Tracking COVID-19’s continued supply chain impact

By Andrew Heck

With half a billion active or recovered cases and nearly half a million deaths worldwide, the COVID-19 pandemic has proven to be the most significant public health and economic disaster of the past century.

The pandemic has affected practically everyone around the world in so many ways, including the Canadian pork sector. Since then, much has happened, including the reopening of many previously closed processing facilities, the lifting of restrictions on conducting business, along with other factors that have helped the industry bounce back in some ways, while fundamentally transforming it in others.

Market impacts reverberate across borders

The U.S. Pork Checkoff organization has created an interactive map to show the status of processing facilities. Active plants are indicated in green, partially active plants in yellow and inactive plants in red, as shown in this example from early May.

The impact of COVID-19 on pork markets continues to be observed with a combination of grief and cautious optimism that the Canadian pork value chain will be able to claw its way out of the spring pricing slump. As slaughter capacity returns closer to normal in the U.S., the effect on pricing has been a gradual climb toward the black.

Data from China customs suggests that the country imported more than 400,000 tonnes of pork in April, representing a 170 per cent increase over the previous year. Record-low prices likely encouraged stockpiling, which is no surprise. Meanwhile in Canada, prices for producers plunged to nearly $60 below cost of production during the same period, following initial reports that China would put a stop to pork imports while trying to contain the spread of the virus. This speculation has since proven to be unfounded.

While Chinese domestic pork prices can fluctuate rapidly, they were around three times higher than U.S. pork prices prior to plant shutdowns resulting from COVID-19. The total price gap, for nearly two years, can be attributed largely to the extended African Swine Fever (ASF) hangover that persists to date and continues to silently spread through Asia.

Government support generates mixed response

With hog futures plunging and a great deal of uncertainty around processing capacity, various market factors influenced provincial pork boards and the Canadian Pork Council (CPC) to step up and request support for producers.

In late April, the CPC 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. While this ask has not been specifically addressed, producer organizations on the provincial level have been calling on their Premiers and key elected representatives to extend support on a localized level.

Canadian pork margins in late April were well below cost of production.

In early May, the federal government announced an initial agri-food support package that totalled more than $250 million, of which $125 million was earmarked for a producer AgriRecovery program, while $75 million was dedicated to supporting processing, with the $50 million balance going toward a food surplus purchase program.

The government response came as a harsh blow to most commodity sectors, including pork, with many producers stunned by the value of support offered, which was only a fraction of the $2.6 billion requested by the Canadian Federation of Agriculture. Reacting to lacklustre support, the CPC published an open letter to Canadian consumers, calling for their help to vouch for the pork industry.

“Farmers have been telling the government about the need to act for weeks, but it hasn’t been enough to get governments to get meaningful help to the producers that need it today,” wrote Rick Bergmann, Chair, CPC. “That is why farmers need your help. We need you to tell the Prime Minister, ministers, Members of Parliament and senators that now is the time to be serious about protecting our food supply by helping farmers.”

In Quebec, the province’s Union of Agricultural Producers (UPA), Sollio Groupe Coopératif (parent company of Olymel) and other partners issued a combined statement calling on the two levels of government to create a specific assistance program for the agri-food sector to ensure its viability.

“The agri-food sector has managed to maintain a continuous supply throughout the [COVID-19] crisis, but many companies are coming to the end of their resilience,” said Marcel Groleau, President, UPA. “The federal announcement promising $252 million in aid is clearly below the needs formulated by the industry as a whole. In addition, the current programs absolutely do not respond to the exceptional challenges we face.”

The Agriculture Producers Association of Saskatchewan (APAS), likewise, called for further support.

“Any assistance to producers is welcome, but this package is only a small first step in addressing the needs at the farm gate,” explained Todd Lewis, President, APAS. “We need more action from the government to help reduce our risk and secure Canada’s agricultural industry and food supply.”

In mid-March, the Government of Canada announced a $5 billion lending capacity increase to Farm Credit Canada (FCC), in addition to loan deferrals. Since that announcement, more than 4,800 producers and agri-food businesses have used payment deferral options on FCC loans totaling $4 billion and have established credit lines totaling more than $500 million to alleviate short-term cash flow concerns.

To complement that original lending capacity increase, the $100-million federal Agriculture and Food Business Solutions Fund was launched to support a wide range of agri-food businesses, with the goal of returning recipient companies to sound financial footing.

In addition, in late May, eligibility criteria were expanded for the Canada Emergency Business Account (CEBA) to include many owner-operated small businesses, including farms, which were previously unable to access the program. The program is now available to a greater number of sole-proprietor businesses and family-owned corporations that pay employees through dividends rather than payroll.

On the labour front, the government also announced an investment of up to $9.2 million to enhance the Youth Employment and Skills Program (YESP) and fund up to 700 new positions for youth in agriculture. The goal of the additional funding is to help attract Canadian workers aged 15 to 30, to assist with labour shortages brought on by the pandemic. The program will provide employers up to 50 per cent of the cost of hiring a youth worker, up to $14,000.

Many of these initiatives may appear good on paper, and they do much to influence public perception about support for agriculture. Despite that, pork producers have largely failed to benefit from the support, which is geared toward crop and other livestock sectors. The chorus of voices asking for further measures has not been enough to sway Marie-Claude Bibeau, Minister, Agriculture and Agri-Food Canada, who doubled down on her government’s actions.

“We are a government who is proud of taking decisions based on evidence. We’re not taking decisions only based on emotions,” Minister Bibeau said. “Please go and get this money and then it will be much easier for me to identify the gaps and to get the money where it should be going.”

While the federal announcements did little to satisfy most agri-food stakeholders, provincial announcements were welcomed in Alberta, where the government has increased the interim AgriStability payment from 50 to 75 per cent for the hog sector, with a total value of up to $25 million for the sector or up to $20 per pig. It remains to be seen whether producers will be able to benefit from this funding, which does not favour mixed-commodity operations. Timeliness is also key, as the money could arrive too late to make much of a positive difference.

Even if provincial support proves to be helpful in the medium- and long-term for producers, short-term cash flow issues still plague production, which is a message that the industry has carried for some time since well before COVID-19.

Processing capacity changes rapidly

Producers across Canada – like the Pastink family near Taber, Alberta – have taken to social media to offer thanks to essential workers, especially those on the front lines in meat processing facilities, grocery stores, food banks and restaurants.

The pandemic’s threat to staffing and business continuity was felt very strongly by Canada’s meat processors. Given the close-quarters nature of meat cutting, it did not take long for the virus to take hold and spread widely within some plants.

Rather quickly, processors across Canada made commitments to address the safety concerns of workers by providing additional personal protective equipment (PPE) and training, working closely alongside provincial occupational health and safety officials to satisfy requirements. Companies including Olymel and Maple Leaf even offered hourly wage bonuses for workers, recognizing their employees’ important contributions.

Retrofitting measures on the plant floor include taking temperatures of employees, additional cleaning and disinfection, monitoring of hand-washing stations and the requirement for employees to stay home if observable symptoms are present. Physical distancing has been addressed through added space or plexiglass barriers between workers where possible.

Despite these efforts, no amount of cooperation could shield processors from the wrath of certain parties that have been calling for full, immediate, indefinite shutdowns of any plant where even one worker tests positive. These calls for shutdowns have been inspired mostly by two high-profile cases in Alberta beef plants.

With the deeply divided sides – processors and critics – in a political tug-of-war, producers continued to ride the pricing waves, while talk of potential welfare culls generated some backlash online from largely misinformed individuals.

Throughout the pandemic, the Canadian pork industry has been fortunate (if that term can be used) to have experienced only two plant shutdowns affecting domestic slaughter capacity: the Olymel facility at Yamachiche, Quebec, northeast of Montreal, along with the Conestoga facility at Breslau, Ontario, northeast of Kitchener.

The Olymel plant reopened after a two-week hiatus, while Conestoga was able to get up and running after only one week of stalling. The closures caused a backlog of more than 90,000 hogs, many of which were marketed through alternative channels, while others were able to be held in barns for longer periods of time and had their growth deliberately slowed.

In some highly exceptional cases, small numbers of market-ready hogs were euthanized in accordance with the National Farm Animal Care Council’s (NFACC) Code of Practice for the Care and Handling of Pigs, including one publicized example in Prince Edward Island. Reports out of Manitoba suggest that some isolated weaners were also disposed due to backlogs in Minnesota and Iowa, where these animals are typically sold. Despite these off-hand cases, no significant depopulation efforts have taken place in Canada, unlike some locations south of the border.

On the food safety side, processors continue to work with the Canadian Food Inspection Agency (CFIA) and provincial health authorities whenever plant closures are under consideration. Together, these stakeholders determine the length of potential closures and when business operations on-site would be able to resume.

To help create pathways for the secure, continued movement of meat and poultry, in late May, the CFIA established a temporary process to allow inter-provincial trade of goods produced at provincially inspected facilities. The goal is to alleviate any potential food shortages in one jurisdiction if food surplus is found elsewhere.

While political gamesmanship and other influences have received a disproportionate share of attention, processors have been the unfortunate victims of a reputational hit. However, producers and consumers alike should feel confident that Canada’s meat processors are making the necessary efforts to protect our supply chain, even if mainstream media and special interest groups sometimes distort this truth.

Producer organizations forced to adapt practices

Full validations under the Canadian Quality Assurance (CQA) and Canadian Pork Excellence (CPE) programs, which require on-farm visits, were postponed due to COVID-19.

Rather quickly in mid-March, provincial pork producer organizations and other industry partners made decisions to cancel, postpone or adapt upcoming in-person meetings, conferences and other events.

Nearly all pork producer organization staff members temporarily shifted to working from home for more than two months, while waiting on provincial and federal authorities to determine it was safe to return to regular work. For clerical staff, the effect was minimal, but for production and traceability staff, a lack of office access and postponing on-farm visits inevitably caused some interruptions for producers who typically rely on in-person support.

One specific impact was related to completing full validations under the Canadian Quality Assurance (CQA) and Animal Care Assessment (ACA) programs, along with the new Canadian Pork Excellence (CPE) program. These programs represent more than 1,000 producers across the country and all hogs sent to federally inspected processing facilities.

In early June, the Canadian Pork Council (CPC), working through its constituent provincial organizations, resumed full validations under the CQA/ACA and CPE programs, in accordance with provincial public health guidelines – a major relief for those who were coming due to renew certification. Full validations require on-farm visits, which had previously been postponed indefinitely in mid-March.

As the COVID-19 air begins to clear, producer organizations are eager to resume their normal support activities for producers, who are looking for that helping hand more than ever.

Canadian meat industry supports communities

Ontario Pork’s charitable goals this year include raising $100,000 for food banks and also providing boxed lunches for workers in the province’s three federally inspected processing plants.

Support for communities across Canada during COVID-19 has been offered by many Canadian agri-food sectors, including pork.

As food banks across Canada struggle to keep up with rising demand and declining donations, Ontario pork producers met this challenge as an opportunity to get fresh pork to families and individuals in need, through Ontario Pork’s Friends of the Food Bank program and community-based food giving.

The $100,000 fundraising goal includes $36,000 to provide boxed lunches to workers at the province’s three largest processing facilities: Conestoga, Sofina, Domingo’s. The remaining $64,000 will go toward maximizing food bank donations. Ontario Pork will coordinate donations of up to 10,000 lbs. of fresh ground pork per week – or approximately 60,000 servings – based on available funding.

Since late March, Alberta food banks have collected more than $25,000 in donations, and Saskatchewan food banks have collected more than $11,000, specifically thanks to those provinces’ Hutterite colonies. These efforts were spearheaded by a colony near Warner, Alberta, and were recognized in a formal letter from Food Banks Canada.

Processors, like producers, have been stepping up to the plate.

In mid-April, Maple Leaf Foods announced a partnership with Food Banks Canada and Community Food Centres Canada to commit more than $1 million in financial contributions and a further $350,000 in product donations to communities across the country.

HyLife has donated $750,000 to six hospitals, including the Bethesda Regional Health Centre in Steinbach, Manitoba.

In late May, HyLife made a combined $750,000 donation to six hospitals, in recognition for those institutions’ efforts to fight COVID-19. These included four facilities in Manitoba, one in Saskatchewan and one in North Dakota, in locations where HyLife centres much of its production.

Also in late May, Olymel announced that more than 800 employees at three of its Quebec plants had volunteered to work overtime shifts in order to help reduce the backlog of hogs caused by the two-week closure of the Yamachiche plant in April. In addition, for each hog slaughtered on May 30, the company donated $2 to a charitable organization chosen by the employees of each plant, up to a maximum of $5,000.

Altogether, these efforts, untaken during a very difficult time, demonstrate the industry’s ongoing commitment to Canadians – a relationship that is not always fully appreciated. With application details released in mid-June on the Government of Canada’s $50 million food surplus program, it is likely we will see additional charitable efforts, thanks to the new support.

Virus woes decrease but anxiety remains

Hope has been extremely sparse for many over the past few months, but farmers, of anyone, are known to be resilient to a fault. Thankfully, for millions of Canadians and customers around the world, pork producers stand tall with the entire value chain, working together to maintain food security, even while being attacked from so many angles.

COVID-19 will undoubtedly have further consequences for our sector, often unpredictably and unintentionally. In other cases, it is possible that lessons learned will have us emerge stronger and better than ever. Our survival depends on it.