Livestock investment will be a boondoggle
The StarPhoenix (Saskatoon) Thu 01 Feb 2007
Page: A9 Section: Forum
Byline: Cathy Holtslander
Source: Special to The StarPhoenix
Following is the viewpoint of the writer, a Saskatoon resident and a member of the Beyond Factory Farming Coalition, a national advocacy group.
At the recent Banff Pork Symposium, Regional Economic and Co-operative Development Minister Clay Serby indicated the Saskatchewan government would be supporting a hog slaughtering plant for Saskatoon.
This comes after Maple Leaf Foods announced its plans to shut down the Mitchell's plant in Saskatoon within three years and Olymel withdrew from the Olywest consortium (Olymel, Hytek and Big Sky Farms), which was hoping to build a slaughterhouse in Winnipeg.
Maple Leaf and Olymel are the biggest players in the pork processing business in Canada, controlling approximately 65 per cent of the market. Both companies have been bleeding red ink profusely and are shutting down facilities in Ontario, Quebec, Manitoba and Alberta. Maple Leaf's business strategy includes drastically cutting its money losing live hog business to shrink production and focus on a smaller volume of higher value products.
Why would the provincial government be interested in putting money into a business that existing industry leaders -- large, fully capitalized, experienced national corporations -- are getting out of?
Meanwhile, Red Williams, in Sask. needs to capitalize on livestock boon (SP, Jan. 25) is recommending that Saskatchewan increase its involvement in livestock production and processing. I don't understand the kind of vision that sees opportunity in an industry characterized by bankruptcies, closures, labour-shortages, an immigrant recruitment scandal, disease outbreaks and moratoriums due to air and water pollution.
Large-scale intensive livestock production must compete as a commodity on the world market by selling large quantities at low cost. There is relentless pressure to reduce costs by cutting wages, avoiding environmental regulation, using the cheapest possible feed, crowding animals into the smallest space and getting government subsidies.
Saskatchewan is never going to have cheaper feed than Iowa, with its U.S. Farm Bill corn subsidies. Nor is it going to have cheaper labour than Poland's or lower heating costs than Brazil's.
It appears that Saskatchewan's competitive edge is to have its taxpayers supply our biggest hog producer with free, or nearly free, operating capital.
Big Sky Farms now dominates production in Saskatchewan with 41,000 sows. According to the Crown Investments Corp., the government owns 68 per cent of Big Sky's equity under Investment Saskatchewan. The government's preferred shares were converted to common shares in 2006. That means that no interest will be earned on the investment (though that may be a moot point, as profit is required for interest to be paid).
The Saskatchewan Government Growth Fund III owns an additional 13 per cent of Big Sky. The company has also obtained discount capital at taxpayers' expense through the Golden Opportunities labour-sponsored venture capital fund ($5 million was invested in July 2006 -- $1.75 million of that amount being supplied by taxpayers in the form of tax credits to investors).
The federal government pitched in, too, with a loan from Farm Credit Canada. When Community Pork Ventures (Quadra) went bankrupt, Big Sky bought up the assets at cents on the dollar (while the original community people who invested in the barns got nothing), giving the company yet another cheap capital competitive advantage.
If the government proceeds with putting public money into an industrial hog slaughtering plant in Saskatoon to service Big Sky, it will certainly have spent a lot of money to keep a lot of people busy and there's no doubt on-going subsidies will be required.
Meanwhile, capital that could have been used to develop a more socially responsible, non-polluting approach to livestock production, or even other industries such as wind and solar energy technology, both employing workers in safer, more enjoyable jobs, will not be available.
It's not too late to change course.