Supply chain disruptions provide important lessons

By Andrew Heck

Processing plant shutdowns have created hog backlogs on-farm in nearly every province since the start of COVID-19.

It has been a little more than a year since the entire world began to face the massive and unanticipated consequences of COVID-19. By now, grudgingly, we are all too familiar with the pandemic song and dance, and it is looking like we may still be in for the long haul.

Despite the grim past and lukewarm outlook, Canada’s meat industry has adapted remarkably well in the face of challenge and criticism. For packers, it has meant ongoing threats to labour stability, processing capacity and, ultimately, social licence to operate. For producers, the meatpacking response has largely inspired decisions made at the farm level over time to adjust pig production, either by conscious choice or necessity, when various plants have been slowed or shut down.

From one situation to the next, Canada’s COVID response in the meat industry is providing us with lessons not only for handling this disease into the future, but also examples of how producer-packer relations have improved in some cases and deteriorated in others. It also gives us a glimpse into hypothetical outcomes for foreign animal disease response, most notably African Swine Fever (ASF), and its potential impacts not only to production and processing, but also trade.

Olymel faces full brunt of COVID catastophe

Between early February and March 2021, three workers at Olymel’s Red Deer plant, halfway between Edmonton and Calgary, were reported to have died of COVID-19, following a resurgence of the disease in the community. The plant had previously experienced a notable outbreak in August 2020.

In response to high rates of worker absenteeism, as the COVID case count in the community climbed, the decision was made to reduce daily slaughter volume by 40 per cent. At this point, Olymel issued a notice to its independent producer-suppliers notifying them that their hogs would be given priority for processing, with the company opting to send its own hogs to U.S. packers and holding others where possible, in a bid to ease the burden on those independent producers.

Shortly following the reduction, after the first worker death was announced, Olymel shifted its decision and voluntarily shut down the plant for nearly three weeks, working to minimize impacts to worker health and safety. Following the shutdown, the plant was re-opened gradually, but not before creating an estimated backlog of 100,000 hogs on-farm in Alberta and Saskatchewan.

Producers adapted to the unexpected conditions by adjusting feed levels to slow their animals’ growth, while seeking processing capacity at facilities across western Canada and the U.S., as options for moving market-ready hogs. The decision to hold hogs longer than desired was made especially difficult on account of high feed costs. Some producers opted to move younger pigs to empty barns in the U.S. to free up space for larger pigs at home.

An outbreak of COVID-19 in Red Deer, Alberta prompted the closure of Olymel’s plant in that city in February 2021. Holt Colony near Irma, Alberta was one of many impacted farms.

“The shutdown had potential to devastate a lot of producers,” said David Tschetter, hog barn manager for Holt Colony near Irma, Alberta – 250 kilometres northeast of Red Deer. Tschetter ships hogs to Olymel weekly and was forced to make adjustments during the shutdown. “The company did the right thing for its workers, but we can’t forget about producers either. We were forced to make alternative marketing arrangements, which adds to costs. Thankfully, the provincial government stepped in to provide a bit of relief, but it’s inevitable that some costs will never be recovered in situations like these.”

As a result of the backlog, Alberta Pork appealed to the Government of Alberta and Government of Canada to launch producer financial support through the federal-provincial AgriRecovery program, similar to the support offered as part of a set-aside program for Alberta cattle producers a year earlier, when two major beef plants in the province were closed. For hog farmers, the program paid impacted producers $0.95 per head per day to cover the costs of keeping market-ready hogs on maintenance rations between the beginning of February and end of March 2021.

Starting in late October 2020, Olymel backlogs also followed in Quebec with reduced capacity at the company’s Vallée-Jonction plant, southeast of Quebec City, after a worker died of COVID-19. Non-lethal outbreaks have also been reported over the past year at the company’s Yamachiche and Princeville plants, near Trois-Rivières, and at the Saint-Esprit plant, north of Montreal.

As a result of labour issues challenging processing ability, with the additional COVID burden, by mid-March 2021, anywhere between 80,000 and 90,000 hogs were backlogged in Quebec, with average live weights around 120 kilograms, thankfully trending downward from weeks earlier. At the height of backlogs, Olymel increased its diversion of hogs from Ontario to the U.S. to help manage the situation.

Olymel continues to work with public health officials across the country to better protect workers by implementing new protective equipment requirements, creating physical distance with plexiglass barriers, staggering shifts and regularly sanitizing common areas. Working closely with union officials and producer groups, the company is making efforts to sustain its business while keeping workers safe and being mindful of producer concerns.

Elsewhere in Canada, in April 2020, a one-week shutdown of the producer-owned Conestoga facility at Breslau, Ontario, northeast of Kitchener, created a substantial interruption. That shutdown, coinciding with the Olymel Yamachiche shutdown, resulted in a backlog of 90,000 hogs at the time.

Other packers fortunate to escape COVID wrath

Maple Leaf Foods’ plant in Brandon, Manitoba accepted a small number of backlogged hogs from Alberta as a result of the Olymel shutdown, but those that were accepted were penalized. The company continues to regularly accept hogs from Ontario.

While Olymel’s struggles with COVID are well-documented, two of western Canada’s other largest packers – Maple Leaf Foods and Donald’s Fine Foods – have luckily remained mostly unscathed.

No COVID cases have been reported among Donald’s workers, but 80 cases were reported at Maple Leaf’s Brandon, Manitoba plant, with another dozen at the company’s Lethbridge, Alberta plant, in August 2020. As in the case of Olymel’s outbreaks, public health officials determined that transmission outside of the workplace was likely responsible for the growth in cases, not the workplaces themselves. Fortunately, in the case of Maple Leaf’s outbreaks, both plants were able to remain open.

However, at that time, as the case numbers continued to grow for Maple Leaf, the company suspended meat exports to China, in response to import controls introduced by the Chinese government. While neither the Brandon nor the Lethbridge plant was ever closed, producers shipping to Brandon were met with complications, on account of reduced processing, as the company eliminated an entire shift. As COVID cases declined eventually to zero, exports to China were resumed, and the backlog dissipated.

Despite the recovery to normal levels by September 2020, the Brandon plant still routinely operates below capacity – somewhere in the neighbourhood of 75 per cent. The plant is capable of slaughtering 90,000 hogs weekly, but regular volumes hover in the 70,000-hog range. This includes between 3,000 and 4,000 shipped every week from southern Ontario – nearly 2,000 kilometres away and nearly 1,000 kilometres farther than any commercial farms on the prairies.

Maple Leaf Brandon’s shipments from Ontario have been a source of contention among some western Canadian producers, who were disappointed that so few hogs were accepted at that plant – western Canada’s largest – while Olymel Red Deer was closed. This resulted in hogs being shipped during the shutdown from Alberta to plants as far away as California and Iowa – approximately the same distance as southern Ontario to Brandon.

While a small number of backlogged hogs made it into the Brandon plant while the Red Deer plant was closed, Olymel readily accepted many backlogged hogs from Maple Leaf producers while the Brandon plant had slowed down. In addition, those hogs were paid consistently with Olymel’s contracted producers, including a standard proximity bonus, whereas the relatively small number of hogs shipped to Brandon from Alberta were docked $10 per head, with no freight compensation.

Though shared value discussions have been taking place between western Canadian pork producer organizations and western Canadian packers for nearly a year, Maple Leaf has not yet made any adjustments to its base pricing or bonuses, with the exception of a short-term pricing floor introduced last summer when hog prices were nearly $50 below the cost of production. This lack of action is contrasted by the efforts of Olymel, and even earlier, HyLife in Neepawa, Manitoba – the first western Canadian packer committed to using cutout values.

Donald’s Fine Foods, which pays producers according to the Maple Leaf Signature 4 formula and covers the cost of freight to its Britco plant in Langley, B.C., accepted some backlogged hogs from Olymel Red Deer producers at its Thunder Creek plant in Moose Jaw, Saskatchewan. Thunder Creek reduced processing speed in response to a small outbreak experienced in November 2020. During that incident, hogs were diverted to the company’s own Langley plant and Olymel Red Deer.

COVID backlogs may simulate an ASF dry run

Eurasian wild boar root on a beach in Berlin, Germany, in August 2020. Just one month later, ASF would arrive in the country’s boar population from neighbouring Poland.

While COVID-19 does not affect pig health, and ASF does not affect human health, there are parallels between these diseases when considering the management of potential backlogs and the resiliency of the entire Canadian meat industry.

In the case that ASF should arrive in Canada, severe hog backlogs could be expected, with the closure of international borders to Canadian pigs and pork. However, critical zoning agreements with major trading partners are providing some confidence for the Canadian industry, which is observing the conditions in Germany with great intrigue. The German pork industry has also suffered from processing shutdowns and public backlash due to COVID-19 worker infections.

Since September 2020, Germany has reported more than 1,000 cases of ASF in wild boar, mostly contained within the eastern state of Brandenburg, along the country’s border with Poland, from where the disease arrived. Shortly after the initial ASF confirmation, China, Japan, South Korea and the Philippines banned pork imports from Germany. Despite being an ASF-positive country itself, China regularly imposes import bans on pork from other ASF-positive regions, causing major turmoil for export-dependent nations. Over time, as those affected regions suffer financially, the Chinese government returns to the bargaining table to negotiate access to its coveted market. This was the case in late April, as Germany’s federal agriculture minister, Julia Klöckner, met virtually with Chinese authorities to plead her country’s case for halting the spread of ASF within Germany’s borders, in a bid to resume normal trade relations.

With ASF cases beginning to pile up, and with most Asian trade routes blocked, the German industry responded immediately by diverting hogs to other plants in the E.U., in countries where ASF is not present, allowing for the continued albeit inconvenient flow of pigs and pork. In Canada, such options would be untenable, thanks to our geography and existing trade agreements, which would not allow for such flexibility. More recently, confidence in the German industry’s efforts to control ASF in wild boar has resulted in the re-opening of some markets, including Vietnam. By the end of April, permanent fencing was being actively erected along hot spots at the border with Poland, further demonstrating the German industry’s fastidious approach to addressing the problem, with ample government support.

As in Germany, getting a handle on the spread of wild pigs in Canada will be key to assuring partners that the Canadian industry is serious about securing its zones. If wild pigs cannot be completely eliminated, a next-best option may be strict containment. Such an accomplishment will be important before any hypothetical arrival of ASF. Unlike in Germany, wild pigs are not native to North America. Despite this reality, some animal activist groups in Canada have petitioned to preserve this invasive species – much to the contrary of ecological experts and common sense.

Around the same time restrictions on German exporters had begun to ease, in March 2021, the Canadian Food Inspection Agency (CFIA) and U.S. Department of Agriculture (USDA) agreed on an approach to guide bilateral trade if ASF is detected in wild pigs in either country. As in Germany, where no ASF cases have been found in domestic pigs, limiting the disease spread within the wild pig population may be a limp the Canadian industry can learn to accept, even if it is far less than ideal.

“We are pleased to announce another milestone in our Canada-U.S. collaboration on prevention and preparedness related to ASF,” said Jaspinder Komal, Canada’s Chief Veterinary Officer (CVO). “This first-of-its-kind protocol will use a science-based approach to minimize trade impacts while protecting the swine populations in both countries.”

On the commercial side, conversations between officials in Canada and Japan have been ongoing related to the issue. Perhaps even more importantly than certain agreements with the U.S., a Canada-Japan zoning framework could be the top priority for the Canadian industry. On volume, Canadian pork traded with the U.S., China and Japan has been fairly consistent over the past decade, while dollar value compared to volume undoubtedly favours the Japanese market.

But for trade to continue in the case that ASF should enter Canada for any reason, Japan wants proof of effective zoning, which is where PigTRACE – a component of the Canadian Pork Excellence (CPE) program – comes into play. PigTRACE is an industry-led, live animal traceability initiative designed to ensure protection, prosperity and peace of mind for the Canadian pork industry and its customers. In the event of a food safety issue or foreign animal disease outbreak, traceability gives government and industry officials the tools to manage the situation.

In Japan, pork of Canadian origin commands an observable premium over and above similar products of U.S. origin, according to the Canadian Pork Council’s (CPC) Made-in-Canada Hog Pricing Report, released in November 2019. CPE is the on-farm program that creates the foundation for the Verified Canadian Pork (VCP) brand. For packers selling product at the retail level in Asia, the VCP logo is an important visual identifier for consumers. A Canada-Japan zoning framework will be important for preserving this valuable outlet for Canadian pork exports.

Animal ag’s newest, biggest threat

When a large container ship became wedged in the Suez Canal for a full week in late March, it caused massive disruptions to supply chains impacted by the delay. For the Canadian pork industry, human or animal disease could be the wedge that jeopardizes business.

Agriculture especially in North America has long been regarded as a pioneering field. From the days of homesteading and breaking land in the 19th and early 20th centuries, to the emergence of largely export-based commodity sectors in the mid- to late-20th century, the 21st century’s greatest new farming frontier, especially for livestock sectors, may well be the management of disease – whether in animals or humans.

For the Canadian pork industry, it is immaterial whether the supply chain breaks as a result of processing issues connected to COVID-19 or trade issues connected to ASF; all stakeholders must stay limber and focused on mitigation strategies and response plans, while ensuring the entire value chain is functioning cooperatively, should the inevitable happen.