History repeats itself … another lamb producers co-op goes down

It will probably sound familiar, but another producer-controlled lamb marketing co-op has gone into bankruptcy proceedings.

AHEAD OF THE HEARD — It will probably sound familiar to some grizzled old veteran sheep farmers, but another producer-controlled lamb marketing co-op has gone into bankruptcy proceedings. The collapse was virtually inevitable to those of us who were involved in a previous producer run co-op back in the 1970s the old Lamb Processors Cooperative (LPC). The genesis of that long-ago lamb marketing effort was quite similar to the latest ill-fated initiative the Canadian Lamb Producers Cooperative (CLPC), which operated a subsidiary called the Canadian Lamb Company with its own marketing label. Both the old and new co-ops were based on the notion that lamb buyers and processors were ripping off innocent lamb producers through low prices with all the fat profits going to packers, marketers and retailers. That producer perspective is not unique to sheep producers; many hog and cattle producers feel the same way when they market their livestock. The problem with the sheep industry is that there does not seem to be any institutional memory of what happened in the past, particularly outside of Alberta. Part of that has to do with the usual massive turnover of sheep producers that took place during the 40-year hiatus between the two lamb marketing coops. I suspect during that time the industry has had a two to 300 per cent producer turnover.

Governments have also had a memory loss and a turnover of industry development bureaucrats. Back in 2014 when the CLPC concept was being floated, various governments (mostly federal and Saskatchewan) granted around $500,000 to get the idea in motion. Some of that was used to create the legal national co-op and to finance the promotional hype to interest lamb producers into buying shares. Anyone who remembers the share-selling efforts of the old LPC could have told you that it is a rather hopeless exercise and would not generate the large capitalization that these types of meat marketing schemes always require. The big difference between the recent marketing scheme and the one 40 years ago is that way back then it was recognized that to take control of one’s own lamb marketing you had to operate your own packing plant and dedicated distribution network. That was missing with the latest CLPC effort and in my opinion contributed significantly to its downfall. Essentially the CLPC had to rely on its competitors to process the lambs it bought from its own share-holder members at a premium with subsidized transportation. Obviously, there were processors that were quite willing to process CLPC lambs but at a price above their own costs. I expect those same processors were also fiercely competing with CLPC products at the wholesale and retail level.

Ironically, the big dog in the national lamb processing business is Sungold Speciality Meats of Innisfail, a direct descendant of the old LPC. They operate the same lamb plant that was built in 1974 by the LPC that originally went bankrupt and ended up costing the Alberta Government around $10 million. Since its acquisition in 2011, present ownership and management has turned that operation into a sophisticated national lamb processor and marketer that is HAACP, halal-approved and produces a variety of value added products. Sungold recently included Canada’s most innovative lamb feedlot in their marketing chain. The Sungold is everything the CLPC aspired to be; clearly in the long run the CLPC could not beat such a formidable competitor on the national lamb market. Ironically, the Sungold operation is also owned by producer shareholders, many are large commercial cattle feedlot operators who are astute businessmen. The biggest ideological difference is that Sungold is not a producer co-op with its propensity to favour members and co-op principles over business and market realities. Much of the CLPC operation was based in Saskatchewan, Manitoba and Ontario. I would suggest that livestock and meat production and marketing, particularly lamb and beef, is at a much more sophisticated commercial level in Alberta.

Your somewhat cynical columnist predicted the fate of the CLPC in a column back in 2012. Unfortunately, my prediction came true and I am sure that there will be CLPC producer-shareholders who will pay a financial price. Once again, another generation of sheep producers have learned that the meat processing and marketing business is a tough and ruthless business. It takes significant levels of long-term capitalization and sophisticated business acumen to survive.

Lamb producers best stick to growing lambs at the least cost possible in large commercial operations and leave the processing and marketing to the meat industry experts.

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