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The BSE decade

Students of history often look back at previous decades to see what lessons were learned and how they can be applied to the present and future. So it’s instructive to look back at the past two decades involving the beef industries on both sides of the border.

The E. coli crisis of the 1990s changed the nature of beef processing, at least in the U.S. Yet it scarcely compared to the drama of the following decade, as homegrown cases of BSE were discovered in Canada and the U.S., a food-versus-fuel debate raged and deal making profoundly changed the ownership structure of the North American meat and poultry industry. Also in the mix was the battle over country-of-origin labelling.

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The Canadian beef-processing industry had long interested U.S. companies because of the supply of high quality, uniform cattle. That’s why Cargill opened a new plant in High River, Alta., in 1989. For several years after that, Cargill and Lakeside Packers at Brooks competed head on, especially after Lakeside started slaughtering seven days per week in 1993. IBP, the U.S. largest packer, wanted a piece of the action so it acquired Lakeside Farm Industries in October 1994. Lakeside at the time was the largest agricultural company in Western Canada.

Fast-forward to the next decade and Cargill spread its wings to Eastern Canada by acquiring Better Beef in Guelph, Ont., in 2005. By then, IBP (now Tyson Fresh Meats) was starting to struggle at Brooks because of a labour dispute. Canada’s first BSE case in May 2003 had also raised processing costs because of Canada’s enhanced SRM ban. So Tyson agreed in 2008 to sell Lakeside to XL Foods. This deal was finalized in early 2009.

The 2001-10 decade witnessed an even more breathtaking series of mergers and acquisitions down south. First came poultry giant Tyson Foods’ acquisition in 2001 of red meat giant IBP, a deal that had more than its fair share of drama. 2001 was destined to go down as The Year of the Mergers, with deals totalling an unprecedented $5 billion. Only 1987 came close to seeing similar changes.

2007 saw Brazil’s JBS SA swoop in to buy Swift and Company, the Smithfield Beef Group in 2008 and a majority share of Pilgrim’s Pride Corporation in 2010. In just three years, the largely unknown JBS had become the U.S. industry’s second-largest meat and poultry company.

None of the above though compared to the fateful May day in 2003 when Canada announced it had discovered BSE in a homegrown cow. Seven months later, the U.S. announced its first case. These cases sparked the most traumatic episodes in the history of the North American beef industry. The Canadian case cost its industry several billion dollars and has stunted cattle herd expansion to this day. The U.S. case was to cost the U.S. industry more than US$16 billion, mostly in lost exports, and its impact also lingers.

Another seminal event in the U.S. was the federal government’s support of ethanol production, which surged in the second half of the decade and forced corn prices to record-high levels by 2012. This set off a furious food-versus-fuel debate that the livestock and food industry comprehensively lost.

The takeaway for the industry was not just how dependent it was on “cheap” corn to make money. Its inability to sway lawmakers and the White House showed how a policy, however misguided, could harm the industry yet it could do nothing about it. The same has applied to the debate over COOL, which remains unresolved to this day.

About the author

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A North American view of the meat industry. Steve Kay is publisher and editor of Cattle Buyers Weekly.

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