By Andrew Heck
At the time of this article’s publication, more than two million cases of COVID-19 have resulted in more than 150,000 deaths in more than 200 countries and territories worldwide since first reported in China in late January 2020. The numbers are simply staggering, and the fallout has resulted in unprecedented societal and economic impacts.
For the general public, heightened fear regarding our food system is to be expected. And while fear can be a reasonable response to perceived threats, it also plays into the hands of market speculators, health officials, labour unions and other authorities who have the ability to impact our industry.
In the case of COVID-19, a high degree of uncertainty, an abundance of caution and rampant opportunism have taken their toll on the global marketplace in many ways, challenging the capacity for producers, transporters, suppliers, processors and retailers to deliver product to consumers while also sustaining their businesses.
Market speculation hurts producers
“It appears, for some reason, lean hog futures traders believe coronavirus in China is going to have consumers stop eating pork,” said Jim Long, President & CEO, Genesus. “Not sure where that idea comes from. Is this rational or just panic by a group driven by the fear of margin calls?”
While the domestic pork price in China remains steady, indicating stable demand, market overreaction since COVID-19 first broke in China has caused undue harm for Canadian producers. For nearly two years, China has struggled to fill its protein needs since the rapid spread of African Swine Fever (ASF) devastated the country’s pork industry. In theory, such a shortfall should have pushed prices upward, but the effect was minimal, thanks to an unfavourable political situation that closed China to Canadian pork for more than four months in mid-2019.
More recently, prices plunged as speculators suggested that COVID-19 would cause Chinese officials to abruptly halt the purchase of foreign goods like meat as a means of getting a handle on the virus. By reports in major news media and on social media, there is no doubt the Chinese government has taken strong action to prevent the further spread of COVID-19, but according to Freddie Xu, China Marketing Director, Canada Pork, food demand remains unchanged.
“Initially, there were rumors from North America that China has stopped pork trading, but I haven’t found any signs that’s the case,” said Xu. “With the extended Chinese New Year holiday, warehouses filled up, since workers had yet to return. Due to efforts to control the coronavirus, disruptions to public highways and transportation systems created additional delays to moving products that were already stored.”
Xu added, “As the government encourages people to stay home whenever possible, urban residents in first-tier cities are relying heavily on online shopping, which includes food. Grocery and meal deliveries have doubled recently, with retailers and restaurants working hard to keep up.”
Despite the overstated market hiccup, the damage was done, and margins reached a yearly low not even two weeks after the first reported case of COVID-19 – bad news for pork producers who have been struggling for many reasons, not the least of which is price-related chaos.
China is a country of 1.4 billion people. The country produces the most pork in the world by total volume and consumes the most pork in the world per capita. If anything, disease outbreaks, whether they threaten animal or human health, should signal a greater need for food security. According to speculators, this was not the case, but it is important to recognize how every market ripple is amplified at the farm level.
Canadian meat industry supports partners
In early March, the Canadian red meat industry made a $50,000 donation to the Canadian Red Cross to support their work with the Red Cross Society of China and its efforts in responding to COVID-19 in the heart of the pandemic.
The donation received contributions from Donald’s Fine Foods (B.C., Saskatchewan), Maple Leaf Foods (Alberta, Manitoba), Sunterra Meats (Alberta), HyLife (Manitoba), Conestoga Meats (Ontario), Olymel (Quebec, Alberta), Canada Beef, Canada Pork, the Canadian Pork Council and the Canadian Meat Council.
Our industry has a long-standing relationship with China. We have witnessed the virus’ devastating impacts on families and communities that consume our products. As a result, industry stakeholders came together to recognize the need for support.
“We see daily what an impact this virus has had on our customers in China and are aware of all the efforts made on the part of the Chinese to address it. We felt compelled to assist,” said Chris White, President, Canadian Meat Council.
Producer organizations take precautions
Rather quickly in mid-March, provincial pork producer organizations and other industry partners made decisions to cancel, postpone or adapt upcoming in-person meetings.
As a result of widespread precautionary measures taken to address COVID-19, producer organizations in B.C., Manitoba and Ontario cancelled their previously scheduled spring 2020 annual general meetings. For all three organizations, there is no word yet on rescheduling. Other industry events have also been impacted. In Alberta, Red Deer’s 2020 Pork Congress and Edmonton’s 2020 Porkapalooza BBQ Festival have been deferred to 2021. In Ontario, the 2020 London Swine Conference and Stratford’s 2020 Pork Congress have been cancelled.
But not all events have been lost. More than 80 registrants participated in the digitally re-imagined Livestock Care Conference, originally scheduled to take place in-person in Calgary, hosted by Alberta Farm Animal Care (AFAC). The conference featured virtual presentations by top experts, live chat and interactive Q&A, backed by vibrant social media conversation. The decision to shift to digital came just four days before the event.
“There wasn’t much time to make the transition,” said Annemarie Pedersen, Executive Director, AFAC. “But with everyone from the AFAC team, sponsors and participants pulling together, we made it happen. The result was a very special conference at an unprecedented time in history that we will always remember.”
Producer organizations formulate proposals
By late April, hog futures had plunged to nearly $60 below cost of production – numbers briefly seen in September 2018, but not for more than a decade before that time. Various market factors, especially COVID-19, influenced provincial pork boards and the Canadian Pork Council (CPC) to step up and request financial support for the sector.
The CPC has requested changes to business risk management programs federally and has similarly offered its support for changes to provincial programs. One such recommendation includes increasing the reference margin floor to 85 per cent of earnings from the previous year. This would make it easier for producers to receive payouts.
“Pork producers simply cannot afford to continue raising animals under these conditions,” said René Roy, Vice Chair, CPC. “We love what we do, and we love being able to feed people a safe, high-quality protein, but we feel very lonely shouldering the impact of this global crisis.”
In response to the crisis south of the border, U.S. President Donald Trump announced $19 billion in funding for U.S. producers in all sectors, following a previous announcement of $12 billion in July 2018. Both announcements have proven unhelpful for Canadian pork producers, due to the absence of a uniquely Canadian pig price, in favour of a U.S. default, which continues to hammer the industry. As a result, the CPC also asked the Government of Canada for an immediate injection of $20 per hog to help producers overcome the projected direct financial losses caused by COVID-19 in 2020.
In Alberta, Brent Moen, Chair, Alberta Pork authored a letter to Premier Jason Kenney asking the province to establish a targeted advance payment program for pork producers, citing a potential loss of $58 per pig for a six-month period, totalling $66 million for overall production in the province. Following the request, Alberta Pork hosted a town hall teleconference for producers, industry partners and media to outline the steps the organization is taking to help producers.
“Existing business risk management programs were established to act as a rainy-day fund,” said Moen. “We are currently in a hurricane.”
Human resources strained by uncertainty
COVID-19 can certainly be measured in terms of its impact on human health, but the economic aftershock can have an even wider-reaching implication on human resource availability for labour-intensive commodity sectors. For producers and processors who rely on Temporary Foreign Workers (TFWs) especially, much concern was generated in mid-March when all non-essential cross-border travel was banned by the Government of Canada.
Only a couple of days following the initial ban, it was announced that agriculture would be given an exemption, relieving the industry but also raising new questions as to how the existing process would change. With the sudden influx of unemployed Canadian workers now looking for jobs due to COVID-19, industry will need to take steps to attract these workers to agriculture.
As industry stakeholders and the public adjust to the COVID-19 situation, Immigration, Refugees and Citizenship Canada (IRCC) has vowed to support TFWs, to ensure the continued flow of workers needed to support the essential services provided by the Canadian pork industry. To protect public health, all TFWs arriving in Canada are required to complete a mandatory two-week quarantine at their arrival location, at the employer’s expense. In mid-April, the federal government pledged $1,500 for each TFW under the agriculture stream, to help producers cover the period of time for which workers must isolate.
In response to the virus’ blows to business on the whole, the Government of Canada did outline some new financial supports for the agriculture sector to help offset further unexpected costs. These new measures included a $5 billion increase in lending capacity for Farm Credit Canada on behalf of producers, agribusinesses and food processors. In addition, all eligible farmers who had an outstanding Advance Payments Program loan due by the end of April received a Stay of Default, allowing them an additional six months to repay their loans. While these measures may be helpful to some producers in other agricultural sectors, they are of little importance to hog producers who need cash advances to offset losses taken in the critical spring and summer months.
Processors and retailers feel the impact despite efforts
COVID-19’s threat to staffing and business continuity was felt very strongly by Canada’s meat processors. Recognizing that the virus could jeopardize their ability to slaughter animals and cut meat, processors including Olymel and Maple Leaf announced hourly wage bonuses of $2 per hour for workers.
Since late March, several pork, beef and poultry plants in Canada and the U.S. have experienced temporary or indefinite shutdowns, which have caused disruptions to processing. The shutdowns have also resulted in market volatility and headaches for producers who ship animals to those locations. Toward the end of April, two Canadian plant shutdowns had directly impacted pork producers: the Olymel facility halfway between Quebec City and Montreal, at Yamachiche, which halted operations for two weeks after nine employees tested positive for COVID-19, along with the Conestoga plant at Breslau, Ontario, northeast of Kitchener, which closed for a week after first discovering a positive case. The closures caused a backlog of more than 90,000 hogs raised by producers in Quebec and Ontario, who were forced to hold pigs and find alternate marketing options. Thanks to the quick implementation of recommended worker health protocols, processors have been able to safeguard workers and maintain slaughter numbers. While the pandemic is creating daily challenges, the pork industry is showing flexibility and innovation when it comes to employee safety.
On the beef side, in Alberta, tensions increased in late April with the death of at least one worker from the Cargill plant at High River, south of Calgary – one of more than 900 COVID-19 positive cases at that location alone, the country’s greatest concentration of positives at any single site. In response, the United Food and Commercial Workers Union (UFCW Canada), which had previously called for preventative shutdowns at the Cargill plant and JBS plant at Brooks, southeast of Calgary, issued a harsh indictment of how worker safety was handled.
Thomas Hesse, President, UFCW Local 401 wrote in a statement, “Cargill and the Government of Alberta ignored UFCW Local 401’s request to shut the plant to keep employees safe and told employees it was safe to go to work. Now a member of our union has died in the epicentre of the largest outbreak in our province. I hold the company and the Government responsible.”
Following the death of the Cargill worker, it was reported that anywhere between 500 and 1,000 employees of the JBS plant had failed to show up for their shifts, prompting the plant to cut back to one shift per day. Shortly thereafter, it was announced that a worker at the JBS plant had succumbed to COVID-19, causing a two-week shutdown and resulting in an occupational health and safety investigation by Alberta’s Ministry of Labour. The two beef plants together represent approximately 70 per cent of Canada’s beef slaughter capacity. Such unpredictable circumstances have increased strain on the meat industry as a whole.
The Canadian Food Inspection Agency (CFIA) continues to work with Alberta Health Services and Alberta Labour to determine the need for future plant closures, the length of time of the closures and when business operations on-site can resume. The federal government has committed an additional $20 million in funding to support CFIA staffing requirements and safeguard Canada’s food supply. And in Alberta, provincial meat inspectors have been trained to help backstop CFIA, should the need arise.
Further down the value chain, major retailers across Canada have also implemented safety measures such as limiting business hours and customer numbers in-store, constructing physical barriers for face-to-face interactions between customers and staff and issuing pay increases for those who are able to continue working.
“We have made the decision to temporarily increase compensation for our store and distribution centre colleagues by approximately 15 per cent, in recognition of their outstanding and ongoing efforts keeping our stores open and operating so effectively,” said Galen Weston, President & CEO, Loblaws, which operates more than 2,000 grocery stores under the Superstore, No Frills, Independent Grocers, Zehrs, L’Intermarché and other names across the country.
On the food service side, provincial restrictions vary, but in most provinces, eating out has practically become an impossibility. As such, many brick-and-mortar restaurants that previously offered only dine-in options have been compelled to switch to delivery and non-contact order pickups.
Restaurants Canada, formerly the Canadian Restaurant and Foodservices Association (CRFA), represents food service in Canada. The organization conducted a survey that has revealed many jobs lost due to COVID-19 might not return, as nearly one in 10 restaurants have already closed permanently and many more might close. Across the country, Restaurants Canada estimated that upwards of 800,000 food service jobs have been lost as a result of COVID-19.
No end in sight for virus woes
As the entire world eagerly awaits the end of COVID-19’s reign of destruction, it is unclear what will happen next week, next month or next year. The virus will have a lasting, profound impact on how we all do business, whether in agriculture or another major industry.
For now, what is clear is that this virus has touched people and businesses across the pork value chain, and if there is any saving grace, a possible positive outcome may be the Canadian and global consumer’s increased awareness of agriculture’s importance and just how lucky we are to have a reliable food system in Canada.