Adapting to change

James Hofer is always looking for a way to shave production costs at his Hutterite colony’s hog barns in eastern Manitoba.

Ractopamine, a feed additive that can cut costs by $2 to $5 per head, sounded like a good idea to try — until he heard from his packer in 2008.

“HyLife was saying, ‘no more ractopamine,’ ” said Hofer. “We need to produce whatever the buyer is asking for.”

In the United States, most major hog farms and processing systems had adopted ractopamine after it was approved there in 2000. Many Canadian producers adopted it in 2006. The additive is considered proven safe in countries like Canada, the U.S. and Japan.

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But since then its use has disappeared in Canada.

All of Canada’s federally inspected packing plants refuse to take ractopamine-treated pigs and virtually no producers still use it.

What happened?

Ractopamine allows a pig to digest feed in a way that produces a higher proportion of muscle compared to fat, and allows a pig to get to market weight with less feed.

Still, for Claude Vielfaure, rejecting ractopamine became a no-brainer the second his hog production company took over the slaughter plant in Neepawa, Man., in 2008. The packing component to Hytek, now known as HyLife, focused on building sales in Asia and ractopamine was a touchy issue with overseas buyers.

“We felt the benefits (of not using ractopamine) were more than using ractopamine,” said Vielfaure. His company was a pioneer of Canada’s ractopamine-free system, which is credited with Canada’s booming sales to China while U.S. sales have stumbled.

But other packers across the country were jolted most by Russia’s announcement in 2012 that it wouldn’t accept any ractopamine-treated pork.

At that time, Russia was the third largest export market for Canadian pork. Losing access to that seemed like a poor result for using a feed additive that provided less than $5 per head in value.

Canadian packers began to evaluate what access to major overseas markets like Russia was worth compared to the efficiency value of ractopamine.

One by one, plants began switching away from it, said Gary Stordy of the Canadian Pork Council. There was no national or industry plan to abandon ractopamine, it just happened incrementally.

“The product is still available. It’s registered by Health Canada,” he said.

However, he added, nobody is using it.

At first, small plants similar to Vielfaure’s in Alberta, Ontario and Quebec made the transition, telling farmers that they were going “racto-free.”

The Maple Leaf plant in Lethbridge went racto-free earlier than the rest of the company’s plants because its sales were heavily reliant on markets that weren’t keen on ractopamine or had banned the product.

Russia might have been the first big driver of the move to stop using ractopamine, but its influence faded as political tension between Canada and Russia flared and as economic stress came to Russia, it almost stopped buying Canadian pork.

But at the same time, China began to suck in huge volumes of foreign pork and Canada became a major supplier.

The country also banned ractopamine and Canada, along with the European Union, were well-positioned to feed China’s growing hunger.

In 2016, Canadian pork exports to China more than doubled, making it Canada’s second largest foreign market by volume, and third most valuable foreign market.

The same was not true for the U.S. Instead of the surging sales increases seen by Canada, the U.S. has been buffeted by the ractopamine issue, slumping in 2015 after strong strong sales in 2014 and having trouble regaining the 2014 level in 2016.

The U.S. industry has seen about half of its packing plants switch to racto-free pigs, but much U.S. production still relies on pigs fed the additive.

Iowa State University agricultural economist Dermot Hayes congratulated the Canadian industry on its transition, allowing it to benefit fully from booming Chinese demand. He said U.S. packers can see the market they are missing, but many aren’t willing to go through the exhaustive process of cleaning out plants, farms and feed mills to ensure no ractopamine will exist in future product.

One reason for the reluctance is that they are cynical about China’s rejection of ractopamine, seeing it as just a handy way to block imports of U.S. pork. If they went to lower-efficiency racto-free production they might not be able to get into that market anyway.

That feeling was shared by Canadian hog market analyst Kevin Grier, who can’t see the racto-free transition in Canada as a true success for the North American industry.

“It’s a topic that I find frustrating because it is a product that is approved internationally,” said Grier.

“It’s a non-tariff barrier.”

He acknowledged the booming sales of Canadian pork to China in 2016 and 2017, but said those come at a cost of accepting an unscientific concern affecting production, without necessarily providing a permanent premium.

“All we are now is commoditized,” said Grier.

His colleague, Al Mussell, an agricultural economist with Agri-Food Economic Systems, had the same lack of enthusiasm for the growth of the racto-free market and the Canadian packing industry’s decision to jump aboard.

“It seems like a niche market that became a de facto ban,” said Mussell.

In the end, all it does is raise the price of pork.

Nobody approached for this article expressed concerns about the safety of ractopamine. While Russia, China the EU and other markets ban or severely limit its use, sometimes saying its safety has not yet been adequately proven, nothing has shown it to be a dangerous product at approved levels

But none of that matters to most of Canada’s pig farmers and packers. It’s been an entirely practical situation of needing to supply customers with what they want to buy.

“I don’t totally agree with the push by the consumer,” noted Hofer, whose instincts usually propel him to use the most efficient methods possible.

“But we’ve always differentiated ourselves around quality and unique product. That’s our reputation around the world.”

Part of that means being able to give the buyer what they think is important.

Canada’s ability to take advantage of the racto-free market comes from its small and flexible slaughter plants, said Stordy.

Not only does Canada have some smaller plants that can quickly change production methods in response to consumer demands, but those packers also have a history of being willing to cater their meat to overseas preferences.

The biggest North American plants, like most in the U.S., loath to monkey around with their basic production speed, but many of Canada’s plants are willing to “slow down the line” to provide different cuts of meat for various customers.

“That doesn’t always happen with our competitors,” said Stordy.

Vielfaure said Canadian meat producers are extremely attuned to their customers, so for many, being smaller wasn’t bad.

“It’s different philosophies,” said Vielfaure. “For Canada it opened up China.”

The U.S. has a massive domestic market and is less reliant on export sales than Canada.

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