Has the drive for efficiency gone too far in the pork sector?
For the past few decades the drive has been to vertical integration, closely matching production and processing capacity, and larger and more efficient (and far fewer) processing plants.
In this MBA-driven world view, any excess surge capacity is viewed as an inefficiency to be eliminated
But now producers are facing the possibility of seeing their highly efficient processing plant in Brandon closed due to COVID- 19, as our Geralyn Wichers reports. Even the uncertainty surrounding the possibility adds unforeseen costs that are exceedingly difficult to absorb in a tightly integrated supply chain.
Once unthinkable, the prospect is being openly discussed due to coronavirus cases amongst Maple Leaf Foods’ 2,000-strong workforce. As of press time, more than 20 workers had tested positive, but health officials were insisting there was no evidence of spread within the plant itself.
That’s prompted calls for an immediate closure, deep cleaning and widespread testing of employees, measures that, thus far, have been rejected by both the company and provincial government.
The company says health officials have found no reason to close the plant, and the province rejects testing the workers on the grounds it would overwhelm testing capacity in the region.
The topic of whether the province’s testing capacity is adequate would justify a separate editorial, so we will bypass that debate for now.
We’ll just note that when the coronavirus gets into packing plant workforces the results can be devastating.
When it got into the JBS plant in Brooks, a community of 15,000 had more than 1,000 cases by the time it was under control.
When it got into the Cargill plant at High River, a community of 13,000 wound up with 1,500 cases linked to that outbreak.
While the virus may not be freely circulating amongst the plant’s staff, the threat that it could happen can’t be ignored.
Human health risks aside — and to be clear, nobody wants to see workers fall ill — what is also of interest to Manitoba’s farmers is just what will happen if the plant does close.
There’s little doubt it would take a huge bite out of the province’s (and country’s) pork-processing capacity, and animals would quickly begin to back up to the farm level.
Some insights into the potential impacts can be found in a 2015 University of Manitoba report on the hog sector authored by Janet Honey, the former head of the province’s agricultural market analysis and statistics branch.
At that time, Manitoba produced roughly eight million hogs in 2015. Of those 3.3 million were exported. The remaining 4.7 million were processed in the province, and 4.53 million of those within a federal inspected facility.
Of that 4.53 million animals the Maple Leaf Foods plant in Brandon processed the lion’s share, though it’s impossible to say definitively exactly how many. Here we have to rely on some back-of-the-envelope figuring.
According to the company itself, the plant can process up to 90,000 animals a week. That means for every single day it were closed, 15,000 animals would need to suddenly go to different destinations.
As Wichers reports, the Manitoba Pork Council has been thinking about this very eventuality, but the group concedes this is no small challenge to come up with alternatives. General manager Andrew Dickson said officials are working closely with processers, the province and other stakeholders on a contingency plan.
A short shutdown wouldn’t likely be a disaster. Processing plants periodically shut for maintenance, cleaning and other regular periods. While an unscheduled halt wouldn’t be ideal, it would likely be manageable.
Longer term, there’s alternative processing capacity that could be fired up in Alberta, where one plant is only running a single shift, due to a lack of animals for processing.
But it’s in the middle ground, where a plant could be shuttered for a week, or two, or three that the worst outcomes seem to lay, as market analyst Kevin Grier told the Co-operator.
A short period like that provides scant incentive for any other processor to go to the time and trouble of sourcing another shift — if it even could, given the sector’s well-documented labour shortages.
“It’s a backlog that would happen (in Manitoba), and it’s a serious problem,” said Grier.
Those costs aren’t factored into the economic models used to drive so-called inefficiencies out of the supply chain. But they are real nonetheless. So is the impact on human mental health and animal welfare when hard decisions need to be made about animals that have no place to go.
Let’s hope such a closure doesn’t come to pass. But let’s also recognize that too much efficiency can sometimes prove inefficient.