Good afternoon, everyone.
My name is Jason Aitken, and I'm the president of Northern Natural Processing. I'm here to directly address the goal that the Barton report is trying to achieve: specifically, to increase production capacity to meet an export objective of $75 billion in 2025.
Northern Natural Processing owns the only CFIA federally licensed beef slaughter facilities in Saskatchewan, and we do business under the brand name Qu'Appelle Beef. We're independent and to date have focused on delivering high-quality, value-added beef products.
We own two CFIA federally licensed facilities, both outside of Regina. The cattle harvest facility, CFIA establishment 659, is approximately 33,000 square feet and is in Neudorf. The beef value-added further processing facility, CFIA establishment 519, is approximately 22,000 square feet and is in Wolseley. Recently, we obtained export licences for the U.S., South Korea and Japan.
Saskatchewan accounts for more than 40% of arable land in Canada, yet 85% of the cattle born in Saskatchewan leave on trucks, with half of them going south to the U.S. Why can't we keep the cattle in Canada and process them locally?
Canada is currently a net importer of beef, so we're here to change this. It's about food security and value creation at home for the benefit of Canadian producers and families in our local communities. Our mission is to be a net exporter of high-quality value-added beef products, not just an exporter of live cattle.
Let me break down the remainder of my time into two segments: the barriers that hold us back as a beef processor and the opportunities ahead.
The three main barriers are capital funding, critical mass and market power.
On capital funding, the capital expenditure required to be competitive in beef processing is significant. The strength of the two main incumbents—both foreign players that control 90% of the market—is well acknowledged. Cargill has 14 billionaires as family members, and JBS's largest shareholder is 25% owned by the Brazilian government.
Capitalization for smaller processors is a critical issue. We've privately raised over $40 million from scratch from investors over the last decade since I founded the business. This represents a 10:1 ratio versus any government funding that we have received.
If Canada wants to have made-in-Canada beef and true self-sufficiency and to avoid the supply and procurement issues being witnessed currently with PPE and vaccines, I would submit that all parties would mutually benefit from greater stimulus participation from the Government of Canada.
On the topic of critical mass, the operating expenditure required to be competitive in beef processing is significant. By that, I mean funding for the working capital requirements for essential inputs like cattle, labour, packaging and utilities. Let me use a simple analogy. Think of a 747 airplane: Does it economically make sense to run it if you only have five people aboard? There must be enough cattle throughput to cover fixed costs. We've succeeded in selling over five million pounds of beef across the country to customers such as Metro, Longo's, Costco, Save-on-Foods and A&W, to name a few, but it's still not enough to realize break-even plant capacity. This is where international markets are critical.
On market power, as you know, the beef industry is incredibly concentrated, so much so that four players control 80% of the U.S. market, where there have recently been antitrust probes led by the Department of Justice. In Canada, two main players have 90% of the market. Cargill and JBS can sell steaks and ground beef as loss leaders because of their global reach. Think of it like a Sony PlayStation or Xbox that embeds their platform with entrenched consumers; they make all their profit with scalability on software and tie-in products. As any parent with teenage kids knows, they get you hooked.
The best way to make money in the beef-processing industry is to consider steaks as almost a by-product of what you do. The Better Beef slaughter plant in Guelph, Ontario, set an important precedent by building a by-product capture plant with strong distribution into Japan. Their success resulted in a high-value acquisition by Cargill at a twelve times EBITDA multiple. Don't let anyone tell you that beef processors can't make money for their stakeholders.
Let’s bring this back to the bigger opportunity and the reason why we’re here: the Barton report and $75 billion in exports by 2025. This gets very personal for me. I've spent 15 years living outside Canada: seven years in Japan and seven and a half in the U.S. I speak Japanese. I've done 1,500 company visits on site in Japan, Korea and China. If there's one thing I'm sure about, it's rising per capita protein consumption in those regions. It's an unstoppable long-term trend.
We have an amazing export opportunity. Asia-Pacific wants to do business with Canada, but they require stability and guaranteed supply. The only way to guarantee this is to develop the hard assets and truly invest in the necessary infrastructure.
This brings us to two points to leave you with.
The path forward is access to funds and greater flexibility. Canada has done a good job of providing funds and initiatives to lay the foundation for export opportunities, for example, the recent CPTPP treaty and the recent announcement of a $4-billion irrigation project in Saskatchewan. However, broader access to funds remains severely limited. Until application and performance criteria are revised, Canada is not encouraging the innovation and participation required to achieve the Barton report export objectives.
Finally, here are the benefits that a true commitment to funding would have. We'd increase the number of long-term skilled jobs and high-value jobs. It’s worth noting that indigenous people make up over 50% of our workforce at Qu’Appelle Valley. We'd create and realize significantly higher prices for local Canadian agricultural inputs. We would provide a reliable, guaranteed, high-quality supply of beef for Canadians; promote integrity and brand value for the region; promote Canadian interests, both domestically and abroad; and finally create a successful template for the business development of healthy value-added products, which can be replicated in other provinces around the country.
With that, I’d like to open it to questions. Thank you so much for your time.