E. coli costs can run high

Difficult to measure | At least $50 million worth of meat will be destroyed starting this week

It can’t be seen and it’s easily killed at high temperatures, but E. coli O157:H7 can have a devastating impact.

“E. coli is a scourge,” said Kevin Grier, senior market analyst with the George Morris Centre.

Few people would have believed after the first recall of tainted beef from XL Food’s slaughter plant in September that five weeks later, one of the largest operators in the cattle business would be fighting for its survival.

The cost of E. coli is enormous yet almost impossible to tally.

It’s difficult to calculate the lost demand for beef, even temporarily. While few cattle producers will avoid eating beef, it’s hard to know how many consumers pause in front of the beef at the retail meat counter before moving on to choose chicken or pork instead.

“Lost demand — in this case it is a very big deal in Canada, but we don’t know what it is,” Grier said in an e-mail.

Sixteen people in Canada were made ill from E. coli bacteria in meat from XL Food’s plant in Brooks, Alta.

Dr. Frank Plummer, the CFIA’s chief science officer, said the genetic fingerprint of the bacterial strain found at XL has never been seen before in Canada and the United States.

“It is pretty unique and we are very confident it came from meat that was contaminated with E. coli at the XL plant,” said Plummer in a news conference.

No one has died from the outbreak, but more than one person has launched a lawsuit against XL Foods.

Sven Anders, assistant professor in the department of rural economy at the University of Alberta, said XL will likely face lawsuits because of broken contracts with retailers in Canada and overseas due to its inability to fill production contracts.

“I am sure there are lawyers thinking of ways to extract money from a company that will soon no longer be in business,” said Anders.

The cost of recalled and destroyed beef has been staggering, said Grier.

“In this case it is off the charts compared to normal, although there is no normal,” wrote Grier in the e-mail.

CFIA officials said last week that 12 million pounds of fresh or frozen meat processed at the XL plant before the recall could not be sold to consumers because of the possibility of improper quality control testing before the plant was shut down.

The meat, which was mostly steaks, roasts and tenderloins unlikely to have E. coli, will have to be dumped in a landfill, rendered or retested and cooked. It is worth at least $50 million and will likely start arriving at landfills this week.

“We are looking at it through a lens of proper assessment, so we will only allow it to enter the marketplace, meat which is safe,” said Dr. Harpreet Kochhar, executive director of the CFIA’s western operations.

Also rendered or dumped in a landfill will be the millions of dollars worth of meat recalled since CFIA began its investigation, or meat returned to XL by retailers.

Grier estimates the impact on the cattle futures market could be $100 million a year as traders sell on recall news.

Steve Kay, editor of Cattle Buyers Weekly, estimates XL Foods has lost 52 million lb. of beef, or $75 to $100 million in lost production, since the plant shut down.

“This means the end of Nilssons in the meat packing business,” said Kay.

He said three crucial factors forced XL Foods to make a tentative agreement to sell its beef packing plants and feedlots to JBS, the world’s largest meat processor.

“They stopped production. That’s a killer. There was returned product and lost customers and they couldn’t get on side with CFIA to get up and running. The whole issue became very politicized.”

Paul Mayer, associate vice-president of programs with the CFIA, said the agency is not responsible for decisions made by XL. He said the agency has based its decisions on looking out for Canadians’ health.

“We are not going to speculate on how XL led itself to the partnership it’s taken with JBS,” said Mayer in a conference call.

“Our focus is on the protection of consumers. The decisions we make are based on the evidence available to us and the interests of protecting consumers and we will continue to do so.”

Kay said food safety standards have risen dramatically in all plants over the past four or five years.

“Maybe they didn’t rise quite sufficiently at XL, but maybe they just didn’t have the wherewithal to recognize or withstand a sudden surge in food safety problems,” he said.

“E. coli can overwhelm a plant. You can be running along hunky dory, all testing showing very low incidents and suddenly you can have a spike out and then it can just get out of control.

Workers at the shuttered XL plant in Brooks were called back to work Oct. 22-23 to renew their security clearance at the beef packing plant. Workers were to spend Oct. 25-26 at the plant being retrained by JBS staff, said UFCW president Doug O’Halloran.

The union head said he will meet with company officials onOct. 23 to learn more details, but has been told the plant is expected to reopen Oct. 29.

JBS – company profile

Owned by: JBS S.A. is headquartered in Brazil with 135,000 employees in 301 facilities worldwide. JBS S.A. ships fresh and processed beef, pork, lamb and poultry products to 151 countries.

Operations: JBS USA employs more than 60,000 people and is a majority shareholder of Pilgrim’s Pride Corp., the second largest poultry company in the U.S. JBS USA and Pilgrim’s Pride collectively operate beef, pork, poultry and lamb processing plants, hatcheries, a tannery, distribution centres, a grease producing facility and feedlots operated by JBS Five Rivers Cattle Feeding. They ship to 60 countries worldwide.

The deal to buy XL: JBS USA announced Oct. 17 that it had reached an agreement with XL Foods Inc. to take over management of XL’s meat processing plant in Brooks, Alta.

The agreement includes an exclusive option for JBS to buy XL properties, including:

  • the meat processing plant in Brooks, Alta.
  • the XL beef packing plant in Calgary
  • a feedlot in Brooks
  • farmland adjacent to the Brooks feedlot
  • a beef packing plant in Omaha, Nebraska
  • a beef packing plant in Nampa, Idaho

If it exercises its option to buy, JBS will pay $50 million US in cash and $50 million in JBS S.A. shares. The deal does not involve JBS assumption of any XL Foods debt or liabilities.

Top 10 – These companies led in overall world meat sales in 2011 ($billions):

  1. JBS $31.28
  2. Tyson Foods 28.43
  3. Cargill 26.00
  4. Vion 12.57
  5. Smithfield Foods Inc. 11.20
  6. Marfrig Group 11.07
  7. Nippon Meat Packers 10.19
  8. Danish Crown 8.05
  9. Brasil Foods 7.85
  10. Hormel Foods Corp. 7.22

Source: www.foodengineeringmag.com

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