Olymel, the protein arm of Sollio Co-operative, announced Friday it will wind down operations at its hog slaughter, cutting and deboning plant at Vallee-Jonction, Que. and permanently close the facility by Dec. 22.

The decision affects 994 employees across two shifts per day, including 911 unionized workers and 83 managers, Olymel said. Of the 911, 122 are in Canada as temporary foreign workers (TFWs).

The decision follows reductions in Olymel’s total annual hog slaughter over the past 12 months by about 1.5 million hogs. By operating just three slaughter plants in Quebec, Olymel said it “will be in a better position” to reach a reduced weekly slaughter capacity of 81,000 hogs, down from 140,000.

“After carefully examining the difficult situation in the fresh pork sector and searching for the best way out of this crisis, it has become clear that closing one of Olymel’s four slaughtering, cutting and deboning plants in Quebec was inevitable,” CEO Yanick Gervais said in a release.

The decision followed an analysis of the four plants which “ultimately revealed the limitations of the Vallee-Jonction plant, given the steady decline in the available workforce and the condition of the facilities.”

The plant at Vallee-Jonction, about 60 km southeast of Quebec City, has operated since 1965 and has been part of the meats division of what’s now Sollio since 1975.

On a call Friday morning with reporters, Gervais said the plant has “some structural problems” and its cooling systems need fixing. The structural problems are nothing dangerous, he added.

The plant’s configuration also “limits technological improvements,” meaning it’s too tight to allow for installation of robots and other automation — a problem that’s not an issue at the three remaining slaughter plants. In all, the needed upgrades and repairs at Vallee-Jonction would require an outlay of almost $40 million in “the very short term.”

The company did cite a “constant decline in available labour” in the Beauce region, leaving Olymel unable to fill normal turnover-related vacancies at Vallee-Jonction, much less to create new jobs through value-added work. The three remaining plants are in areas with “better recruitment opportunities” for workers, Olymel said.

That said, Gervais emphasized the decision to close the plant was not “region-based” but rather mainly on the “current and potential future operational capacities” of the company’s plants.

To process remaining hogs and meet “producer demand” in the Beauce region and elsewhere, the plant’s closure will start in mid-September with the evening shift, affecting 443 workers. The day shift “should continue depending on supply and labour availability” until the plant “ceases operations completely” on Dec. 22.

Vallee-Jonction employees will be offered the option for “voluntary relocation” to one of six other Olymel plants, and the company has also “taken steps with federal and provincial authorities” to allow affected TFWs to apply for relocation to other Olymel sites.

“As if it weren’t insulting and violent enough to be treated this way, we are asked to stay on the job until the final closure,” Martin Maurice, president of the Syndicat des Travailleurs d’Olymel Vallee-Jonction, the local union backed by CSN (Confederation des syndicats nationaux), said Friday in a separate release.

‘Obstinate’

As for affected hog producers in Quebec, Gervais said a new three-year agreement between hog buyers/processors and Eleveurs de porc du Quebec “is being established,” with details to be announced next week.

Provincial Agriculture Minister Andre Lamontagne said Friday on Twitter that the plant closure is part of a difficult restructuring for Olymel — but also said news would come shortly to assure the pork sector’s sustainability.

Quebec’s hog farmers and packers have been in talks led by former provincial finance minister Raymond Bachand since last September, Gervais said Friday, adding that “both processors and producers have suffered from the consequences of the worst economic situation in our industry.”

Gervais emphasized it’s “important to remember the efforts made by both sides to support the sector, such as facilitating the processing of remaining hogs and making financial arrangements to reduce price pressures.”

Martin Caron, president of Quebec’s Union des producteurs agricoles (UPA), said in a separate statement Friday that Olymel’s announcement flies in the face of “the efforts, the investments and the sacrifices” of hog producers, who “deserve better, period.”

UPA on Friday called for the province and its agriculture ministry (MAPAQ) to step in and undertake a “neutral and independent” analysis of the current situation in the province’s pork sector, for the sake of industry stakeholders as well as the general public.

CSN president Caroline Senneville, in that union’s release, said the plant’s closure is “directly linked” to the failure of Bachand’s talks between Quebec’s producers and packers.

Alexandre Laviolette, president of CSN’s trade arm, said the closure stems from Olymel’s bad business decisions and the “obstinate stubbornness” of hog producers who didn’t want to have to continue to discount every hog delivered to the company’s plants.

Furthermore, he said, Quebec’s farm income stabilization program (ASRA) could have been used to support producers in a situation where neither party wanted to absorb expected losses.

Barbara Poirier, president for CSN’s Chaudière-Appalaches council, said that while meatpacking workers were regarded as heroes during the pandemic, they’re now about to be let go because of a dispute over how producers and packers could share market losses against which they were “fully insured.”

The plant’s CSN-represented workers in 2021 had ratified a six-year contract which otherwise was due to run through to March 2027. That contract followed a four-month strike which ended after the company threatened to scrap the plant’s evening shift.

‘Turnaround measures’

The COVID-19 pandemic, shortages of available labour, “instability of export markets” and rising raw material costs, among other conditions, have led to losses “which still have a major impact on Olymel,” the company said Friday, noting its subsequent reorganizations, plant closures, asset sales and reductions of hog purchases by over two million head from both Quebec and Ontario.

Gervais noted those “major turnaround measures” are “starting to show results” but the company is “still in the process of optimizing our operations to achieve a more predictable business model and ensure the sustainability of this sector of the business.”

Olymel’s remaining hog slaughter plants in Canada include its Quebec sites at Princeville, St-Esprit and Yamachiche, plus its western hog plant at Red Deer, Alta.

“Significant volatility” remains in the fresh pork sector and the “business risk is high,” Gervais said. “We need to protect our value-added export markets, such as Japan and Korea, as well as our domestic fresh and processed meat activities.”

The Vallee-Jonction plant, which has a weekly slaughtering capacity of up to 35,000 hogs, makes boned pork products, various cuts and chilled pork, with “a large part” of that volume exported to Japan, the U.S. and Mexico.

As for the Vallee-Jonction building itself, Olymel said Friday it will “assess all of its options and… consider any proposals from interested parties.” — Glacier FarmMedia Network

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The company, an arm of ag co-operative Sollio, announced Thursday it will close its St. Jacques Street plant at St. Hyacinthe, Que. effective Feb. 10, affecting 107 employees.

The plant, which previously focused on ham deboning, still handled some processing and frozen food storage, but most of its operations since 2017 have focused on rendering fats and oils. The company had said in 2016 it was considering “various options to find a new vocation” for the St. Hyacinthe site.

Olymel, which has its head office in the same community, said in a release Thursday the decision follows a reorganizing of its workforce in the fresh pork sector “as well as a reduction in the volume of products requiring packaging.”

The company’s primary kill-and-cut facilities are now able to cover the packaging operations previously handled in part at the St. Hyacinthe plant, Olymel said, and products which until now have been stored there will be transferred to other internal or external distribution centres.

Citing “the scale of the investments required to maintain the melting operations for lard production,” Olymel has decided to stop that work and will instead sell and ship its raw materials for lard to a third-party company.

Employees still actively working at the plant have been notified and received 12 weeks’ notice of termination as per Quebec labour law, Olymel said.

All affected employees get the opportunity to be “voluntarily relocated” to one of four Olymel facilities — two of which, at St. Damase and St. Rosalie, are located in the same municipality and specialize in fresh poultry and further-processed poultry products, respectively.

The other two are the Unidindon turkey plant at St. Jean-Baptiste-de-Rouville and the company’s further-processing plant at St. Jean-sur-Richelieu. Employees who’d rather work at other Olymel facilities further afield in Quebec may also use the company’s relocation plan to do so, it said.

Olymel management said it will be “carefully weighing” available options for disposal of the St. Jacques Street plant itself, noting its buildings and land take up a “significant area in the heart of the municipality.”

Olymel CEO Yannick Gervais, in Thursday’s release, said the decision to close the plant “ties in with the restructuring of the fresh pork sector and stems from a months-long analysis that concluded today.”

The closure, he said, is meant to help ensure the company’s fresh pork sector “gets back on the road to profitability after two years of difficulties caused by the impacts of the COVID-19 pandemic, the labour shortage, market uncertainties and various other factors underlying the unfavourable economic situation.”

Olymel had already announced in July that it would cut back the packaging operations at the St. Jacques Street plant. Last month it served layoff notices for 57 people in its management ranks and said it would eliminate another 120 mainly administrative positions via attrition.

The Olymel arm of Sollio in fiscal 2021 booked a $60.2 million loss before patronage refunds and income taxes, down from earnings of $215.4 million in fiscal 2020. The drop into the red was “largely attributable” to its fresh pork operations in Quebec and Alberta, Sollio said in its annual report in February.

At that time, the company said factors dragging on the bottom line had included a loss of market access to China, a COVID-19-related shutdown at its Red Deer, Alta. hog plant, labour shortages, related outsourcing costs, a four-month strike at its Vallee-Jonction, Que. pork plant, higher hog supply costs and a stronger loonie making Canadian products less attractive internationally. — Glacier FarmMedia Network

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Nearly a year later, the industry is in the middle of a speedy recovery.

At the Chicago Mercantile Exchange (CME) on Thursday, lean hog futures were either approaching or have surpassed the US$100/cwt mark, levels which haven’t been seen since October 2014.

Brad Marceniuk, a Saskatoon-based livestock economist for the government of Saskatchewan, said there are major drivers right now behind the rise in hog prices.

“Domestic markets typically get stronger into spring and summer with barbecue season increasing demand. We have also had reduced U.S. hog slaughter numbers overall the last few weeks which has reduced pork supply,” he said via email.

“Last spring, the pandemic forced many U.S. hog slaughter plants to slow down, some temporarily closing, which reduced weekly pork supplies for many weeks, reducing U.S. pork in cold storage. Previous pork in cold storage levels have not regained to pre-pandemic levels.”

One of the major drivers is China, as it continues to rebuild its hog herd decimated by African swine fever. Last winter, there were reports China was steadily growing its herd and reducing its overseas hog purchases. Now, they are starting back up again.

“Over the last few weeks there have been reports that China is again struggling to deal with African swine fever and have been forced to kill millions of pigs. This news has likely helped the lean hogs futures contracts to move higher in anticipation of higher pork exports,” Marceniuk said.

Canadian and U.S. hog markets are thriving and, despite rising feed prices taking a bite out of profits, slaughter-weight hog prices are now 60 per cent higher than the low levels seen last July, according to Marceniuk.

“I expect hog prices over the next few months to continue to be strong. We’re at the time of year where seasonal demand is stronger…If (China’s) demand picks up again, we could see a bump up in prices higher,” he added.

— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.

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La Broquerie, Man.-based HyLife announced last week it has bought a 75 per cent stake in Taylor Corp.’s Prime Pork, a packing and processing operation at Windom, Minnesota, about 200 km southwest of Minneapolis.

Taylor Corp. set up Prime Pork in 2016 at Windom’s former PM Beef packing plant, which had closed the previous year. The renovated plant now employs about 660 people and has capacity to process about 1.2 million hogs per year on a single shift, HyLife said.

The deal “will allow us to expand our operations into the United States” and will increase HyLife’s total processing capacity to 3.2 million hogs per year, HyLife CEO Grant Lazaruk said in a release May 22. The deal’s dollar figures weren’t released.

“Plants in both Canada and the U.S. will strengthen our supply chain, giving us further diversity in our operations to better serve our customers around the world,” Lazaruk said.

Specifically, combining the two operations for product flow from both the U.S. and Canada will allow for “additional marketing opportunity to customers who only carry pork products from either the U.S. or Canada,” Prime Pork said in a separate release.

Taylor’s Prime Pork and Comfrey Farm businesses also include hog farming operations, in which the company owns the pig inventory and contracts with third parties for barn facilities, feed and management.

Those contract operators today raise about 300,000 feeder hogs per year to market weight and Prime Pork sources other hogs from third party suppliers.

Privately held Taylor Corp. owns various agribusinesses as well as Minneapolis’ StarTribune newspaper and Minnesota’s NBA and WNBA basketball teams. “With this new partner and leadership, I am confident this agreement will be great for the community, employees and area producers,” Glen Taylor said in Prime Pork’s release.

“Prime Pork’s location in southern Minnesota provides an abundance of resources, securing hog supply and the other raw materials required to operate a processing facility efficiently.”

Manitoba hogs

HyLife also announced May 5 it had bought the hog farming operations of ProVista from its Manitoba owners, Harold and Arthur Rempel, for an undisclosed sum.

Steinbach, Man.-based ProVista is today billed as “one of Canada’s largest independent hog farming operations,” with hog production sites in Manitoba’s southeast and Red River Valley regions and in the RM of WestLake northwest of Portage la Prairie, as well as in southeastern Saskatchewan.

The assets going to HyLife in that deal include a boar stud operation and 37,000 sows in 12 sow barns, along with six nursery and six finishing barns producing up to a million hogs per year, employing 252 people.

The ProVista farms are “in close proximity to HyLife’s current operations,” HyLife said, allowing for “strategic synergies, as the newly acquired farms will be added to HyLife’s existing infrastructure.”

“We have a long working relationship with ProVista and look forward to building on all the hard work that they have done,” HyLife’s Lazaruk said May 5. “This acquisition enables HyLife to expand our production team and secure hog supply to facilitate future growth.”

“We are confident this sale represents an opportunity for our employees to grow with a global leader in the pork industry, and it fulfills our farming business aspirations,” the Rempels said in the same release.

The Rempels’ other businesses include Proline Pork Marketing, Horizon Livestock and Poultry Supply, ProVista Feeds, PVS Transport and Quarry Oaks Golf Course.

HyLife has been in aggressive expansion mode in recent years, expanding its hog processing plants at Neepawa, Man. and at Salvatierra in central Mexico, building and buying additional finishing barns and putting up a new feed mill at Killarney, Man. — Glacier FarmMedia Network

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According to U.S. Department of Agriculture supply estimates, weekly U.S. hog slaughter numbers over the past two months have averaged 2.369 million head, up 3.2 per cent from the same time last year.

That increase is expected to continue, following the launch of two new massive operations in Michigan and Iowa last fall.

“That increased hog slaughter has helped ease the higher hog supply,” said Brad Marceniuk, a provincial livestock economist in Saskatoon.

Normally, higher volumes of a product bring lower prices, but strong U.S. exports, and by extension Canada, have helped keep prices strong.

Weekly Saskatchewan Signature No. 5 base slaughter cash hog prices now average $160.45 per 100 kg. That was up $1.12/ckg over the previous week.

New export markets will be sorely needed, Marceniuk said, as slaughter capacity in the U.S. rises.

“We won’t eat more (pork) in North America necessarily but we’re going to have to export more,” he said.

China, Mexico and Japan are three of Canada’s largest customers apart from the U.S., he added, and additional markets are being sought.

That’s why stakeholders in the Canadian pork industry are monitoring negotiations over the future of the North American Free Trade Agreement very closely.

“We do send over five million hogs there annually,” he explained, and roughly a third of Canadian pork is shipped there as well.

Feed costs are another factor pressuring the Canadian market. The price of corn in the U.S. has stayed roughly the same since last year, Marceniuk said, but Canadian barley prices rose over that time.

“So that would be a feed negative for Western Canada,” he said.

Looking at the futures market on the Chicago Mercantile Exchange, he said, the industry expects to see stronger pork prices in the coming months.

He expects cash prices in Canada to be in the $170-$180/ckg range by the spring and summer.

However, he stressed that Canada will be competing with the U.S. for new export markets in 2018, so it will have to come up with additional outlets waiting to take its product for prices to retain their strength.

— Dave Sims writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting.

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“The isoweans are stronger, which tells us that there is greater demand in the U.S. going into the spring and summer,” said Neil Ketilson, general manager of the Saskatchewan Pork Development Board (SaskPork).

Weanlings were trading at less than $10 at their low point, he noted, but have now climbed back to over $40.

“Even though the U.S. is processing record numbers of hogs, the internal demand and exports are very good,” said Ketilson, adding that packers are also seeing good cutout values.

A number of new packers are coming on line in North America in 2017, which will add to the demand side of the supply/demand equation and contribute to the upside potential on price, he said.

“Hogs have made a dramatic turnaround over the month of December,” said Tyler Fulton, director of risk management with H@ms Marketing in Manitoba, adding that “it’s a shocker, really.

“If you’re looking at fundamental information, things are very positive,” he said, noting the U.S. saw a record weekly slaughter in 2.544 million hogs in the latest reporting period, with no price concessions on the wholesale price side.

Packers are seeing some of their best margins of the past 12 years, “and some of that margin is being given back to producers,” he said.

With hog prices currently at about $150 per 100 kg, “most independent hog producers can eke out a profit at that level,” Fulton said, but noted the seasonality of the hog market usually sees lower prices at Christmas time.

“Regardless of what you attribute it to, (the rally) has been well received by hog producers,” said Ketilson.

Feed supplies are ample across Western Canada, although he cautioned high vomitoxin levels were being watched.

“There are certainly challenges, but this business is never a high-margin business.”

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow him at @PhilFW on Twitter.

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Brad Marceniuk, a provincial livestock development specialist in Saskatoon, said he expects prices to stabilize in the next couple of weeks as slaughter numbers come back to Earth.

“It really impacts the price, because the cash market price in the U.S. determines what our cash price is here,” he said.

Saskatchewan Signature No. 3 cash slaughter weight hog prices declined C$2.89 per 100 kg, to average $124.17/ckg, for the week ended Saturday (Nov. 21).

So far this year, the number of Canadian hogs slaughtered was estimated at 18.44 million head, up 2.5 per cent from the same time in 2014.

The U.S. has been even busier. The weekly pork production of 510.5 million lbs. established a new weekly record, according to Marceniuk.

“So when (the U.S.) have record numbers of production and slaughter numbers they see numbers typically fall,” which in turn reflects onto Canadian prices, he said, noting hog exports in North America typically flow north to south.

“It’s not vice-versa; they typically pay higher prices for hogs and our price is whatever their price is less a bit of a basis. It doesn’t move back and forth.”

Marceniuk attributed some of the rush to the holiday season in the U.S. The low Canadian dollar, relative to its U.S. counterpart also helps increase interest.

Once Canadian prices stabilize, he said, they should move up slowly.

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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For instance, cash slaughter-weight hogs in Saskatchewan, based on the Maple Leaf Signature #3 contract, averaged $162.55/cwt last week, down $7.95 (4.7 per cent) per 100 kg, according to Brad Marceniuk, a provincial livestock economist in Saskatoon.

Prices, he said, will “probably creep lower over the next two months, just a function of seasonality.” Cutout values for hogs typically dwindle in the fourth quarter, he added.

Other factors leading to the softening in prices include the rise in pig numbers south of the border. The U.S. hog supply is significantly larger in 2015 than it was a year ago, Marceniuk said.

U.S. hogs slaughtered for the shorter Labour Day week under federal inspection were pegged at just over two million head, down 0.5 per cent from the same period in 2014.

Part of the reason for that increase may be a slowdown in exports of U.S. pork, due primarily to the strength of the U.S. dollar.

However, there were some exceptions in the market: prices for feeder pigs have actually risen recently, with some futures contracts up a couple of bucks, according to Marceniuk.

“I believe the futures went up because the futures price is below the cutout value today.”

This may indicate that hog prices could be slightly better three or four months from now than what the market currently indicates, he said.

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.

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