Windfall profits for meat packers have prompted some operations to plow that money into slaughterhouse expansion.
It is probably easier for existing slaughterhouses to increase their kill and processing capacity than wait for new operations to be built next year, said Brian Nilsson, co-owner of XL Foods in Moose Jaw, Sask., and Calgary.
If the American border reopens to live Canadian cattle soon, the need for additional slaughter space may lessen, so it is a leap of faith to build new plants, he said.
“Building a new facility may not be a prudent risk at this time,” said Nilsson.
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Alberta auditor general Fred Dunn reported packer profits increased by 281 percent over the last year since BSE sent cattle markets into disarray. Packer profits per animal rose to an average of $176.45 from $46.30.
Nilsson’s company is expanding its Moose Jaw facility to increase its daily kill of youthful beef animals to 1,600 from 800 by Dec. 1. The plant will be 40 percent larger once construction of new coolers and other production areas is complete.
Shipping carcass beef to the United States was a major share of XL’s business before BSE closed the border. Only certain cuts of boneless product from cattle younger than 30 months of age are allowed, so the company was forced to realign its operations.
“We need the extra capacity. It is important to the industry right now,” Nilsson said in an interview.
Lakeside Packers at Brooks, Alta., recently announced a $17 million expansion and Better Beef in Guelph, Ont., expects to announce expansion plans soon, said company spokesman Tony TenWestenind. The privately owned plant handles up to 10,000 head per week.
Expansion within existing Canadian plants should see capacity jump by an additional 3,000 head per week this fall, and another 7,000 head per week by next spring, said Dennis Laycraft, executive vice-president of the Canadian Cattlemen’s Association.
Canadian packers now handle up to 70,000 cattle each week.
Resuming live trade remains producers’ top goal, but ongoing discussions also talk about increased slaughter capacity and exporting higher value beef rather than live animals.
One proposal is to ship Canadian cattle in sealed trucks to a plant in the U.S. northwest. The meat would be shipped back to Canada.
If the political will existed in the U.S., two problems could be solved at once: inadequate slaughter capacity in Canada and an inadequate supply of cattle in the U.S. that threatens to close some plants there.
Working with the U.S. department of agriculture, such a proposal could take six to nine months to start.
“The key to its success is that it would be done under the right protocol. It would keep plants from closing and keeping the employment down there, and we would win by getting very quick access to processing,” Laycraft said.
“The initial reaction has been one of interest down there so it is not being rebuffed at this stage. We are at the final stages of the drafting of the rule (to allow in live Canadian animals) and we don’t want to distract them from getting the rule out of the USDA to the office of management and budget,” he said.
A spokesperson representing American packers said the border should never have been closed this long because Canada and the U.S. have basically the same standards. The embargo has caused some American plants that traditionally relied on Canadian cattle to run far below capacity.
“It has cost lost jobs and production in plants in the northern tier states,” said David Wray of the American Meat Institute.
The delay has damaged the Canadian and American beef industries and no one knows the status of the rule that will allow trade to resume.
“Failing to resume trade immediately will permanently scar people who make their living from the beef industry on both sides of the border,” Wray said.
