Michael McCain has all but dismissed any chance that his aged Mitchell’s Gourmet Foods packing plant in Saskatoon would be sold to another operator.
Speaking at the Saskatchewan Pork Symposium Nov. 15, McCain, chief executive officer of Maple Leaf Foods, said the plant is not viable and must close for the good of the industry.
“There’s just too much capacity in the system and these smaller, older, less efficient plants can’t compete. That one has trouble even keeping its licence to operate,” said McCain.
He said his company and others in the hog packing industry failed to adjust to the rising value of the Canadian dollar, improved efficiency of American meat processors and another wave of South American mega-plant hog processors that will soon enter the international pork market.
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He said his company has lost more than $100 million in the past three years as the Canadian dollar rose.
McCain told the 500 farmers in Saskatoon that soon after assigning staff in January to examine “what was happening inside our company, it was apparent we had to make dramatic changes to our approach to this business.”
He said the future of hog processing in Western Canada will be based in two world-class plants: Maple Leaf’s in Brandon, and the OlyWest plant in Red Deer, owned by Quebec-based Olymel and hog producers Hytek and Big Sky.
McCain said Maple Leaf will close its Saskatoon plant, which slaughters 900,000 animal per year, within 12 to 24 months. It will also sell its smaller Japanese-specialty pork plant in Lethbridge.
Maple Leaf also plans to reduce the number of hogs it owns, cut its feed mills to one in Manitoba and pare its six operating divisions down to a single unit.
“I know that producers in Saskatchewan aren’t going to be too happy to hear this news. We don’t need to buy 7.5 or eight million pigs. We will need four million and we will process them in a state-of-the-art facility on two shifts in Brandon,” he said.
Although Red Deer and Brandon are 600 kilometres from Saskatoon, most Saskatchewan producers would have an average haul of only 300 km to reach their market, he said.
McCain said his company would create a transition program to ensure that some Saskatchewan producers get a chance at shackle space in Brandon.
He told producers they need to partner with his company to ensure a healthy future for the western Canadian industry.
“I don’t see another player entering this region to invest $250 million in a new plant and that is what is necessary to be in the international market going forward,” he said.
“Brandon, and I expect Olymel in Red Deer, are operating at 64 percent utilization. The American average is 85 and we have to be there too.”
Big Sky Farms CEO Florian Possberg disagreed with McCain’s view of the Canadian industry. Possberg’s company, in partnership with Olymel, plans to build a $200 million hog packing plant in Winnipeg.
“We (Canada) raise 30 million hogs. We built an industry. Maple Leaf will be a large buyer in our future, but 25 million will find another home. I think we can process hogs competitively here in Canada,” said Possberg.
He said the $15 to $17 per animal cost to ship pigs into the United States for processing would go a long way toward justifying packing animals in Saskatchewan.
High labour costs and a short supply of workers have kept operations like OlyWest in Red Deer from moving to twin shifts, Possberg said. But McCain said he feels the labour issue will be solved, using immigrant workers if necessary.
Researcher John Patience of the Prairie Swine Centre also questioned McCain’s assumption that additional plants aren’t viable in Western Canada. He noted American producers in St. Joseph, Kansas, recently built a plant called Triumph Foods.
“They see the economics. Why don’t we? Shipping all of our production into the U.S. can be a dangerous proposition considering everything we know about their trade politics,” said
Patience.
