Although Eastern Canada beef processing facilities have experienced little disruptions as a result of COVID-19 compared to Western Canada facilities, this did little to mitigate the overall effects that the closure of the High River plant had on the national sector.
This is because Eastern Canada beef processors do not process nearly the same amount of cattle as Western facilities. Additionally, given that there was not a strong upswing in the number of cattle processed in Eastern Canada facilities, it is likely that these facilities were already operating at or near capacity. It was simply not possible for even just some of the cattle that would have been processed at the Cargill High River plant to be diverted east (Figure 5).
In a typical week, Western Canada plants process over 3 times the number of cattle compared to Eastern Canada. In 2019, the average number of cattle processed in Eastern Canada facilities was just under 13,000 cattle per week, whereas Western Canada facilities processed an average of 48,000 cattle per week. Following the High River plant closure, Western Canada facilities were processing less than Eastern Canada facilities, at 10,000 cattle per week, versus the 14,000 cattle per week that were processed in Eastern Canada facilities.
Fortunately, there was only a two-week period where national production was more than 50% below what was processed one year ago, and in recent weeks the number of cattle processed has begun to return to normal levels. Following the reopening of the Cargill plant in High River, Western Canada facilities have increased production to 46,000 cattle per week, and national processing is back up to 60,000 cattle per week. Nationally, this is only 2% less than the amount of cattle processed at the same time last year.
On the demand side, Canadian consumers were not faced with the same relative price swings compared to those faced by producers in Western Canada. In Statistics Canada’s most recent release of the monthly average retail prices for food, the price of ground beef and stewing beef per kg only increased by 1.5% and 3.4% respectively, in April. These are both relatively small increases, suggesting that persistent price increases of 20% or more, are unlikely. One possible explanation for the small increase in retail beef prices, is that processers had enough beef in frozen storage to temporarily fill the gap created by the closure of the Cargill High River plant, and thus ensured that there was not widespread retail beef shortages and significant retail price increases.
If the temporary closure of the High River plant taught Canadians anything, it is that the Canadian meat processing sector is very tightly concentrated. There are just 22 federally registered beef and veal processors in Canada, however just two plants, (Cargill in High River, Alberta and JBS in Brooks, Alberta) are responsible for 70% of Canada’s beef processing capacity. The reason for this, is that beef processing plants experience economies of scale, meaning that the larger they are, the greater the efficiency of the plant and the lower the costs of production. Essentially, they can produce more for less.
When a plant as large as the Cargill plant in High River closes, even just for a short time, it has wide-ranging implications on the national food system. However, the fact that beef processing plants are back to processing 60,000 cattle per week, and retail beef prices are not soaring, reveals that the Canadian food system is resilient and has responded well to the shocks caused by the COVID-19 pandemic. In the weeks and months to come, the bottlenecks created in processing facilities that saw livestock prices fall and retail prices increase, should begin to relax. Barring any future outbreaks, it appears that the worst effects of the pandemic on the beef processing sector are over.