(Resource News International) — The addition of Keystone Processors to the small Manitoba beef market has ruffled the feathers of some of the province’s existing packers and processors and highlighted the industry’s need for federal funding support.
Keystone Processors Ltd. opened March 10 at the old Maple Leaf Foods facility on Marion Street in Winnipeg. It is currently processing beef for Manitoba retailers such as De Luca’s Specialty Foods, Winnipeg Old Country Sausage and Selkirk Butcher Shop.
As a provincially inspected plant, Keystone is currently only licenced to sell within Manitoba. The company hopes to become federally inspected by 2011 at the earliest, which would allow it to ship out-of-province within Canada as well as abroad.
Until that happens, though, some existing Manitoba packers and processors say they are losing business to Keystone Processors.
Their “beef” is not with Keystone Processors per se, but with the funding the plant received from the Manitoba Cattle Enhancement Council and the provincial government.
The MCEC was created in 2006 by Manitoba’s provincial government and was given a mandate to expand the province’s beef processing industry. The council collects a refundable $2 per head checkoff on all cattle produced and sold in Manitoba. The money that is not refunded is matched dollar-for-dollar by the provincial government.
So far the MCEC has invested $2.4 million in Keystone and has committed another $3 million towards the construction of the federally-inspected plant.
Pat Haywood owns BJ Packers, a provincially inspected meat packing facility at Beasejour, Man. that employs a dozen workers. He has spent his entire career in the meat packing/processing business.
As Haywood sees it, until Keystone Processors becomes federally inspected, the MCEC is funding a company that is competing directly in the small local market against existing independent companies such as his own.
“I’m not against the MCEC. I think they’re doing a good job but I think they’re going about it the wrong way,” Haywood said.
The addition of another provincially inspected plant, funded by a producers’ checkoff levy, is not beneficial for Manitoba producers if other local packers are forced out of business, especially is Keystone Processors is unsuccessful in the long-term, Haywood said.
Robert Jowett, who has operated Country Meat and Sausage at Blumenort, north of Steinbach, since 2000, shares similar concerns about Keystone’s impact on the market while it awaits federal approval and funds.
“It looks like Keystone will go federal in two years but in that time they will cripple the existing plants and then when they go federal, they’ll leave all of this devastation behind them,” Jowett said.
Whether Keystone is taking away clients from existing companies or not, it’s the principle of what happened that has made some people angry.
“This plant starts up and goes into direct competition with some of the existing plants and processors and they’re subsidized by the government. If they would have gone about it the right way no one would have cared,” Jowett said.
“We need money to go toward helping provincial plants enter a different market where they supply products currently being imported. This requires a federal licence rather than moving the deck chairs around in the province. Then we will be helping the local farmers who are investing in MCEC,” he said.
MCEC executive director Kate Butler said the council stands behind its support for Keystone Processors.
When the MCEC was created, Butler said the province’s existing packers and processors were invited to a meeting where they were briefed about the opportunities that MCEC could provide, including funding assistance to become federally-approved.
Keystone Processors was “the only one that stepped up to the plate,” said Butler.
The existing plants were given the same opportunity to receive MCEC’s assistance but when many of them were contacted they indicated they were fine or said they were not interested in taking on that effort, she said.
Also, MCEC’s financial support for Keystone moved ahead when it did because the old Maple Leaf plant had come up for sale with a transferable environmental licence that would have expired had the plant sat empty.
“If it went for too long as an empty plant the entire process was going to have to begin again for the environmental licencing, which would be costly and potentially prohibitive if we had to go that far,” Butler explained.
The MCEC recognizes the “delicate” situation everyone is in and agrees that Keystone needs to become federally inspected as soon as possible, Butler said.
To that end, the federal government has been given Keystone’s business plan to review as part of the company’s effort to secure the millions of dollars it will need to go federal, she explained.
The funds sought are part of the $50 million earmarked in the Conservative’s government’s February budget for Canadian slaughter capacity.
The MCEC expects Keystone’s business plan to receive a favourable view.
However, only last week did the federal government provide parameters for its funding program and the MCEC had already invested in Keystone before federal funding was announced in 2009.
Before that, plans were in place to access federal funding through a number of different programs, Butler said.
“Securing funding would not have been so dramatic and clean but by hook and crook we planned to piece together the federal component,” she said.
Kelly Penner, Keystone Processors’ president, said it is a misperception that the company is going head to head with existing processors.
A small percentage of the business the company does overlaps with that other companies, he concedes. However, a large portion of their work is to supply distributers that had previously been buying Alberta, not Manitoba, beef.
Penner said he is sensitive to the situation that has developed but emphasized that Keystone Processors does not want to be a provincial plant.
“This is just an interim plan. (The existing packers and processors) need to be lobbying the federal government to make sure we get this plant up and running. We need government funds to get this complete or we’re going to continue to do what we’re doing,” Penner said.
The willingness of the provincial and federal governments to step up and provide what Keystone’s business plans require will determine how long they are limited to selling with Manitoba’s small market, said Penner.
“So to say exactly when we’ll go federal? I can’t until they commit the required funds,” he said before adding that 2011 is still the goal.