Two of Canada’s premier pork packers battled it out on Bay Street last week, while prairie farmers wondered how impending industry consolidation could change their business.
Maple Leaf Foods Inc. announced it wants to buy Schneider Corp. If it succeeds in a hostile takeover, it will control about 40 percent of the hog market in Canada.
But analysts said the move would be only a grain of sand in the vast beach that is the concentrated North American pork industry.
The four United States packers that control 60 percent of the huge industry to the south affect prices in Western Canada much more.
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“This (move) doesn’t reduce it (competition) very much,” said Larry Martin of the George Morris think-tank based at the University of Guelph, Ont.
“The prices that the processors pay in Canada are pretty much set in the U.S. and backed off by handling and transportation charges to get them into a processor in the U.S.,” said Daryl Kraft, farm economist at the University of Manitoba.
On his farm near Birtle, Man., Stan Yaskiw said he feels uncomfortable with the prospect of Maple Leaf controlling so much of the market.
“I’m probably one of the smaller producers now and will be probably in the future, if I don’t expand,” said Yaskiw, who sells his pigs through the farmer-run agency Manitoba Pork.
In Manitoba and Alberta, Maple Leaf prefers to buy direct from large hog operations rather than working through the former central-desk selling agencies.
“I’m a little more friendly to Schneiders because they’ve been pretty easy to work with. It doesn’t matter what size you are, as long as you meet some specs,” said Yaskiw.
He believes a Maple Leaf-Schneider merger could lead to less power and lower prices for hog producers.
But Alberta farmer Roger Charbonneau said if the merged company is more efficient and can reduce costs, it might be able to offer prices more competitive with U.S. plants.
“As long as the majority of us (farmers) sell together, I think we can still have a reasonable amount of market influence,” said Charbonneau, chair of the Alberta Pork Producers Development Corporation.
Gerry Friesen, chair of Manitoba Pork, declined comment.
The general manager of the farmer-run hog agency in Saskatchewan said fewer processors will lead to farmers chasing packers to secure contracts.
Don Hrapchak of SPI said he expects Maple Leaf to work mainly in Manitoba and Ontario. He thinks the company would close its leased Gainers plant in Edmonton, which has been stricken with labor problems.
“All of a sudden you’re going to get 25,000 hogs a week” extra if the Edmonton plant closes, he said. “Where do they go?
“Up until now, packers have been chasing hogs, and been willing to pay the freight,” said Hrapchak, adding he sees an end to the freight payments in five to seven months.
“Power is starting to switch over to the meat-packing side.”
Independent farmers play a small role in the U.S., where packers have bought out many of their competitors and formed alliances with big hog production companies, said Bill Heffernan, of the University of Missouri’s rural sociology department.
“They’re just plain losing out,” he said of producers.
While farmers are lucky to make a three or four percent return on their investments, processors expect 20 percent.
“They don’t get control of the whole industry, but they certainly have a disproportionate amount of influence in terms of the type of pork that gets produced, where it gets produced … and the price,” said Heffernan.
