XL Foods incident taints Canada’s reputation, tests foreign trust in CFIA: industry expert

TORONTO – Canadian food inspection officials and a troubled Alberta meat processing plant should prepare for an uphill climb in re-establishing Canadian beef as a safe product on the global stage, industry experts and economists say.

While the headlines about XL Foods on Thursday were positive – that management of the notorious plant was moved into American hands – the CFIA and businesses within the beef industry are still doing damage control from the E. coli outbreak that led to about a dozen illnesses and waves of recalls across the country and abroad this fall.

“The food processing industry is similar to the airline industry, where a single commercial plane crash is devastating to consumer confidence,” said Ian Lee, an an economics professor at Carleton University’s Sprott School of Business and foreign trade expert.

“Consumers do not make distinctions concerning which plant and which firm,” he told Global News.

He says that this incident is a second blow to Canada’s beef reputation, following the mad cow disease outbreak that devastated the beef industry in 2003. Some countries have only lifted their bans on Alberta beef within the past year.

XL Foods incident tests trust between global food inspection agencies and CFIA

Canada has seen the extent of this recall expanded in rounds of warnings issued over the course of weeks.

That recall seeped into other countries as well. Last week, Hong Kong’s Centre for Food Safety (CFS) halted the import of XL products into the island district.

Japan’s health minister also told all importers of XL beef that any shipments of the product will be seized.

Puerto Rico and the United States, among other countries, have also doled out advisories about the Canadian product, the Calgary Herald reported.

Ted Haney, former president of the Canada Beef Export Federation, says that if and when the Canadian Food Inspection Agency decides XL Foods is meeting industry standards and allows the plant to reopen, officials and those in the industry will be waiting with bated breath as to how the rest of the world responds.

“It’s a matter of testing the relationship between the CFIA and foreign regulatory bodies, depending on the confidence foreign regulators have in the agency,” he said.

Haney has decades of experience and is now a consultant to the beef sector.

Once the agency is satisfied with the plant fulfilling its requirements within the inspection system, XL Foods can notify fellow countries and importers that they can relist the company’s products to foreign importers.

But foreign food inspection agencies have the final word on whether XL products can make it onto their country’s lines.

Haney said that for the most part, foreign bodies tend to accept the recommendation and relist but some may err on the side of caution, which could delay XL’s return to business with that country’s market for weeks.

“In some countries, some customers will be more reticent to insert XL beef back into their systems, but others will immediately bring it back because they like the product, it’s at a competitive price, it’s good quality and it’s sold with excellent service,” he said.

The CFIA told Global News that it’s only responsible for recalls in Canada. It can’t recall products in other countries but relays food safety issues to countries Canada has brokered agreements with or shares ties with through global food safety organizations.

On XL Foods’ shoulders is the responsibility to contact specific importers or distributors who have E.coli tainted meat.

“The CFIA has an email subscription service that sends out an email for every public alert it issues. People from many of our trading partner organizations including in Great Britain, Australia and the United States, are subscribed to that service and receive notifications,” the federal agency said in an email.

The ripple effect on the Canadian beef industry

Haney said that when the processing plant was forced to shut its doors, it handed competitors all of its business as other plants had to pick up the slack to make up for XL Foods’ production gap.

“Nobody feels like they’re advantaged by this. Nobody wins in a food safety crisis. Everybody, the competitors and all others, want to move through this quickly to recover and get back to normal operations,” Haney said.

“In the short term, there is increased demand for some companies still operating but the negative press and the general concern by consumers would hurt you and offsets anything that can be construed as an advantage,” he said.

Lee called food safety a “public good” so if one company hurts, the others feel the pressure, too. “That is, the reputation of the entire industry is harmed by an outbreak at one firm.”

Fortunately, prices for cattle haven’t taken a hit like it did during the mad cow crisis.

Haney says he estimates that there might be a 10 per cent drop in the price of cows and feed cattle, but there’s been almost no effect on the price of calves.

“So that limits the injury to the cattle producers,” he said.

The remnants of mad cow disease tainting the beef industry’s reputation

Several countries have only recently opened their doors to Canadian beef, hesitating for nearly a decade to accept Canadian beef after the mad cow disease fallout in 2003.

“It was devastating as foreign markets were completely shut down in May 2003. Beef exports at the time were $4.5 billion annually and this was lost completely during the ban,” Lee said.

“Beef prices dropped and farmers’ cash flow dropped.”

Libya lifted its nine-year ban on Canadian cattle on Sept. 27 when the XL Foods E.coli outbreak was reaching its peak.

Last January, Canada celebrated after South Korea resumed imports of Canadian beef, dropping a nine-year ban. South Korea was Canada’s fourth-largest beef market before the outbreak. The federal government estimated that by 2015, the country will have purchased $30 million worth of beef.

By June, Peru lifted its ban, providing access to a $2.5 million market and only in the past year has Canada regained market access to the Philippines, Ukraine, Vietnam, the United Arab Emirates and Azerbaijan, Reuters reported.

What’s in store for XL Foods and the CFIA

While Lee says Canada’s reputation takes a beating once a recall makes its way overseas and that it could take years to reverse this damage, Haney says that it’ll be a “transition period” for XL Foods.

Haney suggests that if the CFIA allows XL Foods to reopen, it’ll take about a month for the company to return to normal levels of business.

“There’ll be a transition period that’ll last days or weeks as the company comes up for production and clients reintegrate the XL product back into the purchasing systems,” he said.

“By four or five weeks, subject to the company being able to operate in a timely fashion, this issue will be behind them.”

For now, the future of the troubled processing plant lies in the hands of JBS USA, a subsidiary of Brazilian-based JBS S.A.

“We know full well the commitment it takes to manage world-class operations that produce safe and nutritious products for consumers around the world,” Bill Rupp, president and chief operating officer of JBS told reporters.

carmen.chai@globalnews.ca

Follow @Carmen_Chai on Twitter.

With files from The Canadian Press and the Calgary Herald