Life is strange. When I learned the Competition Bureau allowed sale of Lakeside to the Nilsson brothers, I was so disappointed and frustrated that I cried a little. Now, less than four years later, I know if they lose that plant, I’m going to cry again.
Anyone who has followed my writing over the years knows how I feel about the vertical integration of this industry. The lack of competition, the concentration not just in the packing level, but even among the retailers, packer-owned cattle, the lack of price discovery, selling our own identity out to lubricate our way into the U.S. through mCOOL… it never ends.
For the record, my position on these issues absolutely has not changed, and I use my consumer voice to express how I feel. I haven’t shopped at WalMart for six years because I don’t agree with their business model. I can’t stand the WalMart way. I detest corporate hegemony, and our current genre of vapid consumerism that rewards low price before high quality.
And yet, for some reason completely baffling even to me, I love the cattle business. I even love the parts that I love to hate. I know it makes no sense – I was raised in a city and knew nothing about the business until 2007, when I moved to Maple Creek, Saskatchewan. Now I live in rural Alberta, but I still don’t own a single cow, and the only brand I have registered is in Saskatchewan.
I love the romance in the cow-calf sector, and its raw, unstoppable grit. I love seeing section after section of native grass and the beasts that graze it, unknowingly filling in for an even greater beast we drove out not so long ago.
And there’s what I like to call the off-the-grid sector – the producers who are going against the grain trying to forge out a living from the animals they love among the economics they hate. Niche players trying to find a foothold, this sector is so interesting because it is comprised of those who are either all heart, or all hate.
Even the feeding sector (though I’ve got exclusively grassfed in my freezer right now) has grown on me, despite my aversion to its inherent sustainability issues. The economics are compelling, and the ratios and mathematics in this sector are beyond fascinating. The labour issues, the underground battles between pharmaceuticals, the political power… what’s not to like?
That leaves the packers – by far the most reviled, mysterious, feared, respected and envied of the chain. In all the steps in the chain before them, cattle are born, raised, bred, fed, sold, bred again, auctioned, fed some more and then something amazing happens – they turn into meat. Make no mistake – it is at the packingplant where all that beautiful native prairie becomes money.
Whether it’s a little provincial abattoir, or the largest plant in the country, that’s where the beef chain becomes a beef business.
In Canada, our cattle business is too large to stay within our borders. We have a lot of land, and few people. We need to export, and to export, we need to be able to compete in same economic paradigm that everyone else operates in or we won’t be able to sell our beef. In the Nixon era, when U.S. agriculture secretary Earl Butz told producers to, ‘Get big or get out,’ he really wasn’t kidding.
That’s the reality. Canada’s producers decided long ago that they wanted to get big. Really big. And that’s exactly what they did. The only thing harder to turn around from than globalism may be death, and like it or not, we’re entrenched in our current model. Even if we wanted to exit from the world stage, and even if that meant we were prepared to just reduce our cow herd by half and supply only the domestic market, even that would be tough.
Why? Because our retailers are huge behemoths. They buy for multiple stores, across multiple provinces and they don’t want to struggle with supply. If they’re going to throw Canadian ribeye on the front page of their flyer, than by golly, we’d better have enough or next month’s centre spread is going to be occupied by the long, supple legs of the poultry industry.
That’s just the way the cookie crumbles these days, and what I happen to feel doesn’t change reality of it.
The year is 2008 – prices this year are still in the tank, the enhanced feedban is about a year old, the dollar is still flirting at par, feed costs are skyrocketing and the future looks grim. There are producer initiatives at creating value chains rising up across the country and Alberta comes out with a provincial bailout.
That’s when we learn that Alberta brothers Lee and Brian Nilsson, who under the banner of XL Foods run a small plant in Moose Jaw and another in Calgary, are making a play for Canada’s largest plant – Tyson’s Lakeside Packers in Brooks, Alberta.
If the deal goes through, that leaves only two significant cattle buyers in the West, and by extension, Canada. The industry is terrified of losing the plant, but almost as scared to rely on just two buyers. There is a lot of resentment of the brothers, who some view as having opportunistically made a fortune in the midst of the BSE crisis. The Competition Bureau intervenes and consults with every level of the industry and the cattle business gives its reluctant blessing. In February of 2009, the deal is given the green light. A little-known cattle reporter with no cows, and one registered brand sheds a tear, and carries on – just like the rest of the industry. Get big, or get out.
Many got out. Many because of BSE, and others because of a changing economy with years of crappy circumstances piled onto bad prices in the years immediately following BSE. In the U.S., droughts and other factors caused a similar contraction, and after being dragged along bottom for a very long time, the cow-calf sector started a very gradual recovery in 2009.
By fall of 2011, the cattle business is a different world than it was when I learned about it. Cow-calf guys are smiling again, and auction marts come alive with a new energy. Feeders are sweating bullets, but forced to pay big if they want to fill their pens. A little-known cattle reporter finally finds a ranch to rent, but can’t afford to buy a cow. Cattle economists wonder where the push-back is going to come from – the retailers or the consumers – and the cattle theologians claim it’s a chicken and egg thing. All the while, the packers just keep packing… Until one of them stopped.
E. coli – a lot of bark for a little bite
On September 4, 2012 the shit hit the fan. Unfortunately, the fan was in XL Lakeside, and the shit was full of E. coli. And since then, everything has just gone completely off the rails, and this runaway train is poised to take our cattle industry right along with it.
It’s very hard to defend against a threat without knowing how much risk is involved. There is absolutely no doubt that E. coli O157 is something the industry needs to stay in front of – and we have. The fact of the matter is that E. coli has declined by half in both Canada and the U.S. over the last decade or so, and other pathogens pose a much, much greater threat to public health.
• There are an average 440 E. coli cases a year in Canada – and nearly half the rate of incidence in 2006.
• There 73,000 cases annually in the U.S., of which 2,000 require hospitalization, and resulting in about 60 deaths.
• Salmonella causes one million illnesses every year in the U.S. and 400 deaths.
• In the U.S., E. coli is down 57% from its 2002 rates.
• Salmonella is not declining.
• In a study of CDC statistics, it was found that only 52% of E. coli infections could be traced to food, and of those infections, less than half could be traced to ground beef. A third of cases were traced to produce.
• In 2011, there were 482 E. coli cases in Canada, and incidences of 6,809 salmonella.
• Viruses such as Norovirus are a much more common foodbourne pathogen, and are also very under-reported.
The E. coli issue at XL Foods has been linked to 15 illnesses. On average, there are 440 E. coli illnesses in Canada every single year. XL’s unfortunate contribution represents 3.4% of the average.
Not all recalls are created equal
The final numbers are not yet in, but when all is said and done, I think a conservative estimate for this recall could be 45 (FORTY-FIVE!) million pounds, including detained product and all the trace-out combined product. At a minimum, if you just calculate the number of pounds produced from five recall days, you could safely use 16 million pounds. At this point, epidemiology tells us that we shouldn’t be finding many more cases – barring any uneaten frozen product that escaped the unending barrage of recall notices and is consumed later.
Assuming the infection rate remains at 15, and the recall size is 45 million pounds, that translates into an average of .33 illnesses per every million pounds of recalled beef.
How does that stack up against other beef recalls due to E. coli O157? Let’s have a look:
XL Foods, 2012, Alberta – 45 million pounds, 15 illnesses, .33 illnesses/million recalled pounds.*
Hudson Foods, 1997, Arkansas – 25 million pounds, 17 illnesses, .68 illnesses/million recalled pounds.
Topps Meat Company, 2007, New Jersey – 21.7 million pounds, 29 illnesses, 1.34 illnesses/million recalled pounds.
Cargill, 2007, North Carolina – 844,812 pounds, 4 illnesses, 4.76 illness/million recalled pounds.
JBS Swift, 2009, Colorado – 421,280 pounds, 23 illnesses, 54.8 illnesses/million recalled pounds.
*Alternatively, if you want to use only 16 million pounds, that makes XL the third-largest recall, and their illness rate becomes .94 illnesses/million pounds, which then becomes the second lowest using that comparison.
A raw deal?
That’s right. The XL Foods recall is now the largest in the history of Canada and the U.S., and if my number ends up being correct, the recall is nearly TWICE as large as any other, with the LOWEST illness ratio among all the comparisons I did.
Oh, and the Hudson Foods recall? There was another recall that happened at the very same time, for the very same pathogen. Only that recall received very little media attention and the recall was miniscule in comparison – 36 people were made ill by eating alfalfa sprouts. Tyson ended up picking up the Hudson’s plant.
Topps Meats went out of business six days after their massive recall.
Last year, a listeria outbreak at the U.S. firm Jensen Farms in cantaloupe killed 30 people. Listeria in Canada at Maple Leaf Foods killed 22. Both of those operations remain open.
The more I learn, the more questions I have. And wait – it only gets worse.
Your friendly neighbourhood food inspection agency
The Canadian Food Inspection Agency (CFIA) has come under fire in the past, and I have little doubt they will come under fire again in the future. (Like, in five minutes or so – just keep reading.) They’ve been regularly updating the timeline of their investigation, and the more I research it, the more unsettling it becomes.
• On September 4, CFIA and USDA both get a positive result from XL beef trimmings, the product is destroyed and never reaches the marketplace.
• During this time, as is typical, there are 46 CFIA employees at the plant, presumably there to safeguard the nation’s food supply.
• On September 5, the CFIA is actively investigating the source of the E. coli and issues a corrective action request (CAR) to a firm supplied to by XL. This later becomes one of the five days where beef is contaminated with E. coli.
• CFIA issues XL its first CAR on September 7.
• CFIA determines on Sept. 10 and 11 that the days of contamination concern at the plant were August 24, 28 and September 5. (Remember that day? When the CFIA were there, looking for the problem?)
• The U.S. finds two more positive samples in beef trim, which isn’t on its own really huge news. After a positive comes through, the U.S. protocol means increased testing (I think 15 times more testing). The product is destroyed, and never sees the marketplace.
• On September 13, the plant is de-listed by the CFIA as being eligible to export to the U.S. – but the plant is still permitted to slaughter for the Canadian market.
• By September 16, the CFIA has determined that there is no real reason for the problem. There is no smoking gun. They had decent protocol, but it wasn’t always followed. The outside testing XL used to find E. coli was legit. The CFIA says some “minor” issues such as ventilation and condensation are addressed, but these issues would not have created the E. coli problem.
• Sometime on or before September 15, XL has already alerted the retailers it sells to of possible E. coli issues from the three identified production days – at least one day before CFIA alerts the public.
• On September 15, Costco starts robo-calling its customers who have purchased any beef from the affected days. (See? Membership has its benefits, such as receiving health alerts before the government gets to it!)
• On Sunday, September 16, the CFIA issues its first health hazard alert, at approximately 10:38 p.m.
• On September 17, the CFIA updates the health alert – not adding new dates or expanding the alert, but essentially drawing out the announcement. The CFIA maintains this incremental approach is to ensure accuracy and thoroughness, whereas the retailers are seemingly already aware of the full recall which is only being announced in stages to the customer. For any company experiencing a staged recall, it must be a nightmare because that incremental effect in the media and public consciousness can greatly exacerbate recoil in the market, illegitimately so.
• September 18 – another day, another update and five new CARs for XL to abide by, bringing the total up to six. This is the last date a CAR is issued to XL.
• September 19 – another incremental announcement.
• September 20 – For the FIRST TIME the CFIA warns the USDA Food Safety and Inspection Service (FSIS) of the health hazard alert that everyone else has had for five days. I don’t know, but if I were the USDA, I’d be pretty irritated. Especially since the USDA was so adept at finding the positive results, and let’s not forget that the CFIA delisted XL to the U.S. a full week before the health alert was provided to them. Oh, and another incremental announcement.
• September 21 – the FSIS alerts the American public of the health hazard. The CFIA makes its last incremental announcement stemming from the first three recall days.
• September 22 – the CFIA adds two new days to E. coli contamination days, August 27 and 29. A brand new health hazard alert is issued.
• September 24 – FSIS finds a positive sample from trim in California from the August 27 production day, and four illnesses from meat originating from an Edmonton Costco store are linked to XL.
• September 25 – another updated health alert linked to the two new added recall days. It’s determined the four illnesses were all in the family and originated from steaks, which is somewhat unusual. CFIA says the steaks may have been contaminated at the Costco location. Again, no smoking gun.
• September 26 – from the CFIA website on the investigation:
“FSIS issued a Public Health Alert related to the positive sample found on September 24 in California and begins discussions with CFIA on possible additional measures. At this point it was not clear where and when the contamination occurred.”
Wait – what? What kind of additional measures? What does that mean? Why is this even a discussion being had between FSIS and CFIA? Shouldn’t the CFIA be able to cut its own grass? Surely, the FSIS is capable of looking after their own backyard? This is an important tipping point – I don’t know why, but it is because the next day is when things seem to spiral out of control.
• September 27 – The day the plant effectively dies.
CFIA shuts down the plant, and XL suddenly decides to expand the recall to include primals (steaks and roasts).
From the CFIA website: “The CFIA announces that it has temporarily suspended the licence to operate Establishment 38 – XL Foods Inc., in Brooks, Alberta. The CFIA determined that adequate controls for food safety were not fully implemented in the facility. The CFIA identified a number of deficiencies during an in-depth review of the facility. To date, the company had not adequately implemented the agreed-upon corrective actions and did not present acceptable plans to address longer-term issues.”
Really? The CFIA determined adequate controls weren’t fully implemented? A number of deficiencies? Since when? Because way back on September 16, there was no smoking gun. There was no real cause, and a few minor issues were being addressed. On September 18, five CARs are issued, without specifics. Would sure be nice to know what each CAR was, when it was issued and most importantly – when they were closed.
This simply does not add up and moreover, if CFIA’s decision to de-list the plant in Canada was prompted by the FSIS, we absolutely must know why. Did the FSIS not have faith in our system? Are the Americans being bullies for some reason I can’t even imagine? Why on Earth would they care if one of our plants is open, if that plant is only serving the Canadian market?
Also from the CFIA website:
“All products currently at this plant are under CFIA detention and control. These products will only be released after being tested for E. coli O157:H7. The company has also expanded its voluntary recall to include raw meat produced on August 24, 27, 28, 29 and September 5.”
Can you even begin to imagine the cost to the plant to take all of that back, and the shock this would be to XL’s buyers? The confidence erosion at this point would be a death knell for any company, much less a meat producer. Of course, the media is foaming at the mouth and simply does not have the context or knowledge they need to start asking the right questions. I mean, I’ve covered the cattle business for years, and look how long it’s taken me to cover all this ground and unravel this sorry mess! And I’ve been living, breathing and sleeping E. coli since this started.
I have a lot of difficulty believing the primals recall was entirely voluntary. It seems to me it’s not only XL that has some explaining to do. Something big happened between September 26 and September 27 and as a nation, we need to find out what it is. As a beef industry, it is a matter of life or death.
• September 28 – expanded health alerts, FSIS alerts the public about the primals on all five recall days.
• September 29 – the CFIA accepts the answered CARS. An expanded alert.
• September 30 – testing begins on carcasses that were hanging at the plant before it was delisted. Another expanded alert.
• October 1 – more health alerts, all still from the five days of recall. More illnesses linked to the plant (running total is seven or eight at this point, but the recall is already the largest in history.)
• October 2 – BOB KINGSTON PRESENTS A BRIEFING TO THE SENATE ON FOOD SAFETY.
Bob Kingston is president of the Syndicat Agriculture Union that represents federal food inspectors, and no doubt, there are many working in the CFIA who aren’t thrilled about recent budget cuts to the department. (Parks Canada isn’t very happy either, but they don’t inspect our meat and have the ability to jeopardize the entire cattle business.)
Bob tells Senate that the CFIA cannot effectively perform their jobs at the XL plant, claiming that the CFIA did not have the resources in place to fully understand what was going on in the plant. Further, he alleges that most of the CFIA at the plant WERE NOT TRAINED in the Compliance Verification System (CVS).
What does the CVS do? According to the CFIA’s own website, it “means that inspection has been done in a consistent, uniform, and efficient way, regardless of which inspector was on the job or where the plant is located.” But don’t take it from me… take it from Bob:
“How could this be, you might wonder. After all, Minister Ritz has assured everyone that there are more inspectors working at that plant than ever. You will be interested to know that at the XL plant only a small portion of inspectors are fully trained in CVS. That’s right. More than four years after CVS was introduced, most inspectors there have not been trained in how to use it,” he told Senate on October 2.
But wait – Bob’s not done yet:
“Why? There’s a simple answer. CFIA cannot afford to deliver the training any faster and does not have enough inspectors to relieve those away being trained. As well, resources are often diverted to address crises which further derails training.”
Ok. Let me get this straight… of the 46 CFIA employees at the plant, only a handful know what they’re doing? Awesome. I’m sure the Nilssons will be so pleased to hear this. And Canadians concerned about food safety? This will help encourage them to buy beef, right?
But here’s what I see as the worst part of Bob’s revelation:
“Because of the pace of production and other factors, those with CVS knowhow at the XL plant did not always share the results of CFIA conducted CVS tasks and tests so other inspectors would have no idea if there was a problem that required heightened vigilance.”
Whoa. The few employees that have the precious CVS training DID NOT SHARE THE RESULTS OF TESTING with the other CFIA workers? Apparently, once someone learns CVS, they forget how to speak English.
In case any CFIA inspectors ever read this, I’ve included a helpful example:
“Hey, fellow CFIA worker, you should know that we’re getting increased E. coli positives. Can you keep an eye on the dehiding area, and maybe throw a few extra tests in there?”
See how easy that was? Maybe I should give up writing, and start food inspecting – I guarantee the pay will be better.
So here we are, October 2, in the midst of the largest E. coli beef recall in the U.S. and Canada combined, and Canada’s food inspectors don’t even know how to talk to one another. And somehow, we expect XL to be able to come out on the other side on this?
And doesn’t the timing of the recall and that address seem perfect for a union to advance an agenda? Between this and the weird happenings between the CFIA and FSIS, I’m not sure the Nilssons ever had a chance here.
• October 3 – Agriculture Minister Gerry Ritz makes an appearance at the plant then holds a press conference at the CFIA lab in Calgary to reassure Canadians (or Americans?) that Canada has a safe food supply, and an effective agency, and things are being looked after. More health alerts, same five days. Nothing really happens with Union Bob’s message to Senate.
• October 4 – Minister Ritz, apparently feeling some heat from the media and the public who are by this time lashing out at XL Foods, reassures the public that XL will absolutely not open until it is safe to do so. After listening to Bob, I’m pretty sure that no one can run a plant that is safe from the CFIA.
• October 5 – One more illness, more health alerts.
• October 6 – CFIA is still observing the company try and do whatever it is they need to do to abide by the CARs. (Perhaps the CFIA now has time to take the training they need?)
• October 7 – another health alert, same five days.
• October 8 – There are 11 confirmed illnesses. CFIA announces a detailed examination of the plant will be held the next day to see if all the hoops have been jumped through. Probably not a very happy Thanksgiving.
• October 9 – the assessment takes place.
• October 11 – CFIA announces a temporary license is granted for XL to process the carcasses that were hanging from before the shut-down. They had been tested negative for E. coli.
That is the last update from the CFIA on their website. But I have been following this closely even without the help of the CFIA.
XL brought workers in on Oct. 12 and 13. There were 5,100 carcasses to do, they got through about 3,300 of them. It was supposed to be a critical first step in getting the plant relisted, so that the CFIA could observe the workers in action.
On Saturday, XL temporarily lays off its 2,000 employees, in XL’s press release, the company says it has no direction from the CFIA as to what comes next or how to get the plant relisted. At this point, they’ve been paying the workers for 32-hour work weeks even though the plant has been shut down for two weeks.
This is when it gets interesting. CFIA apparently wasn’t happy about XL’s news release because they issued a statement saying this: “Unfortunately, the company decided to stop operations after only cutting about half the carcasses. At this time, we are unable to complete our assessment.”
Weird. First off, can anyone tell me how the CFIA is going to make sure there aren’t any evil E. coli pathogens by watching carcasses get cut up? And ok, I can accept you need to see that the workers are wearing proper protective gear and equipment is being cleaned, but is there really that much of a difference between 3,300 carcasses and 5,100? Some plants kill less than that in an entire week – does that mean the CFIA is unable to ensure that food is safe? What if XL had processed 4,900, or 5,099? Not enough? Would 5,101 be too many?
Moreover, would a company dependent on the CFIA’s approval really just suddenly decide to stop processing the carcasses, and then lay the workers off?
Nothing about this makes even an iota of sense.
So now, 800 workers have been called back to finish processing the carcasses for the CFIA to observe. As far as I know, there are still no outlines for what happens next. And I cannot find any protocol or regulations on the CFIA site to describe the process of re-listing a plant. None.
The implications here are staggering. So staggering, I’ve now sat up all night since 10 p.m. on October 14 until October 15 at 6:18 a.m. so that I can write it all down.
We know this is the largest recall in history, with an incredibly low ratio of illnesses to recalled meat – the lowest in history, statistics which even alone are telling.
We know that there were only ever five days of concern. Five days, and 15 illnesses in a country that sees 440 every year, and that’s enough to close the doors on our biggest plant. This is madness.
We know that XL’s license was pulled after some odd discussions with the U.S.
The fact that the CFIA even included that in the summary makes me think they want the public and the media to pick up on that.
It looks from the CFIA timeline that it took the CFIA a little while to communicate that first health warning to the USDA.
It seems as though the E. coli crisis may have been seized upon by the union to make a point about funding cuts.
And if the points that were made to the Senate have any basis in reality, the integrity of our food inspection system is at risk. At this point, I’d have more confidence in my dog’s lick-test before I’d dare bring a CFIA agent in my kitchen – CVR or not.
It doesn’t seem like the CFIA knows what the next stage of relisting even is, much less how to accomplish it.
The last day of contamination was September 5. And yet, nothing the plant did after seemed to help the situation. I just don’t get it. If XL was thrown under the bus, why? And by whom?
The bottom line
This plant is in big, big trouble. If it doesn’t get relisted, I can’t see XL being able to offload it to anyone else.
Looking at how fast other plants have thrown in the towel after even smaller recalls, I’m frankly astounded XL has hung in for this long.
Cattlemen who believe in free enterprise have told me that those who live by the sword must die by it as well, and I can’t say I disagree.
But if you just read everything I wrote, you know this isn’t a matter of free enterprise. This is at the very least, a catastrophic overreaction and devastating case of over-regulation conducted in one of the most inept ways I have ever had the misfortune of witnessing.
All I know is that whether you like them or hate them, this appears to be far beyond the Nilssons’ control. If they are going to lose their plant – fine. But if it’s being taken from them unfairly by an agency that everyone in this business has to live with, we’re all in big, big trouble. And if the Gerry Ritz is standing shoulder-to-shoulder with this, and Prime Minister Harper is looking the other way, what recourse is there?! What if Cargill is next?
But that’s just it, isn’t it? We all know Cargill won’t be. They’re big, with deep pockets, with an experienced communications department and no doubt, armed with brilliant crisis management plans. As much as Nilssons might be the big boys in Canada, they’re small potatoes on the world stage, and they were ripe for the picking.
I very much doubt XL can come back from this and I can’t imagine why they would want to.
But the future of that plant is still at stake and regardless of anyone’s personal feelings about packers, or Nilssons, or globalism – we need to guard against an agency whose own union president says it’s incapable and unwilling to do its job.
And If I’m a packer from the U.S. or anywhere watching this, and considering moving in on this plant, the CFIA and its behaviour would be scaring the crap out of me. Cow-calf guys fear the CFIA when they’re caught without a RFID tag… can you even imagine something on the scale as what’s going on at Lakeside? After going through all of the CFIA timeline with a fine-toothed comb, I wouldn’t open a plant in this country if it was given to me and filled with 2,000 workers who looked a lot like Brad Pitt. In chaps.
I’ve sent a list of questions to the CFIA, and I will eventually unravel all of this, but not fast enough to make a difference. I can’t stop thinking about the foreign workers at Brooks, and how that poor town is going to melt down on account of 15 illnesses.
If the cattle industry in Canada is going to start demanding answers, that needs to happen now. Like, today. Maybe the business is willing to just let XL bleed out, but are we willing to sacrifice the plant with them too?