EDMONTON – It will take more than lower wages to make the Canadian pork industry competitive with the United States, said a report released this week by an agricultural think tank.
“Wage rates are not a silver bullet,” Ron Ball told a news conference called to release a report by the George Morris Centre on the competitiveness of the Canadian pork industry.
“They’re not the only answer for sure,” said Ball, one of the three authors of the report, along with Larry Martin and John Alexious.
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Just as important is the size of the plant, double shifting and the size of the hog carcass, he said.
By increasing a plant from 20,000 hogs per week to 40,000, adding a second shift, reducing wages by 40 percent and increasing carcass size, a plant can decrease its costs by $22.48 per 100 kilograms of pork, said Ball, who is also chair of swine nutrition at the University of Alberta in Edmonton.
“The opportunity for the Canadian industry for savings are very substantial.”
The George Morris Centre is a Guelph, Ont.-based think tank for Canadian agriculture. The study was funded by Maple Leaf Foods. That company is involved in wage disputes with several of its packing plant unions. The company has announced intentions to build a state-of-the-art packing plant somewhere on the Prairies to replace its aging Edmonton plant, but said it needs lower wages to compete with American plants.
While some Canadian packing plants are planning expansions, most are too small and outdated to be competitive, said Ball.
“Canadian plants are much too small to take advantage of the economies of size that are there.”
Outline problems
Ball said by commissioning the study, Maple Leaf has shown leadership in presenting the issues that prevent the industry from becoming competitive with the rest of the world.
Maple Leaf has pointed to the increasing number of live hogs shipped to the U.S. as processing and economic opportunities lost to Canada.
While it may be a blip, exports of Alberta hogs to the States in 1997 are down 20 percent from the previous year, said Ward Toma, of the Western Hog Exchange, the marketing arm of the Alberta Pork Producers Development Commission.
Ball said one of the biggest contributing factors to wage rates is local labor markets. When Alberta laborers can make $18 per hour on a pipeline crew or an oil rig, it’s doubtful Maple Leaf can get any significant wage decrease if it wants to attract workers.
“In the local labor market, they have to pay a competitive wage for the work that they’re expected to do.”
In the U.S., the average wage in a hog plant is $16.25 compared to Canada’s $22.67. However, American wages vary depending on the economies where plants are located.
When it can’t be competitive in wages, a company must compensate by having more shifts or larger processing plants, said Ball.
That’s also the message for unions and management during negotiations. If the two sides can’t agree on wages, maybe they can agree on adding a second shift or increasing the number of hogs killed each week, he said.
