Bottlenecks at slaughterhouses due to COVID-19 are creating a cash crisis for farmers and may threaten the flow of meat to grocery stores

Bottlenecks at pork slaughterhouses due to COVID-19 are creating a cash crisis for farmers, raising fears of bankruptcies at the farm level and threatening the flow of Canadian meat to grocery store coolers.

A cluster of coronavirus outbreaks has bedevilled meat-packing plants in recent weeks, forcing the temporary shutdown of some facilities and the imposition of strict social distancing and safety measures in others.

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Olymel, the country’s largest pork processor, was forced to close a plant in Yamamiche, Que., for 14 days after nine employees tested positive for the virus. The company reopened that plant last week and has introduced new safety protocols at three of its six slaughterhouses.

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While the measures are necessary to keep employees safe and prevent a total shutdown of facilities, they are also dramatically reducing the number of animals moving through the plants, creating a backlog on farms that is costing farmers between $30 and $50 per animal — or roughly half their value, according to the Canadian Pork Council. Most of the country’s 13 pork processing plants are now operating at reduced capacity as infection control measures are carried out.

The organization is seeking aid from the federal government to keep farmers afloat.

“We are asking the government for an emergency payment of $20 per hog so that pork producers can continue to pay bills, feed pigs and keep producing food for Canadian families,” said Rick Bergmann, chair of the council. “Without it, family farms will be lost. In turn we will continue to see disruption in the food supply chain, and increased food insecurity as supplies tighten and food becomes even more expensive.”

Photo by Ryan Remiorz/The Canadian Press files

The federal government is working with the provinces to support farmers and ensure availability of meat products, according to Marie-Claude Bibeau, the federal Minister of Agriculture and Agri-Food.

“We understand the repercussions the short-term capacity reduction in certain meat processing facilities is having on livestock producers,” the minister said in an emailed statement.

Canada exports about 70 per cent of its pork production annually and relies on imports for some domestic needs. The country could expand its imports to backfill domestic production, although other countries are at risk of running into the same problems in their slaughterhouses, said Gary Stordy, director of government and corporate affairs at the Canadian Pork Council.

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“We have to remember also, that countries around the world are putting export restrictions on food,” he said.

The volume of hogs slaughtered in Canada fell by 16.2 per cent for the week ending April 14, as Canadian farmers struggled with a combination of depressed market prices, rising feed costs and lower returns on oversized hogs.

Indeed, as processing plants take fewer animals, farmers are being forced to pay more to continue to feed them. The hogs in turn are getting larger — a problem for farmers who are paid less for animals that have grown beyond an agreed-upon size.

Photo by Hyungwon Kang/Reuters files

“There is a weight and size producers are expected to deliver and they get penalized if they aren’t within those specifications,” Stordy said.

At the same time, a swath of meat processing plants have also been forced to close south of the border due to COVID-19 outbreaks, exacerbating an already significant oversupply of American hogs. That’s driven down market prices to roughly US$45 per hog from a more typical US$55 a hog for this time of year, said Ken Ball, a senior commodity futures adviser at PI Financial. Canadian hog prices are tied by formula to U.S. prices.

“The system was taxed even before this and now even the plants that are open are slowing down,” Ball said. “Eventually market hogs will build up and swamp the market.”

Hog prices typically rally to US$80 or more between May and July, he added.

“The concern now is that seasonal rally just won’t happen this year,” he said. “And without that rally, farmers are going to be hurt even more.”

Olymel now has three of six plants operating at full capacity, said Richard Vigneault, spokesperson for the firm. The Yamamiche facility, which usually processes 28,000 hogs each week, moved 4,000 as it reopened last week and is expected to hit 17,000 this week, he said.

“We have implemented a lot of measures to reduce to zero if possible the risk of contamination,” he said. “We are all trying to adapt and adjust and cope with this situation as best we can.”

Financial Post