Source: The Western Producer
Claude Vielfaure doesn't want to buy Puratone's barns, but he definitely wants his company's Neepawa slaughter plant to keep getting its pigs.
That's the challenge.
“No, we probably don't want to,” Vielfaure said earlier this fall when asked if HyLife, which is based in La Broquerie, Man., is interested in buying some of the barns operated by bankrupt Manitoba hog production company Puratone.
“We're pretty comfortable the way we've balanced our company right now.”
Puratone's bankruptcy protection, which gives it time to financially reorganize or sell itself, and the receivership situation at Big Sky Farms in Saskatchewan are worrying packers who rely on their pigs, such as HyLife, Maple Leaf Foods and Olymel.
Those companies are said to be making inquiries about the price of buying at least parts of the bankrupt hog companies, and Olymel has already made an offer for Big Sky.
Vielfaure said HyLife doesn't need to own more pig production facilities, but it does need the pigs that some of the Puratone barns were producing and shipping to Neepawa.
“We need to secure pigs for our plant,” said Vielfaure in an interview during the Canadian Swine Health Forum in Winnipeg.
“That's our primary goal, so we look at all kinds of ways of doing that.”
Vielfaure said HyLife needs to run its plant at maximum capacity to be efficient.
“Not hitting the maximum number of pigs you want, it costs you a lot of money because your labour and plant have the same cost (regardless of the number of pigs processed).
Every pig you put in your plant brings down your cost and makes more profits,” said Vielfaure.
Many standalone hog operations are in grave financial trouble, with high feed prices demolishing profitability. Losses for most slaughter hog producers are estimated at $20 to $30 per pig.
Vielfaure's Hytek, a hog barn company, aggressively expanded a few years ago by vertically integrating. It bought the Neepawa slaughter plant and also runs trucking, feed milling, construction, genetics and manure management operations.
That form of risk management ― owning elements of almost the entire chain ― is paying off now.
“It's worked out fairly well for us,” said Vielfaure. “That was our business strategy … when we bought our Neepawa plant. We were looking at the highs and lows of this business and maybe if we got on the meat side we'll be able to take away some of the peaks and the lows.”
The Neepawa plant just began its second shift in August and now processes 28,500 pigs per week, which was its goal. The overall corporation employs 1,500 people.
However, Vielfaure said he is worried about the future if the financial downturn doesn't improve and leaves packers like him short of pigs. Maple Leaf Foods, the competitor for the pigs his company slaughters, wants to increase its weekly production by tens of thousands of hogs per week.
“There's a lack of pigs out there for the two slaughter plants in Manitoba, and that's a huge concern for us, so we need to make sure we're working with the government and other stuff that we try to maybe balance this business and make sure our plants (all have enough pigs to run efficiently),” said Vielfaure.