A Canadian think tank on agriculture and food policy says dramatic initiatives at Maple Leaf Foods have positioned the company to become a global powerhouse.
“If they’re not positioned to be the lowest cost processor in the world, I’ll eat my hat,” said Larry Martin, chief executive officer of the George Morris Centre, based in Guelph, Ont.
The George Morris Centre studied the hog processing industry two years ago.
The centre found that Maple Leaf lagged behind its American competitors on almost every count. Its plants were becoming old and inefficient, its labor costs were higher, and it was slaughtering hogs which, on average, had a lower carcass weight than those in the United States.
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Since then, Maple Leaf has turned itself around, closing an older plant at Edmonton, overhauling its plant at Burlington, Ont., and launching a new slaughter and processing plant at Brandon, Man.
Larger plants enable Maple Leaf to benefit from economies of scale, said Martin. And the move toward plants with the capacity for a second shift bodes well for the company.
By bargaining for wage rollbacks among its workers, Maple Leaf also managed to reduce its labor costs to something more in line with its U.S. competitors, said Martin.
“They have accomplished everything they could have wanted to accomplish in terms of wages.”
One small advantage remaining for the American packers is carcass weights, said Martin. It is generally more profitable to process larger carcasses because they yield more product and take about the same amount of time to process.
Hog carcasses passing through U.S. plants continue to be heavier than those in Canada, Martin said, but the gap is closing.
Maple Leaf holds another trump card. A separate study done by the George Morris Centre confirmed that eastern Saskatchewan and Manitoba are the cheapest places in the world to raise hogs. The study looked at how the region stacked up against other places in Canada, the United States, South America and Europe.
With the opening of its processing plant at Brandon, combined with its ownership of a slaughter and processing plant in Winnipeg, Maple Leaf has grabbed a prominent position in the region.
But a few clouds may yet loom for Maple Leaf. Its competitors also are in expansion modes, keen to gain or maintain a presence on the Prairies.
Martin estimated that if all the plans for expansion are met, including the move toward two-shift operations, processing plants in Western Canada could have the capacity to handle 20 million hogs per year. The greatest number ever slaughtered to date was about seven million, he said.
The question is whether hog production can match the growing demand.
“It’s going to be real interesting to watch in the next little while,” Martin said.
