Hytek's Purchase of Springhill Farms Offers Optimism

CANADA - Pork producers and municipal leaders on the prairies are applauding news that La Broquerie based Hytek Limited has finalised the deal that will see it assume 100 percent ownership of Manitoba second largest pork processing company.
calendar icon 9 February 2008
clock icon 7 minute read

Last October Hytek announced it had reached an agreement to purchase the Springhill Farms hog slaughtering plant at Neepawa. Earlier this week (February 4) that deal was finalized.

“We've been pursuing this objective here in Manitoba to acquire, access additional processing capacity for the past three years,” says Guy Baudry, the CEO of Springhill Farms and Vice President of Hytek

With a 66 thousand head sow herd producing approximately 1.5 million hogs annually, Hytek is Canada's largest privately owned pork production company and the 11th largest in North America. The company operates production hubs in La Broquerie, Kilarney and Kola, Manitoba, Spiritwood, Saskatchewan and Cando North Dakota and finishes market hogs in northern Iowa and southern Minnesota.

Pork Processing Intended to Complement Hytek's Pork Production

Baudry says Springhill Farms will complement and augment Hytek's production operations with processing operations as well as initiatives in China where, in March 2007, Hytek established a partnership to participate in both production and processing there.

“From our perspective we've been committed to this processing direction for some time. We have explored different opportunities as Hytek has moved forward with its commitment to secure processing capacity and, having investigated different options, we're extremely pleased to be here in Neepawa.”

Two Year Plant Upgrade and Modernisation Underway

With the purchase of Springhill Farms now final Hytek plans to begin an expansion and modernization of the facility.

“Over the next two years we're committed to making significant capital investment here at Springhill,” says Baudry.

Our thoughts are that there will be upgrades made to the cut floor and eventually to the kill area as well as to the cooler space with the future objective of processing approximately 1.4 million hogs annually at the facility.

Pork Producers Applaud Springhill Sale

Word that the sale of Springhill Farms has been concluded has been welcomed enthusiastically by pork producers in both Manitoba and Saskatchewan.

“That's great news for the pork industry here,” observes Manitoba Pork Council Chair Karl Kynoch.

“It puts a really good solid footing under that plant and we know it's going to be there for the future so this is really positive.”

Saskatchewan Pork Development Board Chairman Joe Kleinsasser agrees, “Hytek certainly is a well managed company and I believe if anybody can make a success of this they certainly will.”

“It retains some shackle space that has, at times, been doubtful with the plant at Springhill.”

Developments in Manitoba Expected to Inspire Similar Activity in Saskatchewan

Kleinsasser likens the development that is occurring in Manitoba to the vision Saskatchewan producers have for their industry where they would like to take control of their own destiny.

“It gives us hope here in Saskatchewan that we can duplicate what Hytek has done. We have always felt that to stay competitive into the future we need a packing plant in Saskatchewan. We are subject to geographical disadvantages and certainly a plant here would address a lot of those [disadvantages] and we're still hopeful we can achieve that in the end.”

International Trade and Concern over M-COOL also a Factor

Kleinsasser notes, with the rumblings out of the U.S. over Mandatory Country of Origin Labelling slated to become a reality, pork from hogs processed here will not fall under the same U.S. labeling restrictions as those processed south of the border which will help improve the situation.

“I don't think any of us here who would like to see a future where the Canadian industry consists of being a farrowing nursery unit to the American mid-west. I think the more we can process the end product here, the better it is in terms of dollars we can extract from the end product and create jobs for people.”

Kynoch agrees, “Any time you put a lot of live animals into another market there's a lot of producers that do gain on both sides of the border. But there are also producers who may not look favorably on the animals going south, especially in the slaughter end. Anytime you can actually increase your slaughter capacity here and reduce the number of hogs that are going south, that's always a positive.”

He says getting that plant up to full capacity will create more opportunity to process hogs at home so it definitely reduces that border risk and the reliance on the U.S. which also reduces the risk of a trade action down the road.

“It doesn't matter where we put that capacity as long as we're adding capacity to the province. It's definitely going to be a benefit to all the producers here and in Saskatchewan because it opens up more slaughter capacity.”

Expansion Expected to Provide Local Spin-off

The Springhill Farms upgrade is also being endorsed as great news by municipal leaders.

“We're going to see lots of investment and at least 200 new jobs coming to the plant in Neepawa and this insures the viability of the Springhill Farms processing plant over many years to come,” says Neepawa Mayor Bob Durston.

Durston notes the impact of 200 new jobs coming to a community the size of Neepawa would be equivalent to several thousand new jobs coming into a centre like Winnipeg.

“It provides opportunity throughout our whole area because we know that not all 200 people are going to live in Neepawa. They're going to be living in our surrounding municipalities and communities so it really brings a vibrancy to the area. You have the population here to do all the other things for the social fabric of your community in terms of recreation and cultural activities and schools.”

Water and Wastewater Treatment Infrastructure to Move Forward

The area will also benefit as a result of additional infrastructure that will result from the improvements planned for the facility.

Durston explains, “Now that the sale is official we can continue working to complete the industrial wastewater treatment plant upgrade that was previously planned for Springhill Farms. There will be a modern treatment facility to handle all of the waste effluent from the plant and meet the new regulations for the treatment of effluent.”

“We'll also will be moving forward on increasing our water supply not only for Springhill Farms but also for our surrounding municipalities who also have a need for treated water.

This is really the catalyst for a number of projects that are going to take place in our region.”

“Now we'll be able to move forward on that to be able to provide safe drinking water for our surrounding areas. And it does allow our partner municipalities to have some residential expansion into their municipalities and provide those who are already there with a better source of water so it's a win-win for everyone.”

Established Partnerships to be Maintained

As for the procurement of hogs and the marketing of the pork, Baudry stresses, “It will be business as usual.”

He notes, “There's a diversified portfolio of suppliers coming to the plant. We will look at continuing those relationships. Our big focus in the facility here will be to increase the capacity so, in turn, we can bring our hogs to this plant as well.”

That is especially comforting to producers in Saskatchewan.

Kleinsasser acknowledges, “The one concern was, for the producers going to Springhill, that eventually they would not find a home there.”

However, he adds, Hytek's indication that they are willing to work long term with their current suppliers is definitely a plus.

Hytek to Capitalise on Existing Marketing Networks

As for marketing the pork, Baudry notes, Hytek plans to build on the foundation that Springhill has already established.

“Springhill does an excellent job in marketing product internationally because they do a great job in producing a wide variety of boneless products. They de-bone the majority of the primals which puts Springhill in a better position to sell that product domestically and also internationally.”

He says the heightened focus on value adding will allow greater use of the products Springhill already produces while creating opportunities to add even further value to those products along the chain.

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