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Better Farming Ontario Featured Articles

Better Farming Ontario magazine is published 11 times per year. After each edition is published, we share featured articles online.


Claiming success from financial failure

Tuesday, June 2, 2009

Although they collectively lost $6.2 million when their beef-processing arm failed,  members of Gencor can take comfort in knowing they pumped $50 million into Ontario's cattle sector during the BSE crisis. "But, that said, we never like to lose money," says the co-operative's general manager, Brian O'Connor.

Cattle producers who bought into the venture by leasing hooks annually for $15-$17 per hook won't get their investment back, says O'Connor.

Money that can be recouped from the sale of the bankrupt subsidiary Gencor Foods Inc.'s Kitchener plant will likely go to major creditors, such as Farm Credit Canada. Selling could take some time, O'Connor says, because offers so far are too low to accept.

The artificial insemination co-operative jumped into beef processing not only to help producers facing price freefalls during the BSE crisis, but also to fulfill a corporate objective of investing reserves in agriculture-related ventures.

When it opened with much fanfare in 2004, the plant paid producers $0.30-$0.40 per pound live equivalent for cull cattle, substantially more than the
$0.12-$0.16 per pound producers received prior to the plant's launch.

At its peak, the plant processed 1,250 bulls, cull cows and steers weekly and allowed producers to lease hooks as a way to raise funds. Each hook entitled producers to process one animal in the plant.

O'Connor blames the plant's March 2008 failure on added costs connected to an enhanced feed ban that came into effect the year before. The ban requires special handling of cattle tissue linked to the spread of BSE. Compliance meant the plant "couldn't be run profitably," he says.

Whether you count it as a success or failure, O'Connor says the experience has helped the company gain "tremendous insight" into marketing food. BF
 

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