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Tight Canadian Supplies Threaten U. S. Packer

Shrinking cattle supplies in Canada and the U. S. Northwest could leave the JBS-USA packing plant in Hyrum, Utah, vulnerable to closure, a Canadian meat market analyst said March 26.

The plant is one of three in the U. S. Northwest that rely on cattle from Alberta and Saskatchewan to supplement U. S. suppl ies, along with Tyson Foods’ plant in Pasco, Washington, and AB Foods’ facility in Yakima, Washington.

JBS’s plant is the most vulnerable of the three to closure because of its distance from Alberta and other major U. S. feeding regions and because it recently scaled back production, said a report by Kevin Grier, senior market analyst at the George Morris Center in Guelph, Ontario.

“It’s something (Canadian) producers need to keep on their radar and plan for,” Grier said. “Clearly it’s a negative – another one.”

A JBS official said the company is “committed” to the Utah plant.

“JBS has not moved away from any of our beef plants,” said JBS spokesman Chandler Keys.

Losing a U. S. plant would not only reduce demand for Alberta cattle by a single bidder but would also free up all of the closed plant’s domestic supplies, Grier said.

The loss of demand from that region could factor into further downsizing of the Canadian herd, he added.

Cattle supplies in Alberta have been shrinking due to a series of factors, including low prices, drought and a high Canadian dollar that makes exports less attractive.

Supplies in the U. S. Northwest are also shrinking as part of a long-term U. S. industry decline due to low prices and changing demographics.

U. S. bidders provide an important floor price for Alberta cattle and competition for Canadian beef plants owned by Cargill and XL Foods.

“It would have a huge impact” to lose a U. S. plant, said Tony Saretsky, owner of Cantriex Livestock in Ponoka, Alberta, who exports cattle to the United States. “We’re dependent on those packers to level the playing field as far as the overall pricing in Canada.”

Closure of a U. S. packer is a possibility but JBS’s investment several years ago in the Utah plant may make it a less-likely candidate, Saretsky said.

In 2009, nearly 351,000 fed cattle were shipped to the United States from Alberta and Saskatchewan, making up 15 per cent of the two provinces’ marketings, according to Statistics Canada. Each of the three Northwest plants relies on Alberta cattle for 15-40 per cent of their kill, Grier said.

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