It’s an intermittent thorn in the side for Manitoba beef producers.
Lack of local processing capacity is a popular topic among the sector, one that has cropped up time and time again for decades, and one that gains particular traction when, like now, the market turns sour.
Why it matters: Processing issues out of Alberta have brought the debate over local processing back into the forefront, but what would have to change in order to make that local capacity a reality?
The temporary closure of Cargill’s High River beef plant, as well as slowdowns at JBS’s plant in Brooks, Alta., thanks to fears around COVID-19, have sent beef markets into a nose-dive bad enough that feeders in Manitoba have compared it to BSE.
Cattle surpluses ballooned in the wake of the slowdown, while the Canadian Cattlemen’s Association estimated that feedlots were facing losses of several hundred dollars per head.
Those market conditions have breathed new life into the debate over how robust the beef supply chain is, and why, after decades of conversation, federally inspected slaughter options within Manitoba are still at a standstill.
The years between 1979 and 2004 saw five beef slaughter facilities close in Manitoba, victims of widespread restructuring in the meat sector as beef processing increasingly moved to Alberta.
In 1976, Manitoba slaughtered 581,000 cattle, a number that dropped to 16,400 by 2002, just before the BSE crisis.
By 2004, only Winkler Meats offered federally inspected slaughter facilities for cattle, a company that later fell off the map for beef processing, while True North Foods in Carman rose to replace it as Manitoba’s only federally inspected facility in 2015.
In 2017, the Manitoba government reported that just over 14,300 head of cattle were being processed in Manitoba itself, a 26 per cent jump over the year before.
That’s a far cry from the province’s heyday as a beef transport and processing centre, when St. Boniface’s Union Stockyards drew cattle from across Western Canada and where six packing plants in the late 1920s produced an annual value of $20 million, making it the largest stockyard in the British Empire, according to the Manitoba Historical Society.
By August 1988, when the Union Stockyards closed, only about 20 staff remained. At one point Canada Packers, J.M. Schneider, East West Packers, Burns and Jack Forgan Meats had all processed cattle in the area, none of which remained.
In 1990 Burns announced the closure of the last remaining major packing house in the province, in Brandon.
Parallels and catalysts?
Following BSE, a crisis that also saw supply chains stall and cattle volumes back up to the farm gate, there was a concerted push in the province to address the problem.
In 2004, the province published a feasibility study on increasing beef processing in Manitoba.
In 2006, the province established the Manitoba Cattle Enhancement Council, a program that applied a refundable checkoff of $2 a head in order to develop federal slaughter capacity.
By 2013, however, producers had grown frustrated by the lack of progress. Members of the Manitoba Beef Producers pushed their organization to lobby the province to do away with the checkoff or, at the least, ensure that those dollars went to facilities outside the perimeter of Winnipeg.
The years after BSE saw a string of optimistic, but ultimately unsuccessful processing projects, according to Dr. Allan Preston, a beef producer, veterinarian and, during the time directly following BSE, assistant deputy minister of agriculture.
In the case of ProNatur (formerly Keystone Processors), which promised to go up in Winnipeg, the sector struggled with years of back and forth before the project quietly disappeared.
“Running a beef-processing plant anywhere in the world, but in Western Canada in particular, is a highly competitive, low-margin business,” Preston said. “It works on volume. It works on having markets for every last piece of the carcass, including the offal and liver and kidneys and heart and tongue and so on. It’s not a venture for the faint hearted. A lot of people got into it thinking that it was a pretty simple procedure to set up a plant and access those markets. A lot of them found out in a very quick hurry that access to markets was and is a very complicated business.”
Those startups also quickly ran into the need for a steady stream of finished animals.
“Most of the ventures that got started post-BSE failed on either one or both of those points,” Preston noted.
True North Foods, the only successful federal plant in Manitoba to come out of the post-BSE push for processing, has focused efforts into developing both ends of the production cycle, he noted.
Calvin Vaags, owner of True North Foods, already owned a meat retail location when he purchased Plains Processors near Carman in 2008. Vaags renamed the business and, in 2013, broke ground on a new processing facility. The plant started operation under a provincial licence in 2014, gaining federal certification the following year.
“The situation today, there are similarities, for sure,” Vaags said, looking at the processing backlog as plants shut down or slowed due to COVID-19.
Chicken or egg?
Cattle volumes are the often-cited culprit during any conversation of processing capacity in Manitoba.
The province boasts relatively few backgrounding or feeder operations, instead leaning heavily towards cow-calf producers who would not be finishing cattle for slaughter.
“Without feedlot capacity, there isn’t much incentive to attract a major packer to build a plant here in Manitoba,” Preston said. “It’s a real chicken and egg (situation). Do you encourage the development of the feedlot sector hoping that the processing sector will follow? Or do you start with processing and hope that the feedlots will move to this province? Nobody has yet been able to answer that question.”
There is enough demand to support more federally inspected processing facilities, Vaags argued — his own facility was setting production records even before the stress of recent Alberta plant closures — but the regulatory red tape looms large for any project hoping to get off the ground.
“I think it’ll be a catalyst for guys to talk about it, and there might even be a few who try it, but I’ll tell you, it is an incredibly difficult thing to try and get a federal packing plant up and running,” he said, looking at the backlogs out of Alberta. “The barrier to entry is huge, so to say, ‘Oh yeah, little packing plants are going to spring up all across Canada,’ I’m not sure that that’s going to happen real quick.”
Vaags had his own extensive list of challenges that he faced while launching True North Foods.
Firstly, he said, most engineering firms are geared more towards larger plants, making design for a smaller plant fraught with difficulty.
Vaags then spent years navigating the necessary regulatory hurdles, while securing CFIA inspection services is, “the mother of all problems.”
Financing such projects also quickly becomes a hurdle, he noted, since banks are reluctant to back such an endeavour.
Vaags also doubts that any of the over 20 provincial abattoirs currently operating in Manitoba could make the jump to become a federally inspected facility.
“There isn’t any provincial slaughter plants in the province which are large enough or new enough,” he said. “It doesn’t make any sense to try and spend money on those to get them federalized because it would just cost way too much and you would still be left with too small of a plant.”
What needs to change?
In an ideal world, new processing facilities might start at the ground up, with frustrated producers pooling resources to start a plant, Preston said, although he has doubts that such a grassroots movement will appear.
“The glass-half-full side of me would say that yes, there’s potential. There’s opportunity there that could be capitalized upon,” he said. “The glass-half-empty side of me tells us that cattle producers are extremely independent. They like to run their own businesses in their own fashion and, sometimes, they follow the dollar very closely, which is logical, they have to do so, but trying to get that co-operative spirit going is a real challenge.”
Manitoba does have a healthy number of direct-market producers on the hunt for processing capacity, he acknowledged, but added that those producers represent a fraction of the cattle volumes produced in Manitoba.
Instead, he argued, the sector might be better served by standardizing regulations across provincial lines.
Preston argued that a standardized national meat code would bridge the gap between provincial plant standards and federal plant standards, allowing meat to trade across provincial borders, something that is currently not allowed unless animals are processed at a federal plant.
“For example, there’s a market in northwestern Ontario for meat,” he said, noting that the area is undercapacity when it comes to local meat plants, but that the streams of people who use the area as cottage country create a demand.
Manitoba Agriculture and Resource Development Minister Blaine Pedersen also has his eye on that market.
Pedersen said he has asked the federal government to relax regulations, given market backlogs from the COVID-19 pandemic. Pedersen said he is pushing for the federal government to allow meat from provincial facilities to move across domestic borders.
“We’re headed into cottage season,” he said. “Think about all the meat that we could be moving out of Manitoba out of a provincial plant into northwestern Ontario and the cottage country.”
Vaags, however, is more doubtful.
“That may make a difference in some other provinces,” he said, citing the larger provincial facilities in places like Ontario.
“If you take that argument and you apply it here in Manitoba, try to count up how many of these provincial establishments you have and what their overall capacity is. Most of them are only doing 10 to 20 head a week at max,” he said. “Even if you had a national code and you had all those provincial plants that said, ‘OK, now we can move meat across the border into Ontario,’ is it really going to help that much? They’re not going to be able to do much more than what they’re doing now.”
The province has said it hopes to attract $500 million in primary livestock production and processing by 2025, part of the provincial protein strategy released last year, although Pedersen noted that goal is for all livestock production, not just beef.
Vertical integration is less than popular in corners of the cattle sector, although Manitoba’s pork industry, such as HyLife Foods out of La Broquerie has used the model to great effect.
While the production cycle for beef certainly differs, the idea of maintaining animal ownership to the processing level has merit, Preston argued.
“If the cow-calf producer were able to retain an interest or ownership of those cattle through to the final marketplace, perhaps we would have more consistency in terms of how the various arms of the cattle industry come together,” he said.
“The people who are doing the direct marketing have done that,” he added.
There is already some level of vertical integration between feeders and packers, he noted, pointing to the massive feedlots that processors in Alberta use to feed their plants.
Current market woes might become a catalyst for another processing push, he said, although his experience post-BSE has made him cautious.
“I’m cautiously optimistic, but frankly I don’t see a dramatic change occurring,” he said, looking at the current, Alberta-centric infrastructure of the industry.
“Trying to turn that process around and trying to move more to small plants is a huge task… I’ve seen this movie before and I know how it ends,” he said.