Feels Like Déjà Vu
February 2005
And so, beef producers will buy the Colbex-Levinoff slaughterhouse. Bravo. And as the saying goes, if you want it done right, do it yourself! And since these producers felt they were at the mercy of a single buyer and weren’t getting a fair price for their livestock, and since circumstances leaned towards a monopoly, this whole affair seems rather fortunate.
Moreover, by acquiring the abattoir, agricultural producers will slowly climb up the industrial ladder that brings their products to consumers. These actions will provide them with significant leverage that will allow them to finally get a bigger cut of consumer dollars spent at the supermarket. And that’s a good thing.

Finally, this whole mad cow scare, which shut down the borders and made slaughter in the United States impossible, will have at least produced an interesting consequence: farmers taking charge of their own slaughter processes. Now let’s hope that when the American embargo is lifted, producers will remain loyal to their own slaughterhouse. Because, let’s face it, there’s a real dilemma when parties have interests in both selling and buying their own products: and if it’s improper to skimp on the price offered to producers to keep humongous profits for themselves, it’s in fact irresponsible to agree to a price that will barely allow them to cover their slaughtering costs. Good administrators must, to ensure the future of the business they’ve been entrusted with, build up and maintain a healthy capital structure. And that means setting aside sums in the good years to allow for their survival in leaner years. Indeed, great skill is needed to find the right balance that will satisfy both the buyer and the seller. Cooperative administrators know this well: it’s their daily reality. In fact, they’re probably feeling the same thing I am, a vague impression of déjà-vu…

It was in 1995. I had just arrived at La Coop fédérée.

I wasn’t yet fully aware of the company’s many commercial activities, but I remember hearing talk about closing a slaughterhouse… Was it in Saint-Charles de Bellechasse? Yes, that’s it. La Coop fédérée used to own a beef slaughterhouse in Saint-Charles de Bellechasse. The younger generation may not know this, and that’s why I’m allowing myself this walk down memory lane and relate these events. So, they said the slaughterhouse in Saint-Charles was abandoned in 1995 because it wasn’t cost effective. Why wasn’t it? Why couldn’t this cooperative slaughterhouse cover its costs?

It’s important to note that for several years there had been an ongoing rationalization of Quebec’s beef slaughter business in an effort to obtain sufficient volumes that could provide a level of cost effectiveness for its activities. Once this rationalization was completed, there were only two beef slaughterhouses left and one of them was in Saint-Charles de Bellechasse, owned by Olymel, a subsidiary of La Coop fédérée. In other words, this slaughterhouse was the property of cooperative member-producers. Normally, this should have guaranteed sufficient volumes: if we own a slaughterhouse and have livestock to be slaughtered, our own slaughterhouse should take precedence. Logical? Yet, it wasn’t. The strength of the American dollar seemed a stronger incentive and producers steered clear of our slaughterhouse and headed for the States. Lack of volume and continuing deficits forced the Saint-Charles slaughterhouse to shut down operations in 1995. From then on, there was only one slaughterhouse left in Quebec – the Colbex-Levinoff abattoir.

No one shed a tear for the Saint-Charles slaughterhouse, Uncle Sam, who was right next door, was still around. And we all know the rest of this story. With the United States now off-limits, we found ourselves desperate and forced to deal with the one and only buyer, Colbex-Levinoff, master of the Quebec domain.

The moral of this story is… know where to build your nest and take good care of it. The Saint-Charles episode was quite edifying. Were the few extra dollars made by producers as they abandoned their slaughterhouse worth the unbelievable black hole they found themselves in 10 years later? Of course not. So, new administrators, this is a lesson we should all remember if we want to ensure the success of the Colbex-Levinoff abattoir.

Colette Lebel, agr.
Director of Cooperative Affairs
La Coop fédérée
Email: colette.lebel@lacoop.coop
Fax: (514) 858-2025


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