The temporary closure of an Alberta meat processing facility due to a COVID-19 outbreak isn't expected to result in beef shortages, but the reduction in capacitywill mean that ranchers will bear the brunt as their costs rise and prices for their product fall.
Cargill Inc.'s High River, Alta., plant temporarily shuttered operations Monday after a worker died from the coronavirus and hundreds of other employees tested positive.
Meanwhile, a second plant — JBS plant in Brooks, Alta. — recorded 67 cases as of Monday. It has reduced operations, according to the Canadian Cattlemen's Association, which represents the 60,000 beef farms and feedlots in the country.
The company says it is trying to ensure the facility remains open, though a union representing federal meat inspectors says it's a matter of time before it is forced to temporarily halt production.
These two facilities make up 70 per cent of Canada's beef processing capabilities, according to the CCA.
Alone, the Cargill plant processes some 4,500 head of cattle daily or more than one-third of the country's total beef-processing capacity.
With the Cargill closure and JBS's reduction, Canada has likely seen a reduction of nearly 40 per cent in its processing capacity, said Mike von Massow, an associate professor in the food, agricultural and resource economics department at The University of Guelph.
However, shoppers aren't likely to see empty freezers in the grocery store meat section any time soon.
"In the short run, I don't think we as consumers will see any tangible difference," he said.
The prime minister echoed that message Tuesday, reassuring Canadians they would continue to find beef products on grocery shelves.
"We are not at this point anticipating shortages of beef, but prices might go up," said Prime Minister Justin Trudeau during his daily update on the coronavirus pandemic.
"We will of course be monitoring that very, very carefully."
Beef producers and associations have said they will prioritize ensuring Canadian supply before exports, he said.
Canada exports about 45 per cent of its beef and cattle production annually, according to the national association, and ships to 56 countries, with the U.S. receiving 74 per cent of beef exports.
The closure is expected to be brief.
It's likely the Cargill plant will be closed for about two weeks — the duration of the virus's incubation period, said von Massow. That's roughly how long the temporary closure of a pork processing plant in Quebec lasted.
Olymel announced March 29 it would temporarily close its hog slaughter and cutting plant in Yamachiche, Que., for 14 days after nine plant employees tested positive for COVID-19. The closure gave employees the time to self-isolate at the recommendation of the public health department. The plant resumed operations on April 14.
A two-week closure allows staff to self-isolate to prevent further spread, deep clean a facility and implement any other measures to help physical distancing after reopening, said von Massow.
During a closure, inventories can be diverted and processing capacity can be increased at other facilities to avoid a shortage, he said. It would take months-long closures, as well as multiple plants shuttering to create a possible shortage.
Ranchers, though, are likely to suffer even from these short-term closures, he said.
If they have to send their cattle further for processing, transportation costs rise and that will come out of the price they're paid for their product. If they decide to hang on to their animals longer, they'll face increased overhead costs, like feed, said von Massow.
In the past week, ranchers have seen a nearly 30 per cent drop in price, said Dennis Laycraft, executive vice president at CCA.
The group's economic scenarios project the industry could lose more than $500 million in revenue by the end of June. It is calling for immediate government action.
That includes improving the availability of cash advances, said Laycraft.
"It's not easy to deal with lenders when the value of your product is falling sharply and no one's really sure what it'll be worth in that environment."
The group also wants price insurance program premiums brought back down to normal levels, he said.
"For young and newer producers that have more debt, that's a pretty important thing."
Source : FCC