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Global demand for pork is down and production prices are up. In Quebec, which produces 31 per cent of Canada’s pork, it’s forcing an industry overhaul

The most memorable part about how the sausage is made is the scent.

La Fernandière sausage factory smells a little bloody with undertones of copper. Maybe a whiff of maple syrup or Italian spices, depending on what is being mixed in. But always the smell of pork dominates.

Which is fitting, given that La Fernandière is located between Montreal and Quebec City, on the cusp of Trois-Rivières, in the heart of pork country.

If you step out of a car in rural Quebec, you’ll recognize the scent. The rolling, lush hills host 1,530 farms that churn out 6.8 million pigs a year. The sector contributes $3.7-billion to Quebec’s economy and employs 38,000 people.

Pork is baked into the culture. Dine at any establishment, and it will be on the menu: les cretons on toast, tourtière (pork pie) and, of course, shredded bacon on poutine.

At some point, most of the pigs raised on Quebec’s pork farms will reach one of the 39 slaughterhouses, deboning factories, farms and distribution facilities owned and operated by Quebec’s pork giant: Olymel. The meat packer processes 80 per cent of the hogs in the province.

But the sector, and Olymel by extension, is in crisis. Global demand for pork is down and costs of production are up. In a news release in April, Olymel said it has lost more than $400-million over the past two years on pork.

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Workers walk towards the Vallee-Jonction Olymel plant in April 2023. The facility is one of five slaughterhouses Olymel is in the process of closing down as it reduces it's operations by 1.5 million pigs annually.Jacques Boissinot/The Canadian Press

In response, the company is trying to kick off a new chapter in the sector’s history. Less pork, higher quality sums up the strategy. Olymel plans to reduce processing by 1.5 million pigs annually.

To do this, it has shut down or announced the closure of five slaughterhouses, including Vallée-Jonction, the primary processor for the Beauce region, the heart of Quebec’s pork country. These substantive production cuts will drastically transform the industry, for both the processor and the pork farmer.

For Olymel, it means investing more in value-added, ready-to-consume processed products such as fresh sausages and fresh pork.

Quebec pork producer Olymel will close a major slaughterhouse in Vallee-Jonction, south of Quebec City and lay off 994 workers as it continues to restructure in the face of tough market conditions. Jacques Boissinot/The Canadian Press
Olymel employees work on the floor of the La Fernandière processing plant in Trois-Rivières, the heart of pork country in Quebec.
Quebec’s pork giant Olymel processes 80 per cent of the pigs in the province.

But pork farmers are not happy. Olymel’s decision to drastically shrink processing leaves farmers across Quebec with no market, a sour pill to swallow after they have faced prices below the costs of production for the past two years.

To combat what is being termed a pork crisis by people in the industry, the pork producers’ union and provincial government are spending $80-million to buy and shut down farms, with much of that cost likely to be footed by the taxpayer.

Even so, farmers are dissatisfied. They face bankruptcy and personal breakdowns as entire livelihoods dissolve. The crisis is a fundamental challenge to the effectiveness of Quebec’s uniquely bureaucratic pork industry.

It is also a case study in the challenges faced by Canada’s highly-regulated agricultural sector as a whole: How can we keep a vital industry alive while competing with other countries that can produce faster, more reliably and for less?

House of straw

Quebec produces 31 per cent of the pork in Canada, the most of any province. The market is export-based: 70 per cent is shipped overseas, largely to China and other Asian countries.

Exports are essential for two reasons.

First, Canada does not consume enough pork, said Yanick Gervais, the president and chief executive of Olymel. Based on 2022 data, Canadians consume 24.8 kilograms of pork per person annually. Americans consume 41.1 kg. The Chinese consume 64.4 kg. We eat a lot of tenderloin and some ribs, said Mr. Gervais, but we don’t eat bone-in unprocessed ham, which means that a lot of the pig carcass goes unused.

Canadian pork consumption is also stubborn. For example, right now the cost of pork is down compared to the prices of beef or chicken, yet consumers are not eating more, despite soaring inflation.

“It’s the opposite from what we learned in school as far as Economics 101,” said Mr. Gervais.

Asian demand for pork is, however, insatiable. And this market consumes the entire pig: hooves, tongues, heads and more. Demand for byproducts pads out thin slaughterhouse margins.

In 2018, pork markets boomed when China (the world’s largest producer) was hit by African swine flu. China culled approximately 20 per cent of its hog herd (90 million animals).

“China was driving demand because they had a disease. So they were buying up pork like crazy,” said Kevin Grier, a livestock market analyst and consultant.

Workers sort cuts of fresh pork in a processing plant of pork producer WH Group in Zhengzhou, Henan province China, on Nov. 24, 2017. Dominique Patton/Reuters
Canada said on June 26 that it is investigating the origin of a tainted pork shipment and bogus documents that prompted China to ban Canadian meat and further strained tense relations. Sebastien St-Jean/AFP

However, the pork boom was not to last. In June, 2019, China suspended some pork imports from Canada following the arrest of Huawei executive Meng Wanzhou. Access to the most important export market was curtailed and continued to decrease as trade relations soured and the Chinese herd made a comeback.

Simultaneously, COVID-19 lead to capacity limitations, reducing processing and in April, 2021, approximately 1,100 employees at Vallée-Jonction, one of Quebec’s largest slaughterhouses, walked off the job over pay and working conditions. At the time, the plant received 35,000 to 37,000 hogs a week. The strike lasted four months.

Production costs have also soared over the past two years, said Mr. Grier. Grain amounts to one-half to two-thirds of those costs. The war in Ukraine, plus a multiyear drought across Western Canada, has led to skyrocketing grain prices.

Pork farmers in other countries are suffering, too. Costs in Britain soared 50 per cent, with four out of every five of its producers threatening to leave the industry. The United States posted the largest year-over-year decrease in breeding stock since the 2008 financial crisis.

Olymel, however, was particularly vulnerable to the downturn. According to Mr. Grier, it’s because hogs in Quebec are the most expensive in North America. The company also does not have the scale of other global players.

“Relative to North American standards, the plants were not cost efficient,” said Mr. Grier. “[Olymel] will kill 80,000 hogs in four plants in a week. In the United States, one plant can do that.”

The sausage remade

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Yanick Gervais, grandson of Olymel founder Fernand Colbert and now CEO of the company, at a La Fermandière product processing plant.Renaud Philippe/The Globe and Mail

The fresh sausages at La Fernandière are emblematic of Olymel’s transition, said CEO Mr. Gervais in a boardroom on the second floor of the factory. Mr. Gervais’ grandfather, Fernand Colbert, started the facility in 1948.

On the plant floor below him, robotic assembly lines move piles of pork shoulder into large steel machines that cut, slice, dice, season and squelch the shoulders into finger-length tubes that are packaged, vacuum-sealed, wrapped and stacked before flying off to supermarkets across the province and the country. The factory will churn out 26 sausages a year per Quebecker.

Mr. Gervais is confident the strategy is working.

“It’s a 180-degree shift,” he said. “Next February, at the annual meeting, we will announce some pretty good results.”

Inside Olymel’s slaughterhouse in Yamachiche, an $80-million, state-of-the-art facility, Nagano pork is prepared for export to Japan.

Nagano pork uses Japanese-inspired specialized techniques to cultivate the best meat. Think of Kobe beef. Developed in Quebec’s Montérégie region in the 1990s, the pigs are crossbred to create the finest, fattest, well-marbled meat. They are also fed only the best grains: wheat, barley, corn and soya beans.

These products do well in Japan and South Korea, and they fetch a higher price than standard pork. Developing Nagano was part of a strategy launched in 2016 to focus on high-quality meat – Canada’s competitive advantage.

“We have probably the best pork in the world,” said Mr. Gervais. “It has been recognized by the Japanese and Korean people. And they wish to pay the premium.”

However, the switch to value-added requires significantly less pork. Olymel has announced a production decrease to 80,000 hogs a week from 140,000. Starting with the closure of the Henryville plant in September, 2021, the company is in the process of closing five slaughterhouses. Three remain: Saint-Esprit, Yamachiche and Ange-Gardien.

This leaves pork farmers scrambling.

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Olymel employees work at the Olymel-owned La Fernandière processing plant in Trois-Rivières on Aug. 4.Renaud Philippe/The Globe and Mail

Les éleveurs de porcs du Québec, the pork producers’ union, has announced that the sector will cut annual production by one million hogs. There are two options for doing that: Either some producers can close entirely, or all producers can collectively decrease output.

In an industry in which margins are already slim and scale is the difference between profit and loss, farmers prefer the first option, said union president Louis-Philippe Roy.

“We’re trying to rebuild the industry right now,” said Mr. Roy. “We’re trying to find a new solution to be in a better place in one year, two years, three years.”

A temporary withdrawal program, in which some farmers will be paid to shut down for at least five years, was approved by Quebec’s agricultural and food markets board on Aug. 10. In total, 22 per cent of pork businesses in Quebec (310 of them) said they’d participate. It will cost around $80-million, an expense borne by producers and Quebec taxpayers.

The first stage of the program is voluntary. This year, two-thirds of the cost will be covered by Farm Income Stabilization Insurance (ASRA), a taxpayer-funded provincial program that covers production costs when market prices are too low. One-third will be paid by Les éleveurs.

This will mean that every producer who remains in the sector must pay $2.86 to the union for every hog they sell, to cover the producers’ share of the expense, according to reporting by La Presse. The pool of cash will be used to pay producers who leave.

There is no guarantee that enough producers will volunteer to join the program. If too few retire, then the union will mandate that all producers cut production by a set percentage.

“The crisis is not finished yet,” said Mr. Roy, who noted that pork prices often dip in the fall and winter. “Maybe in a year or two we will be in a better place than right now. It’s still hard for the producer.”

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Les Éboulements, a small agricultural town that stretches from the Laurentian Mountains to the St. Lawrence River, is home to the Audet family, who have raised pork there for four generations.Renaud Philippe/The Globe and Mail

The pork farmers

The Audets are a farming family based in Les Éboulements, a hillside town with thatched roof cottages on the plateau stretches from the Laurentian Mountains to the St. Lawrence River.

The Audets have raised pork for four generations. The father, Jean-Yves, has worked in the pig farm since he was 17 years old. But he’s approaching 65 now and is tired. He wants to retire. Given the current state of the industry, however, his sons don’t want to take over.

Selling the farm was not an easy decision. Pictures of the two sons as newborns hang on the wall of the family home. Between the portraits is a picture of the farm. This is more than a business, it is the family legacy. If they sell the farm, they don’t know if they will be able to keep the house. The Audets have raised three generations of children in the farmhouse.

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Pork farmer Jean-Yves Audet, and his wife, Andrée Sévigny, at the family farmhouse in Les Éboulements.

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Mr. Audet gestures to a photo of the family farm, which hangs on the wall of their home where three generations of farmers were raised.Renaud Philippe/The Globe and Mail

“My father is disappointed,” said Samuel Audet for his father, who does not speak English. “But he is old. He deserves a rest, a vacation and to retire... it happens. And it doesn’t just affect our family. It is the whole family at large.”

Samuel’s mother, Andrée Sévigny, is disappointed, but she understands the decision her sons made.

“We understand him for not wanting to take it back,” she said. “Work is seven days a week and you don’t make any money.”

In some ways, the Audet family are fortunate. They can afford to leave. Mathieu Pilot, another generational farmer, cannot.

Mr. Pilot bought his uncle’s share of his family’s farm six years ago, when he was 36 years old. Last year, he and his father updated the facility to comply with new animal-welfare rules that come into force in 2029. The new legislation demands producers phase out gestation crates – two-by-seven-foot pens in which pregnant pigs and new mothers are housed.

“I have too much debt to take the retirement plan,” said Mr. Pilot. “If I take the retirement plan, I will fail. I will go bankrupt.”

Mr. Pilot currently sends 7,000 pigs a year to the Vallée-Jonction plant. He does not know what he will do when the plant closes in four months.

He might send it to the next closest plant: St. Esprit. However, it is two hours further away than Vallée-Jonction. Mr. Pilot is not sure his trucks will have the capacity to make this journey.

Other producers face similar challenges. The farms close to Vallée-Jonction typically do not have the drivers and the vehicles required to make long trips.

Mr. Pilot also estimates that shipping his pork the extra distance will cost him $20,000 annually.

“It is much more difficult than I have ever seen. It is very difficult now. We don’t know if we will make it to 2024 or 2025,” he said.

Martine Fraser has heard this many times. A social worker with psychological support network Au coeur des familles agricoles, she has received a flood of phone calls over the past few months.

“It was like a hammer in the producer’s face,” said Ms. Fraser of the Vallée-Jonction closure. “You wake up in the morning and suddenly nothing is left. All your work, all your investment in your business, is now worth nothing. It was your retirement. Your kid’s future.”

The support network offers producers free access to social workers and other resources that will help farmers transition. Pierre Rheaume, vice-president of the association, said he’s never seen a mental-health crisis quite as acute.

“It’s a really tough moment,” said Ms. Fraser. “They feel betrayed... because they didn’t see this coming as hard as it did.”

Pigs are seen at the Meloporc farm in Saint-Thomas de Joliette, Que., in 2019. Quebec produces 31 per cent of the pork in Canada, the most of any province. The market is export-based: 70 per cent is shipped overseas, largely to China and other Asian countries. SEBASTIEN ST-JEAN/AFP

House of stone

Quebec’s pork producers’ union purchases all pork from farmers, takes a cut and then sells to a processor. It is the only province to have a union that directly markets all products. In Ontario, the second-largest pork producing province, farmers are free to sell to slaughterhouses directly.

There are benefits to Quebec’s system. For example, Les éleveurs can negotiate a collective agreement with processors. Based on the marketing agreement signed in April, slaughterhouses will pay 4.5 per cent less than market price (a global price set by the U.S. Department of Agriculture, dubbed the “cutout” by people in the industry) for the next two years. In return, processors will share profits 50-50 with producers and stop buying hogs from Ontario.

But Mr. Grier, the livestock analyst, says the system is dysfunctional. It is too bureaucratic, and the pork union and the provincially-backed ASRA insurance program, which pays pork producers when costs increase beyond selling price, inflate an industry that has failed to stay competitive, often to the disadvantage of farmers in other provinces such as Ontario.

“Every pork producer in Canada, other than in Quebec, thinks the ASRA program is an unfair advantage,” he said. “If it wasn’t for ASRA, I don’t know how big the Quebec hog industry would be … I bet it would be half the size.”

Last year, ASRA paid producers $240-million.

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Jean-Yves Audet has been working on the family pork farm since he was 17. On the verge of retirement, none of his children will be taking over the farm, so they're going out of business.Renaud Philippe/The Globe and Mail

To Mr. Grier, the key to the survival of Quebec’s pork sector is adaptation, and he believes that Olymel, in switching to a value-added approach, is taking the right steps. He notes that Canada, as the seventh-largest pork producer in the world, is not a small player. China has cheaper labour and lower regulations, said Mr. Grier, but Canada can stay competitive by efficiencies and offering a boutique service.

According to 2020 data collected by InterPIG, an international group of economists, Canada’s pork sector is the third most efficient in the world, just below the U.S. and Brazil. This is because Canada’s does not need to import grain, the most significant production cost for pork farming.

And Canada’s grain industry remains resilient. Yields of wheat, canola, barley and corn have only increased over the past few years, with 2022′s corn yields alone hitting a record high.

Mr. Grier also said that Canada has efficient animal husbandry practices that lead to more pigs per litter. A switch to value-added products also plays into Canada’s smaller scale, meaning we can offer a more boutique service.

“We’re good at what we do,” said Mr. Grier. “When you get pork from Canada, you get it to your specifications. Whereas in the United States you get it to the plant’s specifications. It’s just classic big company versus small company.”

Mr. Gervais, sitting on the second floor of La Fernandière sausage factory, needs this strategy to pay off. After weathering two years of losses in the hundreds of millions, Olymel is hoping to invest in higher-tech facilities that will take optimization to the next level using artificial intelligence and more robotics. He’s also hoping that the drop in pork supply will increase prices.

Reflecting on the past year, he is optimistic but realistic.

“We did what we had to do,” said Mr. Gervais. “We stabilized the ship, but we have to continue to optimize.”