On April 18, the Canadian Pork Council said Olymel’s announcement of the closure of its Vallée-Jonction, QC plant is tough news for the industry.
“The reasons the company stated – the pandemic, an ongoing labour shortage, inflationary pressures and challenges with accessing foreign markets – have impacted the entire industry,” said Rene Roy, chair of the council. “We know food security is an ongoing question for governments across Canada and starts with producers able to compete and have buyers for their products.”
The CPC said the council will work with governments and partners to find long-term solutions. However, this closure will impact Quebec, Atlantic Canada and other parts of the country and requires a national solution.
The pork industry is a $7-billion industry in Canada, with almost $5 billion in exports.
The shutdown affects almost 1,000 Olymel employees laid off in a rural region of Canada and the producers who need to find a new home to sell their products.
While a huge impact in Eastern Canada, Cam Dahl, general manager for Manitoba Pork said the closure would have a small impact on Manitoba hog farmers or processors.
“We have seen a small increase in the number of pigs coming in from Eastern Canada for processing. This pig movement will continue. However, it will not significantly impact Manitoba farmers’ ability to access processing,” said Dahl.
He said the announcement demonstrates the processors’ and farmers’ tight/negative margins. African Swine Fever ASF (in the EU, Asia, and especially China) creates significant global market uncertainty. High input prices while feed has come down from record high prices, feed costs are still beyond any experience. Also, the war in Ukraine, a major feed supplier, especially in the EU creates additional general economic uncertainty with inflation and rising interest rates.
“The closure demonstrates the impact of chronic labour shortages. We must continue to work to ensure that our farmers and processors have access to the skilled labour needed to run farms and plants, including foreign labour,” said Dahl.
Manitoba must work to ensure the province is an attractive place to invest in the pork sector, including investments to refurbish existing barns and build new barns to keep the critical mass of production needed to keep the local processing plants working.
Bill Alford, general manager of Hams Marketing Services of Winnipeg MB, said little detail on the negotiations with Les Eleveurs du porc Quebec and Olymel is available. However, in the West, the surplus of hogs from out East will dry up and not be available for Western Canadian packers to purchase as in the past few years. This is good news regarding getting Canadian hog production back in balance with demand.
“Western Canadian packers cannot supplement slaughter schedules with hogs from the East. This should translate into a more competitive environment for Western Canadian hog producers. It is difficult to say by how much, however,” said Alford.
The $1M hogs per annum will no longer be available in the North American hog market because of the situation in Quebec. Therefore, reducing the hog supply will ultimately lower the amount of pork available for domestic and export consumption.
“There are other factors at play in determining the hog price and profitability but less supply will help with price recovery across the industry,” he said.
Part and parcel of the negotiations are to reduce hog production in Quebec to inevitably match up with plant capacity, given all the plant closures. Back in 2009-2010, there was a federal program to buy out hog producers, given the overall poor state of the Canadian hog industry.
“I understand Quebec is preparing a similar buyout for producers. “X” amount of money will go to the buyout, and interested producers will submit bids to cease production, e.g. {# of sows/feeders/finisher X $/space} = Buyout Bid.”
Producers who successfully bid would then be obligated to cease production out of the respective facility(s) for at least five years or face a penalty/repayment. There would likely be successive bidding rounds until the allocated monies are gone. •
— By Harry Siemens