The hog production system that emerges from Maple Leaf Foods’ restructuring will be radically different from today’s, says Scott McCain, Maple Leaf’s hog and meat processing chief.
The company plans to end its pig-production partnerships with producers, and will focus more on its wholly owned hog supply, but will still need to buy most of its slaughter hogs from others, he told Manitoba Pork Council members.
The company is shutting or selling major slaughter plants in Saskatchewan, Ontario and Winnipeg and reducing hog slaughter to four to five million pigs per year from seven million.
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It will either buy out its hog production partners or sell barns to them, but once the partnerships end the company will still need to buy at least 75 percent of its hogs from independent producers.
“That’s not vertical integration,” McCain told reporters.
“That’s a lot of pigs that we’re buying and dealing with producers, so there shouldn’t be any fear that we’re going to cut off local supply. That’s simply not the case.”
Maple Leaf’s break-up with its partners will mean that instead of part owning about 85,000 sows in Manitoba, it will wholly own between 40,000 and 50,000. How quickly that can be done is not clear.
“Each one of these sow units have independent farm families and partners that we need to sit down with,” McCain said.
The company hopes to complete the restructuring within 12 months, but isn’t interested in just walking away from operations.
“These aren’t fire sales,” he said.
“These are good assets. These are good people. We’ve been very transparent. We need them to be focused on producing hogs.”
McCain told council delegates that under its old structure, Maple Leaf divisions supplied outside customers as well as its own processing chain. Under the new structure, Maple Leaf will try to match assets to internal needs, such as producing only enough feed to meet the needs of its own barns.
Maple Leaf is also selling all but a couple of its feed mills and while many have questioned whether the company will be able to find buyers in a competitive industry, McCain talked up the value of those plants.
“These are great assets,” he said, stressing that selling them doesn’t mean they are not good businesses; they just don’t fit the new model for the company.
Maple Leaf wants its Brandon plant to kill between 70,000 and 80,000 per week by next summer, with an eventual peak of 100,000 once the second shift is fully running.
For that to happen, Maple Leaf needs to find workers to staff two full shifts and expand its facilities, including waste water treatment capacity.
McCain said the rapid rise of the Canadian dollar to almost 90 cents US from 65 cents created a severe problem for the company, whose financial results have been poor. But he said a possible decline of the loonie’s value to the low 80 cent range, which analysts are predicting, won’t change its plans.
“What we’re doing, I think, is the right choice, regardless,” McCain said.
“Would we change our strategy if the Canadian dollar was at 80 cents? No, we wouldn’t.”
