Flying high on the flatlands
By B. TOBIN & J. MUGGERIDGE
Why not Ontario? "I'm not one of those millionaire Dutch farmers," says Wooldrik with a chuckle. In the summer of 1993, he scouted farms in the London area, but then headed for Alberta, where he says he could get double the farm for the money, and have fewer headaches from neighbours pressing in on all sides. "From what we saw in Ontario, it is difficult to set up a farm. Here, there is more space."
The last two and a half years have been good for the Wooldrik family. They have expanded from 80 to 280 sows farrow-to-finish on their quarter section (160-acre) farm in Fort Macleod, in southern Alberta. Finished pigs, fed barley, wheat and canola, are shipped 300 kilometres north to Fletchers packing plant in Red Deer.
The Wooldrik enthusiasm is shared by many Prairie livestock farmers these days. The death of the Western Grains Transportation Act, which subsidized grain transportation to the tune of $1 per bushel, has brought uncertainty, but it's also brought cash - about $20 per acre from a federal government $1.6-billion transition fund.
With more grain staying on the Prairies, Western farmers have been pouring money into cement, looking to take advantage of cheap feed wheat and barley. Barns are popping up in areas where, in the past, only combines dared to tread. And animal genetics companies, processing giants and agribusiness suppliers have flocked to the flatlands.
All the Prairie activity has left many Ontario livestock farmers wondering if their industry will be swept West in the hoopla. The beef industry fell victim to the Western tide 10 years ago. Could the pork and chicken industry be tugged along in the same current?
The George Morris Centre's director of economic research Larry Martin says Prairie livestock expansion "does not have to have an impact in Ontario." With growth in world markets, Canada "could double production and nobody would notice," Martin says. "But farmers have to put their minds to it."
Pork farmers are meeting the challenge, says Carl Moore, chairman of Ontario Pork. "You can talk about barns being built out West, but you can go up to Huron county and Perth county. There are barns being built in Ontario, too."
Ontario Pork wants to see the weekly hog run increase to 110,000, up from the 70,000 to 75,000 producers had been marketing for most of 1995 and early 1996. Moore says 81,000 pigs were marketed late last month, despite record grain prices this summer - a sure sign of producer confidence. "The barns that were built last year, the barns that were built earlier this spring, these are just barely starting to come into production," Moore says.
Back on the Prairies, John Kroeker, CEO of Puratone Corp., a Manitoba hog integrator which produces up to 15 per cent of the province's pigs, thinks Western livestock expansion is just beginning. "We're seeing the beginning of a trend," says Kroeker, based in Niverville, Manitoba. "We have a lower cost base," he says, citing land costs of $200 to $800 an acre. In highly-populated Ontario, meanwhile, you'd have to add a zero to those figures. Kroeker says land base is also becoming more restricted: "Hog smell issues, not so much grain, will determine expansion, as well as herd health," he says, noting the industry exodus from South Carolina.
Moore, who farms at Embro, bristles when he hears talk of Ontario's market being usurped by Western provinces. "The Western Canadian farmer is still a grain farmer, and will continue to be....The only people breeding hogs out West are the ministers of agriculture," Moore says.
But a quick peek at hog marketings will show that Prairie growth is dwarfing Ontario advances. Between 1985 and 1995, the total number of hogs marketed on the Prairies increased by 61 per cent to almost seven million. During the same period, Ontario marketings dropped by seven per cent to 4.6 million. Moore says, however, that the number of pigs marketed in Canada isn't the whole story; not showing up in the statistics are as many as 20,000 Ontario weaner pigs trucked to the U.S. weekly. Weaner pigs would stay in Ontario if Ontario packers would pay an extra $5 per hog, he says.
But Ontario packers are also looking West. Kitchener-based Schneiders will stop slaughtering hogs at its plant next February. The company will buy pork carcasses from other packers until a new $40-million Winnipeg kill plant is operational.
Maple Leaf Foods, Canada's largest food processing company, has also cast its eyes westward, recently purchasing Burns Meats Ltd. and its 3,600-head daily killing plant in Winnipeg. Does this mean Maple Leaf, which operates Ontario's largest processing plant at Burlington, is turning its back on Ontario?
Not at all, says Maple Leaf Meats president Michael McCain. "There's room for both [Ontario and the Prairies] to grow, provided both are competitive."
McCain says he wants to double the Burlington plant's 30,000 weekly kill and needs Ontario pigs to do it. "For a plant to survive, it must source pigs from a very small radius around the plant." Right now, McCain says, he can't afford 60,000 Ontario pigs.
The lure of cheap Prairie hogs, however, made the Burns deal a tough one to resist. "They've got substantial hog growth opportunities....And there's no secret that the hog costs are lower in the West," McCain says - up to 36 per cent lower, according to a Saskatchewan government survey.
"The old rule of thumb was that they're [production costs] lower in the West, but they've got to take a premium freight east to get the pork into Ontario.
"The business isn't in Ontario. The business is in Asia," says McCain, who exports 30 to 40 per cent of the Burlington plant's production.
A proposal to make Winnipeg the launching pad to Asia is the brainchild of Winnipeg-based trucker Hubert Kleysen. When the globe is viewed from the North pole, Winnipeg is the ideal central point between the Europe-Pacific Rim air route, says Kleysen. North-American-bound product could be flown to Winnipeg, and trucked to destinations such as New York, Chicago or Toronto. Empty cargo jets heading back to the Pacific Rim could be crammed with exports such as chilled pork.
Today, Kleysen's global dream has taken shape in a $30-million proposal called "Winnport", and is a few short months away from reality. Billed as a "northern hemisphere distribution alliance", Winnipeg-based Winnport Logistics Ltd. has had more than one inquiry from Ontario-based pork packers, including Schneiders, whose aggressive expansion plans in Winnipeg position it perfectly for the export scheme.
"Japan and Korea are primary countries of opportunity for Canadian meat products, particularly fresh-chilled pork....China also represents opportunity," says Kleysen, Winnport president. By mid-1997, the Winnport service is planned to operate scheduled flights between North America and Asia, and North America and Europe, using Boeing 747-200 freighter aircraft. Ground destinations include Chicago, New York, Minneapolis, Boston, Detroit, Denver, Kansas City and Toronto. Also planned is a $100-million "multi-model facility", developing a business park and foreign trade zone on lands at the Winnipeg International Airport.
For Western Canada's burgeoning livestock industry, Winnport's gateway to the world was the missing piece to the puzzle. With Burns Meats and the new Schneiders plant in Winnipeg, the West will be able not only to raise livestock on locally-grown grain, but add value as well, keeping jobs at home, and securing expanding markets abroad.
Back in Ontario, Sebringville manure equipment manufacturer Dennis Nuhn sees dramatic growth in Western sales, but hasn't written off Ontario. "We're experiencing an unbelievable growth of sales in Ontario - more optimism than I've seen in a long time.
"Geographically, talent-wise, knowledge-wise, land-base and climate, we have more going for us than anybody," says Nuhn. On the Prairies, expansion fever has not stopped at the Manitoba border. Livestock barn contractor Shaun Heldt, president of Advanced Equipment in Thorsby, Alberta, says business has doubled in three years. "The expansion that has gone on here in the last two to three years is unbelievable. It's surpassed any expectation," Heldt says. In the last three months alone, his company has done nine barns, some expansion, some renovation. "We've never been as busy at this time - ever," he says.
Beef is thriving as well. Heldt, who ranches himself, knows of a 100,000-head feedlot expansion this past summer. Alberta's two primary cattle slaughtering plants - Cargill and IBP - have doubled in capacity. "IBP moving to Alberta pretty much tells you where it's at," he says. "They're the biggest independent slaughtering facility in the world."
The beef industry has grown tremendously throughout the Prairies over the past 10 years. Alberta, with cattle and calf numbers estimated at 4.9 million as of Jan. 1, 1996, has increased its herd by 40 per cent since 1985. The Saskatchewan herd has grown by 36 per cent and Manitoba by 24 per cent over the same period.
Much of the Prairie beef growth has come at Ontario's expense. The number of cattle and calves in Ontario dropped from 2.7 million in 1985 to just over two million in 1994. Ontario cattlemen have seen numbers increase in the past two years, but poor prices have dampened enthusiasm.
Ontario's cow numbers haven't shrunk, but Alberta's are growing much faster, says Graeme Hedley, Ontario Cattlemen's Association executive vice-president.
Hedley sees continued growth in Ontario, Manitoba and Saskatchewan. But Alberta, with its two world-class packing plants, abundant water and feed barley, large grass base and Chinook winds that take the edge off southern Alberta winters, is tough to beat, he says.
"There's potential for growth [in Ontario] but you have to able to compete. It's difficult to compete in cattle feeding with the U.S. Midwest and southern Alberta," which is the cheapest place in North America to feed cattle.
Ontario isn't the cheapest place to grow chicken, but it remains Canada's biggest poultry producing province, and Ontario broiler producers don't plan on relinquishing top spot to Western upstarts.
Like other Ontario livestock producers, the province's chicken farmers are losing the cost of production battle to Prairie producers. But nobody this side of the Manitoba border is showing much concern.
In September, 1994, both Prairie and Ontario producers were spending about $1.14 to produce one kilo of chicken, with virtually identical feed costs. But two years later, in September of this year, Prairie farmers had gained an 8.5-cent production advantage - an average of $1.334 per kilo for Prairie farmers compared to Ontario's $1.422. Ontario producers' feed cost portion of the formula is five cents higher than their Western counterparts.
All provinces have shown sustained production growth over the past 10 years. Overall, chicken consumption has doubled since 1972, and now accounts for a 27-per-cent share of the country's meat consumption. Much of the gain has come at the expense of beef producers, who have seen their market share plummet from more than 50 per cent in the mid 1970s to 34 per cent in 1995. During the same period, pork's market share has slowly moved from 25 to 30 per cent.
Right now, there is plenty of chicken growth to go around, says Fred Homann, general manager of the Manitoba chicken producers marketing board. Manitoba currently has 128 chicken growers, and they're planning to expand, but growth will be slow. Producers recently adopted a seven-week cycle, trimming one week of production off the traditional eight weeks it takes birds to reach market weight. That will increase Manitoba production by 15 per cent without new barns and capital expense, Homann says.
In Ontario, where chicken farmers produced 33 per cent of the nation's chicken in 1995, producers have processors, further processors, wholesalers, retailers and consumers at their doorstep
"We have a competitive advantage," says Ontario chicken board chairman Ron O'Connor. The West will have a feed advantage, but the processing and market advantage is too great to overcome, he says.
O'Connor, who raises 25,000 to 30,000 birds six times a year at his Shelburne farm, says cheap feed wheat gives Prairie farmers some advantages they never had before, but predicts the distribution of Canada's chicken industry will change little in coming years.