Discussions are underway on whether or not a new beef packing facility would be viable in Saskatchewan. The industry has sustained healthy margins over the past two-and-a-half years and with Saskatchewan being the literal breeding ground for upwards of one million cows, it’s no wonder the province is up for consideration.
Saskatchewan Stock Growers Association (SSGA) has hired Willie Van Solkema, through Kevin Grier Consulting, to delve in to the viability and possibility of the project.
A successful packing plant is a combination of many variables, including the size of the proposed plant, but Van Solkema says Saskatchewan’s cattle production could easily sustain a new facility of reasonable size.
With about a million cows, including 150,000 fed-cattle in Saskatchewan, a 1000-head per day slaughter plant could be feasible, says Van Solkema.
He notes that these cattle are largely being hauled to Alberta packing plants and so it’s not that these would be new cattle numbers, they would just be redirected to the new facility in Saskatchewan rather than shipping them out of province. The dispersement would create a competition factor, he says, but one that would ultimately save producers freight costs.
On the competition front, it’s important to note that when it comes the size of the plant, the number of available cattle in the province isn’t the only thing to consider when making that decision.
Van Solkema explains that even though Saskatchewan could maintain a 1,000-head per day facility, at that size, they would be competing with the two main packing facilities and would then also need national and international customers. This oppose to a smaller facility of 150 head-per-day, in this case, the plant could market and sell locally, putting less pressure on the sales and marketing funnel.
Although they have established that Saskatchewan has more than enough cattle to sustain the facility, producers are also simultaneously having very real conversations about downsizing the herd. Van Solkema says the nature of the industry from both a packer and producer standpoint is cyclical and it could be coming around full circle again.
“At what point in time, with the cattle numbers are lower, does this operating margin change — where the cattlemen now have leveraged and they’re going to get more money for their cattle, and the packer loses?” asks Van Solkema. The other challenge is, once you sign on the dotted line, it takes you two to two and a half years to build a plant. In that two and a half years, I would say the cycle could change. I believe it’s even forecasted to change. So the timing is also one of these issues.”
He says the project needs long-term investors. Looking at plants in High River and Brooks, Alberta, those plants have been operational for upwards of 30 years with 20 or more still left to go. To have an investment of only five to 10 years, isn’t likely something that would be beneficial for the plant or the investor, says Van Solkema.
Right now, he says with all things considered it does sound like it could be a viable option, however there are still many things to consider, one of which is making sure the right partner comes on board. Van Solkema theorizes this is ideally someone who is in the food industry in Canada, but not in the beef business and who has contacts in international markets.
This will be the next step in the process to see if they can secure suitable and viable investor(s).
Subscribe: Apple Podcasts | Spotify | RSS | All Podcasts
