There are numerous ways to increase beef processing capacity in Ontario — but none of them are quick or easy.
The Canadian Cattlemen’s Association is working with Beef Farmers of Ontario, the Ontario Cattle Feeders Association and Dairy Farmers of Ontario to try to find some relief to a lack of processing capacity — and maybe more importantly, a lack of outlet elsewhere for extra cattle.
Why it matters: Ontario has been chronically short of beef processing capacity, which has been a factor in driving down return to farmers in Eastern Canada compared to Western Canada and the United States.
“It’s a fairly informal process, just kind of tossing around all kinds of ideas to increase the capacity here in Eastern Canada,” says Rob Lipsett, the new president of Beef Farmers of Ontario (BFO), taking over from Joe Hill at the recent BFO annual meeting.
“There are several avenues we could pursue. We’re just not sure yet which would be the most fiscally responsible at this point in time and which ones would make the most sense for the industry.”
Short term solutions look to be few.
When Toronto meat packer Ryding-Regency lost its licence in December after the Canadian Food Inspection Agency decided it couldn’t continue licensing the plant due to E.coli bacteria concerns, it meant a further 15 per cent decrease in Ontario’s slaughter capacity. Ryding-Regency processed cull cows among the beef cattle it took in to make its products. When capacity is lower, cull cows end up as lower priority, affecting the price of lower quality animals to the farmer.
The sector also lost the ability to fill numerous niche markets and brands that Ryding-Regency had developed.
There were several resolutions presented to the Beef Farmers of Ontario annual meeting relating to the shortage of processing capacity.
One resolution encouraged BFO to make processing capacity its primary focus. Another pointed to the per week cost of having Ryding-Regency’s former staff collecting employment insurance payments, suggesting that money could be used in employing them in a beef processing capacity.
Another resolution from Grey County requesting that BFO engage in feasibility studies to establish a co-operative processing plant was narrowly defeated.
A co-operative processing plant would require investment by beef producers. Co-operatives do significant amounts of processing of Ontario hogs and milk, but there isn’t a history of success in beef processing. An attempt to run a cow slaughter plant by farmer livestock genetics co-operative Gencor ran from 2008 to 2011, but ended in bankruptcy.
Another resolution passed that called for BFO to lead a plan to attract potential investors to a federally inspected beef slaughter facility.
There are several things going on in the market, but none of them are significantly helping the oversupply situation.
Brian Perillat of CanFax Marketing says that the Guelph Cargill plant is now processing cattle on Saturdays, but it has cut back on cull cow slaughter in order to accommodate higher value cattle.
Some Ontario farmers have shipped cattle west for processing too, but that has been costly due to increased transportation. Perillat says about 10 trucks per week were moving west for processing from Ontario. He says Ontario slaughter capacity is down about 1.7 per cent per week since Ryding-Regency losts its licence.
Dennis Laycraft, the executive vice-president of the Canadian Cattlemen’s Association (CCA), said at the BFO annual meeting that there’s appetite for processing expansion in Ontario, but there are serious risks including regulatory and policy issues.
“The frustrating part is that there’s no doubt there is international and strong domestic demand for our product. It’s the bottleneck at the local level that needs a solution,” he says.
“We are working on a series of solutions to fix this permanently.”
Laycraft and Lipsett both said that beef farmers need some interim solutions from government to keep them going until there are new options for expanding processing capacity.
“We’re going to bring forward some asks through the Canadian Cattlemens to the federal government and ask for some injection into Ontario’s Risk Management Plan. We could immediately funnel that out to producers for some relief,” says Lipsett.
The challenge with South Korea
South Korea, strangely enough, has a significant effect on Ontario’s current oversupply of cattle.
American plants have stopped taking Ontario cattle because of the strong market the U.S. has in South Korea. Canada and the U.S. have different global risk factor ratings for Bovine Spongiform Encephalopathy (BSE) and Lipsett says the Americans worry that if a case of BSE shows up in Canada, then they could have boats with beef that will be stuck on the water, with South Korea blocking access, because of a Canadian positive BSE test.
The Americans have a free trade agreement with South Korea and as such have a six per cent tariff advantage over Australia and eight per cent tariff over Canada. As the U.S. decided not to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) trade deal, it has a lot riding on its deal with South Korea as other CPTPP countries, such as Canada have an advantage in other Asian countries. South Korea also did not sign onto the CPTPP.
“Even if we could get some kind of memorandum of understanding that they would not stop that shipment coming in, it would relieve some of the stress,” says Lipsett.
When American plants take no Canadian cattle, then a valuable “pressure valve” is lost for excess cattle in the system, helping to maintain local prices.
The plant in Pennsylvania that once took Ontario cattle has markets for its product in South Korea. Changing its system to only process cattle from Canada one day a week hasn’t made sense for the company, when there are large supplies of American cattle in the marketplace.