Small slaughter plants not the answer: Unrau

About 15 years ago, Martin Unrau assumed that small slaughter plants made sense.

If Western Canada had a number of beef processing plants scattered across the Prairies, they could benefit cattle producers and the beef industry.

Then he became president of the Manitoba Cattle Producers Association and the Canadian Cattlemen’s Association, and that completely changed his point of view.

“At first I thought this would be a good idea, to have 10 small kill plants across Western Canada … instead of having two big ones,” said Unrau, who raises cattle near MacGregor, Man., and served as CCA president from 2012-14.

After traveling to Europe, Asia, Australia, Mexico and across the United States with the CCA, it became clear to him that bigger is better.

“I saw where we had the upper hand, is we could kill cattle cheaper than they could in Australia or Europe or almost anywhere, except the U.S.,” he said. “When you export products … it’s about cost. Everybody squeaks about quality and having an environmentally friendly country to grow your product in … but the discussion always kicks back to, what’s the price?”

In April, Cargill temporarily closed its packing plant in High River, Alta., because hundreds of employees had contracted the coronavirus. The JBS plant in Brooks also had an outbreak, forcing the company to scale back its operation. The massive plants, which have a combined capacity of 8,000-8,500 head per day, represent about 70 percent of beef processing in Canada.

The problems in High River and Brooks have prompted many conversations inside and outside Canada’s ag industry. Some are convinced the country needs more diversity in beef processing and more plants across Canada.

There were 119 federally inspected beef packing plants in Canada in 1988, the National Farmers Union said in April. Now there are just 17, not including High River and Brooks.

“For the past three decades, Canadian governments have measured success in agriculture by export volumes. The measuring stick is Canada’s share of global exports — not the quality and value of food being produced for Canadians, the livelihoods of Canadian farmers, nor the prosperity of rural communities,” the NFU said.

“The pursuit of maximum exports has resulted in a corporate beef sector that extracts all it can from workers, farmers, taxpayers, consumers and agricultural ecosystems.”

The NFU recommends spreading packing plants across the nation to serve regional markets and says they should have a diversity of ownership.

This conversation is not new.

Following the BSE crisis of 2003, provincial governments and farmer-led co-operatives proposed building packing plants across the Prairies. In Manitoba, the province introduced a voluntary levy on cattle producers, matched by government, to fund a slaughter plant in Winnipeg. After years of feasibility studies and payments to consultants, the Manitoba Cattle Enhancement Council (MCEC) spent $5.7 million on a project that never got off the ground.

The province abandoned the levy and the project in 2013.

Unrau didn’t comment on the MCEC, but he did say using taxpayer dollars to build a packing plant is a mistake.

“When government gets involved and tries … to compete with private business, it’s a massive screw up and it costs people money beyond reason,” he said.

“I’m not knocking these (government) people. I’m just telling the truth.”

Unrau is also skeptical about cattle producers investing their own money in slaughter plants.

“Cattlemen know how to raise cattle. Feedlot men know how to finish cattle and sell cattle,” he said.

“But the meat business is a vicious, cut-throat business that you and I don’t really understand. We cannot, as cattlemen, be in the meat business…. Do I want to put money into the meat business? No, I don’t.”

If consumers do want regionally processed beef and are willing to pay the additional cost for that meat, an investor or investors will take advantage of the opportunity, said James Rude, an agricultural economist at the University of Alberta.

But it comes back to the market.

Perhaps there isn’t sufficient demand right now for regional beef to warrant a $250 million investment. Even if an investor is willing to take the risk, could a 300-head per day plant compete with Cargill, JBS or Tyson?

Rude has studied this question.

In a paper published in 2006 in a Canadian Ag Economics Society journal, he concluded that small plants must follow a different business model.

“There is no guarantee that small, start-up slaughter facilities will achieve success in an industry characterized by economies of scale. Such plants should not attempt to operate as scaled-down versions of their larger counterparts but should exploit specialty markets where larger firms lack flexibility.”

One potential market is cattle raised without growth promotants. The European Union doesn’t allow imports or production of beef with growth hormones, so a new plant could focus on that opportunity.

However, building a Canadian Food Inspection Agency-approved packing plant is not a simple task.

It took years for True North Foods in Carman, Man., to get its federal license.

“That True North plant … the red tape he had to jump through (was) just insane,” Unrau said.

During his time with the CCA, Unrau spoke several times with Cargill reps, trying to sell them on the idea of running a secondary, 1,500 head per day plant, possibly in Saskatchewan.

If there was such a plant, it would encourage more cattle producers in Manitoba and Saskatchewan to finish their steers.

“The first thing I always heard was there’s not enough cattle (in Western Canada),” Unrau said.

“Well, it’s the old chicken and the egg thing. Which goes first.”

Such a plant would be helpful, but what Unrau really worries about is the closure of one of the Alberta plants.

What if Cargill decided to shut down High River for three months because of the coronavirus? Would it open again, or would the company walk away?

“We don’t want to even think about that right now, but it is very, very real,” Unrau said.

“That’s exactly what happened at the Moose Jaw plant (XL Beef). Nilsson shut it down and then (said), ‘we’ll start up in three months or four months.’ … Then finally, it was, ‘we’ll have to spend too much money to get it going, so we’ll just leave it.’ ”

What Canada needs, he added, is favourable conditions and a political climate that’s open to investment to create a situation where companies such as Cargill, JBS and others want to invest in beef plants.

That’s critical because the two Alberta facilities are decades old and need an injection of cash.

“If we want to keep those plants going at the capacity they’re at today … something needs to happen,” he said, such as retro-fitting the facilities or building new plants.

“It would really put us in a tenuous situation if (we) lose one of them.”


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