CANADA - With the closure of Quality Meat Packers and their Mitchell Subsidiary in Ontario, the Canadian slaughter capacity was reduced by 35,000 per week. Bob Fraser Sales & Service, Genesus Ontario discuses how this has affected the Canadian hog market, specifically in Ontario.
Bob Fraser said Steve Meyer, Paragon Economics has been a good monitor and guardian on shackle space state side. Although I appreciate his diligence and concern to running short it seems (at least to date) the packer’s creativity runs large to getting everything dead particularly if they are getting them cheap! However how do things look for Canada and specifically Ontario?
As noted in earlier commentaries Ontario lost 35,000 head of weekly capacity last spring with the closure of Quality Meat Packers and their Mitchell subsidiary. Had you suggested such a possibility as this to anyone in the industry even three months earlier and the possible consequences to the Ontario industry I believe most would have suggested it would be an unmitigated disaster.
Here some six months plus after the fact it would almost be easy to forget it happened as far as the seeming effects and producers talking about it. This even with all the producer suppliers to Quality being stiffed for a week’s worth of hogs in the process of bankruptcy.
So how was this possible? Well I guess the adage "a rising tide lifts all boats" applies here as a rising market of unprecedented proportions certainly helped. That along with several other fortunate bounces.
Conestoga Meat Packers (producer owned packer) was just in the process of doubling down with a second shift. They had been killing 14 to15,000 head per week a year ago. They were growing into their second shift (which they thought could well take a year plus to be fully implemented) at 20 to 21,000 head when Quality went down.
They then went to 28,000 per week, with the odd week hitting 30,000. Sofina in Burlington had been stuck in a rut for at least three years of a four-day week of about 7,500 per day. They in a similar heartbeat jump up to five days and nearly 9,000 per day with an odd Saturday kill.
This results to at least an extra 14,000 per week closely matching Conestoga’s year over year increase. Rounding out the picture is Olymel out of Quebec increasing their take from Ontario to about 20 to 22,000 from a former 14,000 per week for an increase of approximately 7,000 head.
Finally with some 3,000 plus hogs finding their way to JBS plant in Louisville KY and the Quality Meat hogs are all gone.
As to whether this was good luck or good management at this juncture is academic as it allowed a badly beaten up industry to heal itself with unprecedented margins. The question now becomes where from here? With the traditional increase of fourth quarter numbers there is some rumblings of challenges to marketing surplus hogs, some weekly holdovers and the inherent increase to slaughter weights.
This may be somewhat cyclical but anyone looking to expand in this Ontario industry would need to give more than a little consideration to where they’re going to get their hogs slaughtered.
Looking across the field there appears to be challenges on all fronts. Conestoga appears to be beyond full and is likely to take some time to fully digest what they have already bitten off. Also their model is their producer/shareholders in essence buying shackles as their investment.
Therefore they have no immediate cause to take on more. Sofina is likely now feeling in the driver’s seat as the main buyer in Ontario and of course when you’re full you feel less compelled to do anyone any favours. A larger problem is the sustainability of their plant.
The previous owner Maple Leaf Foods had got to the point where they "wanted to put a stick of dynamite in it" due to some inherent bottlenecks and constrictions they could not overcome and move to building a "green field" plant.
Politics and host of factors colluded such that did not happen and Sofina bought it. Buy at the right cents on the dollar suppose you can run a long time but hard to imagine what has changed on the plant for it to kill anymore and reasonable odds that it could end up killing a lot less.
Similarly Olymel although perhaps unlikely to take less hogs one would wonder if they will ever take anymore. Talk has them looking to lay down more sow production in Quebec. If and whenever they get that accomplished probably fair to say Quebec will be their first preferred choice for any additional supply and may come at the expense of Ontario.
Finally although commendable having JBS as an American packer in the mix the ongoing conflab of COOL that we’ve supposedly won is likely to remain protracted at least for a couple more years if not longer. Not particularly conducive for the entry of any other American plant as a bidder or JBS particularly doing more.
I would have little fear in putting the Ontario hog producer (particularly the land based ones) up against anyone in the world. They are very, very good at what they do and certainly give definition to resilient! I wish I could say the same of our packing/processing industry.
It in conjunction with our marketing boards had a paternalistic approach of "knowing what was best" for the industry for at least 30+ years that led to an inefficient industry with serious issues of scale and productivity. Just how that all gets overcome is likely to remain the biggest issue to health and vibrancy of the Ontario and Canadian pork industry.
To find out more about Genesus Genetics, please take the time to visit their website at www.genesus.com .