Bottlenecks at pork slaughterhouses due to COVID-19 are creating a cash crisis for farmers, raising fears of bankruptcies at the farm level and threatening the flow of Canadian meat to grocery store coolers.
A cluster of coronavirus outbreaks has bedevilled meat-packing plants in recent weeks, forcing the temporary shutdown of some facilities and the imposition of strict social distancing and safety measures in others.
Olymel, the country’s largest pork processor, was forced to close a plant in Yamamiche, Que., for 14 days after nine employees tested positive for the virus. The company reopened that plant last week and has introduced new safety protocols at three of its six slaughterhouses.
While the measures are necessary to keep employees safe and prevent a total shutdown of facilities, they are also dramatically reducing the number of animals moving through the plants, creating a backlog on farms that is costing farmers between $30 and $50 per animal — or roughly half their value, according to the Canadian Pork Council. Most of the country’s 13 pork processing plants are now operating at reduced capacity as infection control measures are carried out.
The organization is seeking aid from the federal government to keep farmers afloat.
“We are asking the government for an emergency payment of $20 per hog so that pork producers can continue to pay bills, feed pigs and keep producing food for Canadian families,” said Rick Bergmann, chair of the council. “Without it, family farms will be lost. In turn we will continue to see disruption in the food supply chain, and increased food insecurity as supplies tighten and food becomes even more expensive.”
The federal government is working with the provinces to support farmers and ensure availability of meat products, according to Marie-Claude Bibeau, the federal Minister of Agriculture and Agri-Food.
“We understand the repercussions the short-term capacity reduction in certain meat processing facilities is having on livestock producers,” the minister said in an emailed statement.
Canada exports about 70 per cent of its pork production annually and relies on imports for some domestic needs. The country could expand its imports to backfill domestic production, although other countries are at risk of running into the same problems in their slaughterhouses, said Gary Stordy, director of government and corporate affairs at the Canadian Pork Council.
“We have to remember also, that countries around the world are putting export restrictions on food,” he said.
The volume of hogs slaughtered in Canada fell by 16.2 per cent for the week ending April 14, as Canadian farmers struggled with a combination of depressed market prices, rising feed costs and lower returns on oversized hogs.
Indeed, as processing plants take fewer animals, farmers are being forced to pay more to continue to feed them. The hogs in turn are getting larger — a problem for farmers who are paid less for animals that have grown beyond an agreed-upon size.
“There is a weight and size producers are expected to deliver and they get penalized if they aren’t within those specifications,” Stordy said.
At the same time, a swath of meat processing plants have also been forced to close south of the border due to COVID-19 outbreaks, exacerbating an already significant oversupply of American hogs. That’s driven down market prices to roughly US$45 per hog from a more typical US$55 a hog for this time of year, said Ken Ball, a senior commodity futures adviser at PI Financial. Canadian hog prices are tied by formula to U.S. prices.
“The system was taxed even before this and now even the plants that are open are slowing down,” Ball said. “Eventually market hogs will build up and swamp the market.”
Hog prices typically rally to US$80 or more between May and July, he added.
“The concern now is that seasonal rally just won’t happen this year,” he said. “And without that rally, farmers are going to be hurt even more.”
Olymel now has three of six plants operating at full capacity, said Richard Vigneault, spokesperson for the firm. The Yamamiche facility, which usually processes 28,000 hogs each week, moved 4,000 as it reopened last week and is expected to hit 17,000 this week, he said.
“We have implemented a lot of measures to reduce to zero if possible the risk of contamination,” he said. “We are all trying to adapt and adjust and cope with this situation as best we can.”
Profit falls at TD and CIBC as loan loss provisions soar – CBC.ca
Canadian Imperial Bank of Commerce (CIBC) and TD Bank Group missed quarterly earnings expectations on Thursday, as they set aside billions to cover future loan losses due to the COVID-19 outbreak.
The massive jump in provisions took the total amount set aside by Royal Bank of Canada, Bank of Montreal , Bank of Nova Scotia, National Bank of Canada , CIBC and TD Bank to $10.93 billion.
The money set aside for credit losses on both performing and impaired loans as a result of the COVID-19 pandemic and continued pressure on oil prices has added to pressure on Canada’s biggest lenders from decade-low interest rates.
Canadian banks have grown their oil and gas loan books faster than total lending in recent quarters, and their business loan books overall expanded during the second quarter as borrowers unable to access debt markets drew down credit lines.
CIBC posted an adjusted profit of 94 Canadian cents per share for the quarter ended April, compared with analysts’ expectations of $1.58 per share.
TD Bank, Canada’s second-biggest lender, reported an adjusted profit of 85 Canadian cents per share, missing estimates of 89 Canadian cents.
Net income was $1.5 billion at TD, down 52 per cent from last year. Net income was $392 million at CIBC, down 70 per cent from last year.
CIBC also reported lower net income across divisions and higher expenses. Controlling costs is particularly vital for CIBC, which has already said it expects expenses to grow this year at about double the rate of its rivals.
It flagged layoffs earlier this year to aid its efforts to cut costs and become more efficient.
CIBC set aside $1.41 billion in the quarter for future loan losses, compared with $255 million a year earlier, while total provisions for TD Bank jumped to $3.22 billion, compared with $633 million a year earlier.
Irving Oil Purchasing North Atlantic Refining Corp. – VOCM
A tentative deal has been struck for Irving Oil to take over North Atlantic Refining and the Come by Chance oil refinery.
Irving Oil signed the agreement with Silverpeak to acquire North Atlantic, subject to a regulatory review and the conditions of sale being met.
Silverpeak purchased the facility from the Korea National Oil Company back in 2017 amid widespread speculation that Irving was also eyeing the refinery at the time.
Operations at the refinery were idled in March due to a downturn in the industry and concerns around the COVID-19 pandemic.
The refinery shutdown came ahead of planned upgrades and expansion work that officials had indicated would extend the life of the facility.
New Brunswick-based Irving says North Atlantic Refining provides a “reliable supply of fuel products to businesses and consumers across Newfoundland.”
There’s no immediate word on Irving’s plans regarding a possible restart of operations at Come by Chance.
Irving signs purchase agreement for dormant Come by Chance oil refinery – CBC.ca
In another shakeup in the Newfoundland and Labrador oil sector, Irving Oil announced Thursday that it has reached an agreement to purchase the idled refinery at Come by Chance.
In a news release late Thursday morning, New Brunswick-based Irving confirmed it will acquire North Atlantic Refining Corp. from U.S. investment firm Silverpeak, with the deal subject to regulatory review and conditions of sale being met.
The agreement includes the refinery in Placentia Bay, which has the capacity to refine 135,000 barrels per day of oil, and North Atlantic’s network of retail sites and other marketing assets.
“As a family-owned international refining and marketing company based in Atlantic Canada, Irving Oil has proudly served the people of Newfoundland and Labrador since 1950, providing a secure supply of energy to its customers across the province,” states the news release.
The refinery stopped making fuels in March because of the pandemic, and a resulting collapse in the oil market. Hundreds of workers have been laid off.
A source tells CBC News that Irving plans to keep the refinery in “care and maintenance” mode for now.
It’s yet another chapter for a refinery that has had a checkered past since it opened in the 1970s, including five different owners, an extended closure and a political scandal at the outset.
But prior to the pandemic, the refinery was riding a wave of optimism, with performance and environmental upgrades, and plans for more.
“We are coming from what we call a basket-case refinery to become a refinery of the future,” Thomas Jenke, former CEO at North Atlantic, said prior to his departure late last year.
If approved, the deal will represent another large investment by the Irving family in Newfoundland and Labrador.
Irving Oil Limited is already a powerful player in the retail gasoline market, with a chain of gas stations and restaurants, including its iconic Big Stops. J.D. Irving Limited operates a chain of Kent home improvement stores in the province, and owns Atlantic Towing, a company that operates a fleet of supply vessels in Newfoundland and Labrador’s offshore oil sector.
Meanwhile, North Atlantic provides fuel products to businesses and consumers across the province, and is a major contributor to the province’s economy, with some estimates putting its value to the gross domestic product at three per cent.
It has a deepwater terminal that welcomes oil tankers from around the globe, and a network of retail assets.
“Irving Oil would look forward to the opportunity to continue to provide a secure supply of energy to customers across the province,” says the press release.
Most workers at the refinery are represented by Local 9316 of the United Steelworkers. CBC has requested comment from union president Glenn Nolan.
This is not new territory for Irving. The company operates Canada’s largest oil refinery, in Saint John.
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