Maple Leaf Foods shocked Saskatchewan hog producers last week when it announced it has changed its mind about building a $110 million slaughter plant in Saskatoon.
In its Oct. 12 announcement, which was part of a major restructuring plan for the company, Maple Leaf also said it will close its existing Mitchell’s Gourmet Foods slaughter plant in Saskatoon within three years. It is Saskatchewan’s only major hog slaughtering facility.
The news will leave provincial pork producers with higher freight costs and fewer in-province market options.
“My initial reaction was shock and disbelief,” said independent hog producer John Germs of Saskatoon.
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His 200-sow operation has delivered hogs to the Mitchell’s Gourmet Foods slaughter facility for 40 years.
With the closure, freight costs for producers to ship out of province will add $10 per hog, he said, which small independent producers will not be able to afford.
“Disappointment, but not completely unexpected,” said producer Shirley Voldeng, chair of the Saskatchewan Pork Development Board, in reaction to the news.
Maple Leaf’s proposed slaughter plant was to replace Mitchell’s aging hog processing plant.
The news, plus the recent closure of the hog slaughter plant in Moose Jaw, means there won’t be a federally inspected plant in Saskatchewan, Voldeng said. The added shipping costs to Brandon or Red Deer, which she estimates between $5 and $9 per hog, will be significant in an industry where margins are already tight.
Germs said the province’s hog industry needs to devise a plan for the future within six months so producers can make informed decisions.
“If producers want to exit, it takes a year to exit out of the industry in terms of liquidating your herd, so we have to have a plan and the clock is ticking,” he said.
The Mitchell’s plant slaughters 850,000 hogs year, and Voldeng said there is still a place for a packer in Saskatchewan.
“Sask Pork is going to look at … what other options there are so other packers could come in,” she said.
Don Hrapchak, general manager of SPI Marketing Group Inc., said producer and industry meetings will be held to decide what to do next. Options include courting a new packer or a producer-invested slaughter plant, he said.
Some of the newest hog facilities in the United States are producer owned, he added, such as the $150 million US Triumph Foods plant in St. Joseph, Kansas.
“Perhaps Saskatchewan is going to have to look at the same type of facility with the producers leading the charge as far as investment.”
Perry Mohr, general manager of Manitoba Pork Marketing Co-operative, said the Saskatchewan government will also likely act to solve the packer question.
“We all know the Saskatchewan government has been aggressive before and will probably be aggressive again in trying to find some solutions for Saskatchewan producers,” he said.
The Saskatoon slaughter plant employs 450 people.
“It’s a sad day both for the city of Saskatoon, our province and the producers,” said Maurice Werezak of the United Food and Commercial Workers union, which represents workers at Mitchell’s.
Maple Leaf has said its restructuring plans don’t threaten its further processing plant in Saskatoon.
“We’re going to continue to invest and create jobs at that plant, and the employees from the (slaughter) plant would have first preference in terms of applying (at the processing facility),” said Maple Leaf spokesperson Lynda Kuhn.
Business at Mitchell’s will continue to operate normally “for the time being,” she said.
A corporate news release said Maple Leaf decided to scrap the proposed slaughter facility because of rising construction costs and changes in the global pork industry. The company’s restructuring plan was prompted by the rapid appreciation of the Canadian dollar in the last three years, the release said.
Maple Leaf employs 24,000 people internationally and had sales of $6.1 billion in 2005.
