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Is there another beef recall shoe to drop?


 I hate to sound pessimistic, but there is just something
about this XL Foods meat recall that reminds me of the 9/11 attacks on New York
in 2001.

I know the contaminated meat recall at XL wasn’t a terrorist
attack, but I remember turning on TV in the early morning of September 11, 2001
and seeing the second jet liner slam into a Word Trade Centre tower, and
wondering of course, “what the heck is going on”. And to me the more
unbelievable part, a few minutes later was watching both towers collapse.

Plane hits 9:11.jpg

So I guess as I look at this meat recall story unfold or
drag on with the delay in getting the plant fully re-opened and operating, I
wonder is there a greater collapse coming that I really haven’t been expecting.
I certainly hope not, but it does make me wonder.

As of today, it appears that XL Foods has about 800 workers
back, less than half of its work force, and full operation is held up as the
Canadian Food Inspection Agency needs to see how the entire production facility
is running before it gives a final letter of compliance. 

And I see more politicians are getting involved in the
re-start issue. Alberta Agriculture minister Verlyn Olson toured the plant this
week, along with Dennis Laycraft, executive vice president of the Canadian
Cattleman’s Association. At about the same time Alberta Liberal leader Raj
Sherman and Wildrose party leader Danielle Smith were in Brooks, to assess the

situation. Thank God, help had arrived.

This morning I am reading in the Calgary Herald, where the
National Farmer’s Union (NFU) is calling for more smaller (mid-size) beef
packing plants in Canada, just so the beef industry doesn’t have all it’s eggs
in one (or two) baskets.

I don’t always agree with NFU viewpoints and policies, but the
NFU questions whether two plants should have control over 80 per cent of beef
processing.

“Cattle farmers are already feeling the effect of the
closure, as prices for fat steers and cull cows have already dropped by 20 per
cent and 30 per cent respectively,” says Glenn Tait, NFU board member from
Meota, Saskatchewan. “This sudden and unpredictable loss of income may well
wipe out our 2012 profits. As farmers, we have done nothing wrong, but we are
paying the price for XL’s inability to run a clean plant and the Canadian Food
Inspection Agency’s inability to enforce food safety standards.”

Tait went on to say: “With only two players in the industry
controlling 80 per cent of the national capacity, it’s obvious. Those two
players have undue influence on the rancher and the farmer and even the
consumer.”

Tait didn’t like the fact companies such as XL Foods
(Nilsson Brothers) are vertically integrated, owning parts of the whole
production chain from cow/calf ranches, to auction marts, to feeder buying
services, to feedlots, to packing plants.

I know, just about every aspect of most businesses and
industries is driven by economies of scale — maximizing efficiency to produce
the lowest unit-cost widget possible. But I also wonder if there comes a limit.
Would the Canadian beef industry be any worse or better off if Walmart decided
to buy both XL Foods and Cargill, and build one meat processing plant at Moose
Jaw, Sask to process 10,000 head per day? I believe one plant would afford
improved efficiencies. Is that a ridiculous scenario?

Some investors/managers are developing Million Acre
farms.  Maybe we should gear
Western Canadian crop production toward 50 farms each one million-acres in
size. That may provide an improve economy of scale.

There are many industry and business developments I have
seen in the last 10 years that I didn’t think were possible. Where is T. Eaton
company, Woodwards, Kodak cameras, Zellers, and what about the daily
multi-billion dollar deals as one company eats its largest competitor.

On a more intimate level, 10 years ago did anyone think it
would be normal or acceptable for people to allow some stranger to pat down
their groin area before getting on an airplane? That wasn’t on my radar.

I know the laws of economics and the economies of scale
logic aren’t likely to disappear any time soon, but I also think we have to be
asking if everything should be guided by the unit-cost of production.

Lee Hart is editor of Cattleman’s Corner based in
Calgary. Contact him at 403-592-1964 or by email at [email protected]

 

About the author

Field Editor

Lee Hart

Lee Hart is editor of Cattleman’s Corner based in Calgary.

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