High worker wages are to blame for lower pig prices in Canada compared to the United States, a Maple Leaf Meats Inc. executive says.
And the company will make sure the $50-70 million plant it intends to build on the Canadian Prairies will have wages more like its American competitors, said executive vice-president Pat Jones.
He said when plants in Canada and the United States are compared, it costs about $5.66 more in labor costs to slaughter a pig in Canada. He said the average cost per Canadian employee, including wages and benefits, is about $22 per hour, while an American worker costs about $16.55.
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And that is mainly why pigs can be sold for more south of the border than in Canada, Jones said. American packers can afford to pay higher prices.
“We found that that’s not a coincidence that growers are getting $6 less a hog,” he said. The $6 U.S. premium is based on prices in Indiana and Illinois as a benchmark.
Jones said hogs are killed less efficiently in Canada than in plants in the United States. There, the larger plants kill 1,250 to 1,300 pigs per hour, whereas the Canadian plants average 650.
He said the planned Maple Leaf plant will be as efficient as any plant in the world and lower wages are a necessary part of that.
“We’re going to have to undertake to have a world class labor rate,” said Jones.
Maple Leaf is involved in negotiations, some of them strained, with its workers at nine plants. It has locked out workers at its North Battleford, Sask. bacon plant and the Hamilton, Ont., plant.
Flexible hours
Jones said he wants more flexible work hours, with several different shifts, without paying overtime. Other industries have similar arrangements with their unions.
He said labor flexibility and lower wages allow American packers “to step into Canada and take the pigs.”
He said 3.3 million hogs were shipped to the U.S. last year because of the higher price offered there.
Jones admitted American packers have faced difficulties in turning profits for the past two years and have “outreached for pigs” because of that.
But Outlook, Sask., producer and Quadra Group manager Richard Wright said better prices south of the border are due to competition, not a temporary price war. Quadra manages several intensive pig operations in Saskatchewan.
Jones said wages at the company’s new plant will have to drop to mid-level U.S. wage levels or it won’t work.
“We have to have each component right or we won’t be successful,” Jones said.
Not everyone in the hog industry shares Jones’s view.
Ward Toma, of the Alberta Pork Producers Development Corporation, a hog marketing agency that sells most of its pigs to Fletcher’s Fine Foods in Red Deer, Alta., said there is no $6 bonanza awaiting producers who ship south.
“I know we can’t market hogs into the states and get $6 more,” Toma said. “You can’t just take a load of hogs from an assembly station in the Prairies, go to the States, and get $6. If that happened every hog in the Prairies would be going for it.”
And he said live exports to the U.S. are down. This year Alberta exports have fallen about 20 percent, and Canadian exports are down almost 10 percent.
Who benefits?
Toma also questioned whether farmers would benefit if Maple Leaf managed to push down wages.
“There’s no guarantee they’d pass the $6 on,” said Toma. “What it means is they’d have $6 to buy hogs away from competitors if they had to.”
Toma said he is skeptical about Maple Leaf’s claim that Canadian slaughter plants are imperilled by shipments to the U.S.
Don Loewen, chair of Fletcher’s Fine Foods board of directors, said wages haven’t stopped that company from expanding.
He wouldn’t comment on Jones’s statements that Canadian wages are too high, but said he thought Fletcher’s could negotiate a good agreement with its unionized employees “that allows us to grow and prosper and develop in the industry.”
