Intercontinental Packers has the money and the markets to double its hog processing output to two million head a year, says company president Fred Mitchell.
Now all Mitchell needs are the pigs and he is very aware that his success is tied to a doubling of hog production in Saskatchewan.
“We don’t need more packing plants, we need pigs. We can assure hog producers and this province, if you grow the hogs we have the plant,” Mitchell said July 4 as he announced Intercon has been refinanced and will undergo a $14 million expansion over three years.
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The announcement had the air of a revival meeting, with Intercon in the role of born-again company, back from the slippery edge of oblivion.
“A couple of years ago, people were very skeptical about Intercon. A lot of people were saying it couldn’t be turned around. They were wrong, hallelujah!” said a jubilant Mitchell.
Just last fall, Mitchell was in court fighting brother Chip and other members of the family, in what Fred calls “a very ugly battle” for control of the company.
At the time, Chip had control of the struggling company and wanted to sell it to Burns Foods Ltd.
But in November the feud was settled out of court.
Fred has now bought out the other members of the family and has ended his interest in the family’s other meat business, Western Canadian Beef Packers in Moose Jaw.
Central to Intercon’s turnaround is a $33 million refinancing package and a long-term supply agreement with Taiwanese meat company Tai Fang Foods. The financing was led by RoyNat Inc., a subsidiary of the Bank of Nova Scotia, specializing in term financing and merchant banking.
Part of the money, $14 million, will be spent to update and expand the company’s Saskatoon plant. The rest will cover one-time costs associated with the closure of the company’s Vancouver plant and the replacement of loans with its former financial institution.
Tai Fang Foods had made an undisclosed investment in Intercon, as well as committing to buy carcasses from it for 10 years.
Seeking outside suppliers
Howard Kuo, chief of marketing for Tai Fang Foods, said his company had been looking for hogs from outside Taiwan long before hoof-and-mouth disease devastated the industry there.
“Tai Fang knows that Canada has excellent hog breeds, cheap feed, flat land and small population. It is perfect in my mind for developing hog industry,” he said.
Since the hoof-and-mouth outbreak, Tai Fang has been buying hogs from Intercon, the United States, Australia and Mexico.
He expects that because of feed costs, environmental and policy reasons, Taiwan will never regain its position as a major hog producer. In the future, the company expects Intercon will be its main supplier of carcasses, 22,000 hogs a week.
Tai Fang has already had its people at the Saskatoon plant instructing staff in the style of butchering needed for the Asian market.
With the Tai Fang contract and a rebound in domestic business, Intercon has been able to rebuild employment to 1,027, about what it was before the troubles began about two years ago. With expansion, the employment goal is 1,400.
Saskatchewan hog producers were pleased at the announcement.
Art Crone, a Moose Jaw area producer and a member of SPI Marketing, the provincial hog board, said Intercon’s deal with Tai Fang should give producers confidence that increased production will find a home.
“He wants double what he’s getting now and I guess there aren’t enough pigs. But he’s giving (producers) time and I don’t think there is any place where you can grow them cheaper now that the Crow is gone,” he said.
Producer Alfred LeBlanc, of St. Denis, said he was glad to hear of the plant expansion, but said building hog numbers will require more than money and concrete. A critical factor is skilled labor to work in the barns at a wage that is sustainable, he said.
