The move from open market pig sales on the Prairies to production based on contracts between farmers and packers will likely be accelerated by Smithfield Foods’ takeover of Schneider Corp.
A Smithfield corporate vice-president says the company is “absolutely” interested in building its own pig barns.
Smithfield is one of the biggest hog processors in the United States, and the largest vertically integrated hog products company – meaning it owns operations at every level of the production chain. It has been described as a “piglet to plate” company.
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Smithfield recorded sales of $5.5 billion in the year ended April 27, 1997. It owns hog slaughter, processing, and production facilities in the eastern U.S., in the Midwest and in South Dakota.
Aaron Trub, Smithfield’s secretary and treasurer, said his company sees the Canadian Prairies as “really ripe for a lot of increased hog production.”
It is “premature” to decide whether Smithfield will build barns on the Prairies because the Schneider takeover is not finalized, but “we would definitely consider (building barns),” he said.
In the United States, the only country in which Smithfield operates, the company produces 10 to 11 percent of its own hogs, Trub said. But more than half of the hogs it processes come from long-term supply contracts.
In Canada, contract hog selling is relatively new because provincial monopolies on hog sales have only recently been eliminated: First in Manitoba in July 1996, then in Alberta.
When Saskatchewan does away with its hog monopoly on April 1, the Prairies will be completely open for contract production.
So far there has been little direct packer investment in primary hog production.
Some of the first vertically integrated barns will soon be shipping pigs from Saskatchewan.
These are the ones owned by Heartland Livestock, a company owned by Saskatchewan Wheat Pool and Manitoba Pool Elevators. Sask Pool is the dominant shareholder in Fletcher’s Fine Foods, an Alberta-based meat packer.
Trub said the success of vertical integration in the U.S. makes Smithfield confident its acquisition of Schneider will be profitable.
And it has no worries about buying a company whose major operations in Winnipeg are just down the road from Maple Leaf Foods’ proposed $112 million slaughter plant in Brandon.
“With vertical integration, I think the plant can be as competitive as any plant,” Trub said.
The Schneider family, which owns 75 percent of the controlling shares of Schneider Corporation, has agreed to sell its stake to Smithfield for the equivalent of $25 per share. Maple Leaf Foods is still offering Schneider shareholders $29 per share in its own take-over bid, but the Schneider family remains committed to the Smithfield deal.
