For months, hog industry insiders have been wondering why Schneider Corp. hadn’t moved on applying for permits for a plant expansion it announced Jan. 31, 2000.
On Jan. 15, 2001, they got some answers.
Schneider revealed it won’t invest $125 million in Winnipeg. Rather, it will sell its processing operations to rival Maple Leaf Foods.
Some analysts had been skeptical about Schneider plans from the start.
Kevin Grier, analyst at the George Morris Centre in Guelph, Ont., recalled saying that he wouldn’t believe it until he saw earth moved at the site.
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He said he thinks most producers didn’t believe it either, and that’s why they didn’t jump whole-hog into expanding for the proposed plant.
Yet, production has been growing in Manitoba. In 2000, farmers produced 5.3 million hogs, according to preliminary provincial statistics, up from 4.75 million the previous year.
But 2.3 million of those hogs were sent to American feeder barns and packing plants in 2000, making it difficult for Manitoba packers to get as many hogs as they wanted.
“The hog numbers are just going right under their noses,” Grier said.
Without enough supply to warrant a larger slaughter plant, Schneider had no reason to keep its small processing operation in Winnipeg, he said.
“That Winnipeg plant would not be anyone’s crown jewel in terms of efficiencies,” Grier said.
Doug Dodds, chief executive officer of Schneider, said the company had hoped to encourage new barns last January when it announced its expansion goals.
“What we have seen in the last year is the continued growth in the production base, but we aren’t seeing the growth in finishing to the same degree.”
Ron Plain, economist at the University of Missouri, recalled thinking last January that the expansion required to feed the proposed plant would be enormous, especially given the outcry from environmental groups and neighbors of proposed barns.
Plain explained that American packers can pay more for hogs because their labor and operating costs are cheaper.
Dodds said the consolidation will give the Canadian hog industry more stability.
“It’s never good for an industry where there is either too much production or too much capacity,” he said.
Michael McCain, chief executive officer of Maple Leaf, said consolidation in the United States means the Canadian industry “needs to work together to effectively compete to succeed.”
The purchase doesn’t decrease competition in Canada, said McCain, noting his company will now have only six percent market share in North America.
The largest U.S. competitor, created recently in the Tyson-IBP merger, is seven times larger than Maple Leaf, he said.
“The headline is: different future, but a bright future,” he told reporters.
McCain said both plants will operate “business as usual” for two to four years, until Maple Leaf’s Brandon plant is ready to start running a second shift.
Then, it will close the former Schneider slaughter plant in Winnipeg, keeping the Schneider cutting plant for specialty processing for the Asian market, case-ready meats, and other new products.
