A complicated, litigious and politically charged corporate struggle over the future of New Brunswick’s chicken industry is a shot-across-the-bow of supply management, says a former federal agriculture minister.
Lyle Vanclief, Liberal agriculture minister for more than six years until 2003, says the battle for control over processing New Brunswick chicken between Groupe Westco and Nadeau Poultry is a test for chicken supply management systems across the country.
“The New Brunswick situation could have longer-term negative ramifications for Canada’s poultry supply management system,” he wrote in theSaint John Telegraph Journalnewspaper last spring. “The industry is watching the outcome of this situation with well-justified concern.”
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He accused Chicken Farmers of New Brunswick and the provincial government of allowing “a level of dominance over New Brunswick chickens that is unprecedented in Canada” that could become a template for other provinces.
Chicken Farmers of Canada, the national chicken supply management agency, says it is no such thing.
“The CFC perspective is that it is a private commercial dispute,” CFC executive director Mike Dungate said.
“We don’t see it as an erosion of supply management. It is a commercial dispute within supply management but one that is having ramifications across. Where I agree with Vanclief is that from a public perspective, it’s not good for supply management. That’s why we want them to solve it.”
Dungate also noted that Vanclief has worked as a consultant for Nadeau Poultry.
“His opinions didn’t come free-of-charge.”
Even Maple Leaf Foods president Michael McCain has weighed in on the issue, although his company is not directly involved.
A disruption in the chicken supply management system could hurt his company and its $520 million in poultry product sales, he wrote in a 2009 letter to agriculture minister Gerry Ritz.
“The longer-term consequences for the whole industry include … erosion of public and political confidence in the chicken supply management system.”
What issue could unite Vanclief and the Maple Leaf Foods president on one side against Chicken Farmers of Canada on the other?
It is a story both simple and complex that has been playing out for more than a decade in New Brunswick, a province with a small chicken industry but a sector that is an important economic engine in the northeast where it is concentrated.
Nadeau Poultry Farm has been a fixture in Saint-Francois-de-Madawaska for a half century, buying and processing chicken. It was bought almost a decade ago by Brampton, Ont., processor Maple Lodge Farms Ltd., a strong player in Eastern Canada’s chicken processing business and by next year, half owner of a new processing plant in Nova Scotia.
It owns the only processing plant in New Brunswick.
Its last provincially based competitor was a Canada Packers plant in the south that closed almost two decades ago. The quota sold by that plant’s farms migrated to northern New Brunswick and became the feedstock for Nadeau.
In the process, the provincial chicken marketing board lifted its previous 10 percent restriction on what portion of the industry any single quota holder could own.
Over the years, a group of six producers holding more than 50 percent of provincial quota and with arrangements for chicken from farmers holding another 29 percent of quota formed Groupe Westco and struck a deal to partner with Montreal-based Olymel, shipping most of New Brunswick’s birds to Quebec for processing.
Maple Lodge Farms is crying foul, arguing that the deal has cost 169 jobs at the Nadeau plant, leaves too little chicken to run the plant efficiently and will cut off the supply of chicken from New Brunswick and effectively put Nadeau out of business.
Olymel promised three years ago to build a new plant in northern New Brunswick but with no start to construction, Maple Lodge chief executive officer Michael Burrows said he does not believe it.
All sides agree there isn’t room for two processing plants in New Brunswick.
Burrows was in Ottawa recently lobbying Ritz’s office to create a new independent chicken marketing board in New Brunswick to allocate chicken between plants, essentially making sure Nadeau has enough supply to survive.
Ottawa and the provincial government have not taken up the idea.
Burrows said part of the mandate of supply management is to guarantee supply for processors.
“Instead, governments have stood back and allowed a monopoly to form that will move jobs and an industry out of New Brunswick.”
There have been court cases, including a defamation suit launched by Westco and recently decided in favour of Maple Lodge.
Westco CEO Thomas Soucy has responded to the Nadeau campaign by arguing it is about a company unprepared to fight for market share.
“What New Brunswick has experienced over the past three years is a private war against competition.”
Dungate insists supply management does not guarantee supply to particular processors.
He said the proposal for a new independent board to allocate supply to processors is not a good solution.
They need to work this out within existing rules.”
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