WINCHESTER - In an effort to give beef producers more control in the beef supply chain, Gencor Foods Inc. (GFI) in Guelph came up with a Lease Hook Program, and GFI executive director Brian O'Connor was at Eastern Ontario Beef Day here on March 12 to explain the program.
"Basically, it's a supply agreement between the producer and the plant," he said. "It gives producers the opportunity to become involved in that next link of primary processing."
Gencor started processing cull cows last July. In the last two weeks, they were killing over 900 cattle. The Canadian Food Inspection Agency (CFIA) is going to let them get to 1,000 per week, and, when an expansion on their barn is finished, they will increase their kill capacity to 1,500 per week.
O'Connor is very happy with the direction the plant has taken.
"The marketing has gone exceptionally well," he said. "I'm very pleased with how the start-up has gone."
In January, Gencor rolled out its Lease Hook Program, which allows producers to purchase a hook for their cull cows.
Producers need a hook to market cattle to GFI, and one hook requires producers to deliver one animal to the plant each year the hook is leased.
Gencor's original goal was to lease 30,000 hooks, and O'Connor says that as of March 11, they had leased just over 20,000 hooks to 1,500 producers.
"We're pleased with the number of people who have supported the program, and we're quite confident we'll hit the target," he said. "By the producers working together to fill the plant, we're going to run it competitively. The support has been wonderful."
In Phase II, which ended March 31, hooks were available exclusively for mature, ungraded fed animals.
As of April 1, producers still have the opportunity to get what hooks they need, but the program is now open to truckers, dealers, sale barn operators and individuals from outside the province for processing cull cows.
"In Phase III, our goal is to maximize the number of cull cows processed in the plant and initiate the processing of fed cattle," O'Connor said, adding they are planning to develop a Lease Hook Program for fed cattle.
The planned term for lease hooks is five years. So that all hooks do not come due for renewal at the same time, hook leasing terms are staggered in four-, five-, and six-year terms. The renewal term is five years.
If one hook is leased, the term is four years. If two hooks are leased, the term for the first hook is four years, and the second hook is for six years. If three or more hooks are leased, one-third of the hooks have a term of four years, one-third have a term of five years, and one-third have a term of six years.
Producers have two payment options.
Hooks cost $27 per hook per year if complete payment is made when they apply for the program. If producers want to pay in two installments, the cost is $30 per hook per year, with one-third of the cost submitted at application and the rest deducted from the proceeds of the animal marketed with the hook in the first year.
GFI offers producers $3 downer insurance, and producers will be paid a fair settlement price for cattle that become non-ambulatory once they've reached the plant.
Producers can also purchase optional condemned carcass insurance for $6, which provides $200 for animals condemned by the CFIA, as long as cows are not drug-residue condemned.
O'Connor says the number of hooks producers can lease is based on their needs. So far, Gencor has leased anywhere from one to 120 hooks to individual producers.
Hooks are leased in two-month blocks with a 30-day grace period, so producers have 90 days to fill their hook. For every 10 hooks a producer leases, one is a floater, which can be used any time in this delivery period.
A lease pool will be established for producers wishing to gain or give up a hook during the year.
If producers have a surplus hook, they must notify GFI at least 14 days before the delivery period ends, and GFI will try to fill the hook on a first-come, first-serve basis. The producer who fills the hook pays $30 for using it, with $25 going to the hook-holder and $5 going to GFI for administration. Surplus hooks are leased for one year.
Delivery to the plant is coordinated through regional depots. Producers co-ordinate trucking to the depot, including ones in Winchester and Alexandria in Eastern Ontario, where cattle will be assembled and transported to the plant. An $11 depot fee and the trucking cost from the depot to the plant is deducted from the gross payment.
Emergency cases can be delivered directly to the plant without reservation by leaseholders.
The program aims to pay producers fair value for their cull cows while guaranteeing them a spot in the plant.
"The reason we came with lease hooks is to build a long-term relationship with producers and be on solid financial ground," O'Connor said.
O'Connor says visiting Gencor's website (www.gencorfoods.ca) is the easiest way to learn about the program and get an application form.