March 19, 2009
Canadian Beef Consolidated Further
The recent takeover of Canada's largest beef packing plant leaves two companies controlling a whopping 83% of Canadian beef.
In light of last year's largest recall of meat in Canadian history, Canadians have become quite aware of the impact that just one company can have on the country's food supply.
As a result of the tainted meat originating from one plant in Toronto, there were 51 confirmed cases of listeria and 21 deaths recorded among seven provinces.
Had it been an isolated incident, fears may have been curtailed, but the Maple Leaf Foods recall was only one of a long string of national and international food recalls over the past few years.
It might then come as a concern to Canadians to learn how, on February 27, Industry Canada's Competition Bureau permitted the country's beef packing sector to become even more consolidated than it already was.
The permitted sale of the Lakeside Packers plant in Brooks, Alberta went almost entirely unnoticed by Canadian media.
In June 2008, American multinational Tyson Foods announced they had struck a deal with Alberta's Nilsson Brothers and their XL Foods division. Tyson's Lakeside plant is known as the country's largest slaughterhouse and packing facility. Now in the hands of XL Foods, Lakeside will continue to maintain a capacity of processing 4,700 head of cattle per day.
Prior to the sale of the plant, four companies controlled 89% of the processing of beef cattle in Canada. Since the Competition Bureau's review process and the subsequent approval of the takeover, the country is now left with only two companies overseeing 83% of the market; XL Foods and American multinational Cargill.
The Bureau has strongly suggested that permitting the sale was a difficult decision, however, their industry-wide consultations informed them that many groups viewed the takeover as the lesser of two evils.
According to the Bureau's Denis Corriveau, industry consultations returned an overwhelming fear that without the sale of the Lakeside plant, Tyson might have closed the plant altogether. "Tyson had been in the process of restructuring all of its activities, and there was a perception that Tyson was no longer interested in the beef packing business in Canada," says Corriveau. "It was also based on the fact that these days, Canadian packers have higher costs of production than their comparable U.S. packers."
The National Farmers Union (NFU) has been one of the most vocal opponents of the takeover and communicated their opposition to the Competition Bureau on a number of occasions.
In November 2008, the NFU released a report titled, "The Farm Crisis and the Cattle Sector". According to the NFU's Fred Tait, the "crisis" referred to in the report is one of a return to farmers. "This [crisis] is a problem with a disfunctional marketplace that is taking more and more of the wealth that farmers produce and distributing it to other players in the cattle industry," says Tait.
The centrepiece of the report is a graph that tracks the prices received for beef cattle by Canadian farmers since the time of the Great Depression. "This graph starts out in the 1930s and it shows the depressed prices, but then, in 1942, we see prices rise to a different threshold that we call normal," describes Tait.
This 'normal' period lasted until 1989, and throughout that period, farmers received twice the amount for their cattle that they receive today.
Two significant events took place in 1989 that the NFU sees as the primary reason for the depression-era prices received by farmers today. It was in that year that the Canada-U.S. free trade agreement was signed and U.S. based Cargill entered the market.
Shortly thereafter, many medium-sized packing plants across the country began to close. According to Tait, this left less competition in the market. "Any time you reduce the number of bidders for a product, one should expect that the price of that commodity will decrease," suggests Tait. "We believe that's the major part, corporate concentration and the integration of the industry on a North American basis."
The NFU's report also tracked the increasing prices that consumers have paid for beef throughout the last ten years. With even tighter concentration in the sector following the takeover of the Lakeside plant in Brooks, the NFU believes that farmers will continue to receive less for their cattle and consumers will continue to pay more for their beef.
Shortly after the Competition Bureau was making their announcement on February 27, Fred Tait was in Ottawa speaking before Canada's Standing Committee on Agriculture.
On behalf of the NFU, Tait requested that the Committee "pull both packers and retailers before the committee and demand they open their books and show why it is, that in an industry that is supposed to have reached its maximum efficiency, producers are getting less and consumers are paying more."
"That's a challenging question that needs to be resolved," says Tait.
Deconstructing Dinner is heard on radio stations across Canada and is available as a Podcast. More information on this topic can be found at www.cjly.net/deconstructingdinner/031209.htm
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