“I’m cautiously optimistic that we should be at the end of this road within a month,” he said. “I’m more confident than ever that we’re almost done.”

It’s been a very long road. Vaags bought the former Plains Processors, north of Carman in 2008 after starting up a successful business Carver’s Knife doing wholesale and retail sales of beef when BSE struck.

Vaags began to pursue the federal stamp shortly after that seeing what “an island” Manitoba had become when the border closed during the 2003 crisis.

True North Foods is now fully constructed and has been operating under provincial licensing, processing about 80 to 100 animals per week, since last year.

That that number will jump to about 1,000 per week once CFIA gives the green light, Vaags said.

Their business plan includes killing for the regular commodity market as well as servicing niche producer groups such as those raising cattle in organic and grass-fed systems.

True North Foods will have a unique traceability program that’s piquing the interest of offshore markets in particular, Vaags told the tour group.

“We have the capability to keep the origin right to the CTA tag number right back to every piece of meat that goes out in the box,” he said.

“That’s unique to other plants. The Chinese are very, very interested in that. Canadian beef or western beef has a very good reputation in China but they’re worried about authenticity. If you can prove through traceability that it came from this farm and in Canada it’s a real marketing feature.”

Twenty-six people now work at True North Foods. It will begin hiring more once federal approval is received. He doesn’t anticipate labour shortages will be a problem.

That’s because the plant doesn’t need a huge number of people, he said.

“We need an additional 50 to 55 people,” he said. “It’s a big enough number to have a positive economic impact for the area. But it’s not like we’re bringing thousands of people in. I think generally speaking it’s going to provide employment for people already in the area or close to the area.”

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Based in King of Prussia, Pennsylvania, AFA filed for Chapter 11 protection in the U.S. Bankruptcy Court at Wilmington, Del., on April 2. Of those assets, Cargill bid only for AFA’s Fort Worth plant.

Cargill plans to keep the approximately 250 full-time ground beef-production jobs at the facility and make further investments to boost the plant’s competitiveness.

The Fort Worth plant will produce ground beef patties and a variety of ground beef packaged products.

Cargill’s meat division employs more than 34,000 people, and has more than 30 facilities, in its North American businesses. The position of Texas as a top producer of beef cattle added attraction of the deal, the company said.

In the past 15 months Cargill has announced approximately $100 million of investments in Texas supporting the company’s meat businesses, including acquisition of a hog-production facility near Dalhart, construction of a livestock feed-production facility at Bovina and the Fort Worth beef-processing facility. For fiscal 2012 and 2013, Cargill has also earmarked $20 million in investments for its Plainview and Friona, Texas, beef-processing facilities, the company said.

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Canada’s shrinking beef herd means that simply expanding slaughter capacity is no longer the priority it once was, Kate Butler told a producer forum here.

“It’s not about capacity. There’s no sense getting into commodity beef and getting killed,” she said.

Fifteen applications have been received for funding under the $2-checkoff program, and furthest ahead is the Keystone Processors plant, which is now being run by the Astana Group, headed since this summer by Doug Cooper, a meat-packing executive with experience in the United States and Uruguay.

COMMITTED

So far, $3.8 million has been committed to renovating and retrofitting the former hog-killing plant in Winnipeg’s St. Boniface neighbourhood since 2008.

“The plant will focus on premium meat products for niche markets internationally,” said Butler.

“The main goal of the plant is to bring profits back to producers. Our goal is to have a successful plant that is operating 10, 20, and 30 years from now.”

The critical environmental licensing is already done, meaning that it could begin slaughtering 250 head per day by March 2012, with further expansion a future possibility.

Two other smaller plants in the province are in advanced stages, and both are now working with the Canadian Food Inspection Agency in seeking federally inspected status.

Jerry Bouma, a consultant, said that total Canadian demand for beef requires 7,200 head per day, of which Toronto accounts for 1,200, and Calgary, 244.

“Let’s be clear. The market is getting what it’s asking for. There are no obvious holes,” he said. “You have to elbow your way in, find channels and retailers that want to do something differently.”

That could be grass fed, organic, local or regional, or kosher or halal, he added.

NIMBLE NEEDED

With two large packing companies and a handful of smaller operators already boasting a capacity of 12,500 head per day, any new plant in Manitoba will have to be nimble, well planned by professional managers, and target higher-value production, or get “clobbered” like beer league players facing off against NHL stars.

“How do you set up a small plant and make it successful? As we all know, the landscape from coast to coast has been littered with failures,” said Bouma.

With two plants dominating over 80 per cent of the market, the establishment of three or four small plants killing 500 to 800 animals per day could be a “game changer” in terms of cattle prices, he added.

In his presentation, he estimated that setting up an 800-head-per-day “greenfield” plant would cost about $80 million, with about $20 million in startup costs and $3.2 million in working capital.

With all hooks full, cost of kill would be around $232 per head. At 40 per cent capacity, the cost soars to $435 per head, making committed supply critical to success.

ALIGNING CAPACITY TO CUSTOMER

The key to success is aligning a “certain type of capacity with a certain type of customer” that can’t be done easily by a high-volume, commodity-based operation.

“The standard response from the beef industry status quo camp is that we’ve got more capacity than we need. That’s not the point. If capacity was the issue, we’d all still be driving big Fords and Buicks. Was there ever a lack of capacity in the late 1970s in the auto industry? No, it was a lack of competitiveness,” said Bouma.

The sparse attendance at the forum was noted by one person during the question period.

Butler responded that she was “very disappointed” by the abundance of empty chairs.

“You can look at it two ways,” said Butler. “If things are going really well, then people don’t tend to show up. It may well be that we’re on track and doing OK.”

Cooper, whose group has made a five-year commitment to the plant on top of the two-year building period, said that the turnout was what he expected, with mainly “early enrollers” filling up the seats.

“These things work better if they are evolutionary, not revolutionary,” he said. “I don’t see any whiners in the room, and that’s why I’m back here.” daniel. winters@fbcpublishing.com

———

“Thestandardresponsefromthebeefindustrystatusquocampisthatwe’vegotmorecapacitythanweneed.That’snotthepoint.Ifcapacitywastheissue,we’dallstillbedrivingbigFordsandBuicks.Wasthereeveralackofcapacityinthelate1970sintheautoindustry?No,itwasalackofcompetitiveness.”

– JERRY BOUMA

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“This is about the future of the cattle industry here at home.”

– kelly penner, keystone processing

lans for a new beef-processing plant in Manitoba got a $17.5-million boost this

week.

The provincial government is

investing up to $7.5 million in Keystone Processors Ltd., which will trigger as much as $10 million in loans from Ottawa.

Keystone Processors is renovating a former Maple Leaf pork plant in St. Boniface to process up to 500 cattle daily.

The money, announced Nov. 2, will go toward upgrading the plant to meet federal and European Union certification standards, enabling it to sell beef abroad.

The plant will be provincially inspected at first. It’s expected to become federally licensed within 18 to 24 months, said Kelly Penner, the company’s president and CEO.

Manitoba currently has one federally inspected beef plant located in Winkler.

The facility at 663 Marion Street is currently undergoing extensive renovations. It hopes to start killing cattle on site by September 2011, Penner said.

For now, provincially inspected plants in Manitoba are custom killing 50 to 80 cattle a week for Keystone Processors. The beef is being marketed in Winnipeg and elsewhere in the province.

The province’s contribution comes from the Manitoba Cattle Enhancement Council through a refundable checkoff of $2 a head on cattle produced and sold in the province. The province dollar-matches the levy.

MCEC previously invested $2.8 million in Keystone Processors as a loan converted into equity, making the council the largest shareholder in the company.

At a news conference, Penner said his company plans to export premium and specialty beef to niche markets in North America, Asia, Europe and the Middle East. It will also sell locally. Kosher and halal beef are among the its planned products.

“This is about the future of the cattle industry here at home. It is vital for all Manitoba cattle producers to have secure access to markets outside this province,” he said.

“That’s what we set out to do when we formed Keystone Processors: to build a beef plant that would give Manitoba farmers the opportunity to sell their beef to the world and to keep more of the profits here at home.”

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Keystone Processors is a step in the right direction, but it will be only a mid-size plant.

It’s been another tough year in a series of tough years for the Manitoba cattle industry. There’s no way around that fact. Before the unseasonably high rainfalls hit this summer, producers were already having trouble coping with rising transportation and feed costs. The rains made it worse by washing away their fields.

But this year also saw what I believe could be the start of an industry revival. Keystone Processors announced it was setting up the first beef-processing plant in Manitoba in a generation. The company’s plan is to take a former hog plant in Winnipeg and turn it into a high-end, federally inspected plant that can slaughter and process our cattle for premium niche markets around the world.

Financial help

Keystone Processors was able to purchase the building and begin renovations with the financial help of the Manitoba Cattle Enhancement Council (MCEC), which has invested $2.4 million in the venture. As chair of MCEC, I’m very proud to have played a part in helping Keystone to this stage. Our council worked very hard with the management of the company to hammer out a sound business plan and find the right property.

But this is just the beginning, both for Keystone Processors and for MCEC. The company plans to create a new, premium brand of Manitoba beef. Under its plan, over the next few years the plant will be upgraded, production will begin and export orders will be filled.

It’s vital for Manitoba producers to have access to federally inspected processing facilities. It’s the federal licence that permits export and gains access to large supermarket chains and foreign markets. It was our lack of this type of facility that hurt us so badly when the U. S. border was closed to Canadian beef exports in 2003. Our producers were effectively blocked from getting their animals to market.

For our part, MCEC won’t be satisfied with only one new facility. The Keystone Processors operation is a step in the right direction, but it will be only a mid-size plant. We need more options for our producers. That’s why we are already working with other organizations in the province to add slaughtering and processing capacity as well as other marketing opportunities for our cattle producers.

Business plans

Our ultimate goal is to build a stronger provincial industry that will be able to stand on its own and prosper in a highly competitive global market. That was the reason MCEC was formed and it’s a challenge we’re tackling with determination. Our council administers an investment fund that is funded by a $2 levy on every head of Manitoba cattle

sold. The province has been matching that for the past two years, turning every $2 into $4.

We now have a fund that is large enough to provide financing for operations like Keystone Processors. But we envision the council will invest in multiple organizations in the coming years. We are in the process of vetting other business plans that we hope will form the basis of more good news for cattle producers.

– Bill Uruski is a former provincial minister of agriculture and now chairs the Manitoba Cattle Enhancement Council ( www.mancec.com).

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