In financial difficulty, Olymel, responsible for 80% of pig slaughter in Quebec, pays bonuses to its partner breeders while imposing price reductions on all 2,500 pork producers in the province since 2022.
Since October 30, Olymel and its owner Sollio have even increased the bonuses they pay to the hundred breeders with whom they maintain privileged business ties, La Presse has learned.
This process – making the masses pay and rewarding a few – raises issues of fairness, argues the federation of Quebec pig breeders, in an email sent to La Presse in reaction.
Olymel and Sollio began paying bonuses to their best customers last February, at a rate of $6 per head for breeders who purchase their feed from Sollio. This represents a special program worth 1.5 million.
As of October 30, the premium has been increased from $3 per head to $9 for breeders who follow animal welfare standards. For pigs fattened using the conventional method, the premium was increased from $1 to $7 per head.
After prosperous years, Canadian pork exports have declined in recent years due in particular to the closure of the Chinese market. The imbalance between global supply and demand has led to a drop in prices. Olymel and its parent company found themselves in an unfortunate financial situation.
In the fresh pork sector, Olymel claims to have lost 390 million over the last two years.
For his part, Sollio lost 346 million in two years. It has variable rate debt of 800 million which matures in June 2024. The weighted average rate on the loan stood at 8.38% in 2022. As a result of the increase in interest rates, its interest expense increased by 135% between 2021 and 2022, reaching 84 million last year.
To get out of the quagmire, Olymel demanded a price reduction from producers. The discount was initially $40 per 100 kg in April 2022, which was reduced in mid-October 2022 to $25. In April 2023, a new negotiated merchandising agreement set the discount at 15% of the U.S. merchant price. The agreement is in effect until April 26, 2026.
Olymel also announced six plant closures, including the Vallée-Jonction slaughterhouse and the Princeville cutting plant, resulting in the elimination of 1,500 jobs.
At current prices, the rebate represents a discount of about $18 per head. The financial losses of breeders are compensated by the Agricultural Income Stabilization Insurance Program (ASRA), two-thirds of the cost of premiums of which is assumed by Quebec taxpayers. In June, Financière agricole, which administers ASRA, announced the payment of an advance of 103.7 million to pork producers. In September, 55 million more were paid to them. Further payments are expected this month, in February and April 2024, depending on how the situation evolves.
In parallel with the rebate on the price of pork and still in reaction to the crisis in the pork sector, the Régie des Marchés Agricole et Alimentaires du Québec – an administrative tribunal – gave the green light in August to a voluntary production withdrawal program. pig for a period of five years. The goal is to reduce annual production by 640,000 animals. Before this decline, Quebec produced 6.8 million fattening pigs annually.
