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Trouble in hogtown: Toronto meat packers seek creditor protection

Quality Meat has been in business since 1931 and produces fresh pork for domestic and international markets. The Tecumseth Rd. plant is one of the province’s oldest and most inefficient hog processors, a source said.

Ian Willms/Report on Business magazine

Soaring hog prices have pushed a Toronto pork packer to file for court protection from creditors.

Quality Meat Packers and Toronto Abattoirs Ltd., which employ 750 people at a downtown Toronto abattoir, say they will continue their operations and seek restructuring alternatives under the Bankruptcy and Insolvency Act.

Hog prices have soared by about 35 per cent in the past year as a piglet-killing virus has reduced the size of the U.S. herd by more than 3 per cent. Porcine epidemic diarrhea, or PED, has crossed the border and been found in dozens of Canadian farms and handling facilities. The virus does not affect human health or food safety, but limits the number of pigs going to market. This means processors are forced to pay more for the animals ahead of the summer barbeque season.

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"It's the big volatility in pork prices, hog prices that the market's experiencing right now. That's been the management challenge," said Jim Gracie, marketing vice-president of Quality Meat, in an interview.

Quality Meat has been in business since 1931 and produces fresh pork for domestic and international markets. The Tecumseth Street plant is one of the province's oldest and most inefficient hog processors, a source said. Like other pork makers, it is unable to pass on high costs to consumers, who can easily choose chicken or other protein to keep their grocery bills down.

Quality Meat is one of the province's largest pork processors and one of Ontario's four federally inspected plants, which are licensed to export.

"We do not yet know what the outcome of this process will be. We are making every effort to continue operations with a financially viable business model," the company said in a statement.

"We sure hope they can pull through this," said Amy Cronin, chair of Ontario Pork Producers Marketing Board, which represents 1,600 hog farmers.

Mark Cripps, a spokesman for Ontario's Ministry of Food and Agriculture, said Quality Meat‎'s move was a difficult one that will have an impact on the employees and their families.

"We will continue to work with the industry to ensure that our province has a vibrant pork production and processing sector," Mr. Cripps said.

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In the past few years, the pork industry has faced several hurdles, including:

-a strong Canadian dollar that made exports expensive and hurt international sales.

-country of origin labelling rules in the United States that hit exports.

-a 2009 ban on pork sales to China, Russia and several other countries amid an outbreak of H1N1 flu.

-a drought in the United States in 2011 and 2012 that drove up feed prices and caused farmers to cull their herds.

-inflation-causing competition from the biofuel sector for corn and other grains that animals eat.

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-the PED virus, which has no cure and is spread by contact with feces. Its spread has been linked to dirty transport trucks, boots and feed.

Between 2006 and 2013, the number of Canadian pig farms fell by 400 to 610. And the number of pigs sent to market fell by more than 10 per cent, between 2006 and 2012.

"There are always challenges in the meat sector," said Ron Davidson of the Canadian Meat Council.

Mr. Davidson said prices meat processors pay for animals are set in the United States, because much of the Canadian herd is exported. At the same time, the meat processors face stiff competition from imported food from Europe and the United States.

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