This is a David vs. Goliath situation. On the one hand you have a strong willed united group of beef producers with limited resources and little experience in marketing beef. And on the other hand you have a multi-national privately owned company with solid financial backing and extensive knowledge and networks for marketing beef.

Both groups have recently acquired slaughtering facilities in Eastern Canada. In Quebec, the Federation of Beef Producers entered into a partnership with the Z. Billet facility, a 700-head/week processing operation. And in Ontario, Cargill has agreed to acquire the Better Beef plant, a 10,000-head/week operation. Both groups will be competing for customers and supplies in the Eastern Canada marketplace.

What makes this situation particularly precarious for the Quebec beef producers is their producer equity position in their acquisition, as compared to Cargill’s. With a combination of check off dollars and government grants, they hope to achieve a 50% equity position and then only have to borrow and pay back the other 50% needed to buy their share. Cargill is in a very different situation: their massive profits resulting from the closure of the U.S. border are subject to corporate taxation. They have chosen to reinvest them by acquiring Better Beef rather than to give them to the tax man. Good financial strategy. The other advantage that Cargill has is tremendous economies of scale; the 10,000 head/week Better Beef will be pooled with the 25,000 head/week Alberta plant. This will not only lower their unit cost of production but will expand their market opportunities with a combined sales force in all of Canada – to say nothing of effectively removing a strong competitor from the marketplace. Cargill will now control 45% of Canada’s slaughter capacity.

The only hope, and it may prove to be the proverbial rock in David’s slingshot, is that the Quebec producers own 100% of the raw product, whereas Cargill must source their animals by any means available to them. The Quebec situation is a win-win for the producer and the slaughterhouse – the better the product sent to the slaughterhouse, the more it sells for as meat and the producers receive all the benefits of this higher quality. In Cargill’s situation, this dynamic does not exist as the driving motivator for profits is to buy cheap and to sell dear. To maximize profits, they must pay the producer as little as possible. This is an "I win, you lose" situation, and is not the most productive relationship. As the beef market evolves and producers are asked to provide traceability, age verification, quality assurance and best management practices, Quebec producers and their slaughterhouse will be the first to provide these requirements as they will receive the direct benefits of all premiums paid or with the sale of their product (meat).

Cargill, on the other hand, has no obligation to pass on any benefits to its suppliers of primary product. Cargill will always have a major problem of sourcing cattle for its operation as long as it persists in a buyer-seller relationship with suppliers.