A report from a council tasked with building Manitoba’s cattle slaughter capacity sees serious risk in flowing federal support to the “already overdeveloped” beef sectors in Alberta and Ontario.
Following federal Finance Minister Jim Flaherty’s budget in late January, the Manitoba Cattle Enhancement Council recently released a report on the “Manitoba pillar” in Canada’s federally inspected beef packing industry.
Flaherty’s budget pledged $50 million in federal matching funds for private-sector investments in “sound business plans” to cut costs, boost revenues or improve operations at packing and processing facilities.
Critics at that time ripped the proposal as doing nothing to ensure the funds don’t just flow to major meat packers such as Cargill, XL Foods or Tyson.
The MCEC, in its report, agrees that larger packing plants aren’t built to fill the demand of “important growth markets” in the developed world, such as organic meats, “functional foods” or kosher and halal products.
The report also questions the sustainability of long-range shipping of live cattle to the major packing plants or to the U.S., describing such hauls as “environmentally unsound” and creating “unnecessary risks of biohazards.”
Moreover, the council said, Canada’s beef industry now sits “at odds with current and forecasted industry trends,” focusing on lowest-cost beef for the slow-growing North American market rather than the growth markets in Asia and developing countries.
Federal policy should encourage more players in the beef packing sector in areas that now have “few options,” MCEC wrote.
“This may seem counterintuitive given the current reported overcapacity of packing plants in Alberta,” the council continued, but the alternative would be to “officially give up on regional beef production entirely” and hand the beef industry’s fate over to Cargill and XL (which last year made a deal to buy Tyson’s Lakeside plant at Brooks, Alta.).
“That would make Canada’s beef industry nothing more than a feeder for the giant U.S. industry. And it’s worth noting that with recent U.S. country-of-origin labelling (COOL) legislation, we are not expecting trade barriers to become simpler in the future with respect to shipping live animals.”
Flowing federal cash only to Alberta and Ontario “will only exacerbate the industry’s current malaise,” rather than respond to market pressures through a “smart, nimble regional infrastructure consisting of smaller plants.”
Local ownership and management of regional plants with federally-inspected slaughter capacity “encourages knowledge of disease and other risk factors, builds industry infrastructure and improves both producers’ and packers’ financial feasibility,” the council wrote.
Such a focus would also help the industry steer clear of potential trade barriers or “outright border closures,” MCEC said.
MCEC, formed by the Manitoba government in 2006, administers a beef slaughter and processing investment pool, funded by Manitoba cattle producers through a $2-per-head levy on every animal sold. The province will match producers’ contributions for the first three years.
Its report outlines several MCEC projects for federally-inspected packing capacity now in the pipeline, including the Keystone Processors proposal for a former Maple Leaf pork plant in Winnipeg; an upgrade to federal inspection for Plains Processors near Carman, about 70 km southwest of Winnipeg; and development of a small federally-inspected plant to serve niches such as the organic market, at Oak Ridge Meats at McCreary, about 90 km southeast of Dauphin.
“The bottom line is, there is pent-up demand from producers and consumers for new federally-inspected beef slaughtering capacity in Manitoba,” the council wrote.
And in Alberta, the council added, the major packers are running below 70 per cent capacity for want of both cattle and labour. The cattle are missing because ranchers are “right-sizing” their herds and cattle have been moving south to the U.S. “in greater numbers.”
The greater challenge, MCEC wrote, is that Alberta packers “have had to compete for workers with the province’s red hot oil and gas industry, construction industry and tourism industry,” while inflated wages have pressured margins and therefore pressured cattle prices due to the major packers’ influence.
“Had the industry not been so concentrated in Alberta, it is possible that we never would have developed an overcapacity,” the council said, noting that cattle prices in Manitoba are “further discounted due to the wear and tear on the animals due to those long hauls.”