* JBS assumes management of XL Foods plant, holds buy option
* XL Foods-produced beef sickened 15 people
* JBS had meat recall in 2009 but touts safety record
* Plant shutdown holds back Canadian cattle from market
By Rod Nickel and Theopolis Waters
WINNIPEG, Manitoba/CHICAGO, Oct 18 The Canadian
government said on Thursday that management changes at an
Alberta plant responsible for one of the country's biggest-ever
meat recalls would not affect a nearly completed review of
changes made to improve the plant's safety.
Canadian food inspectors are set to recommend this week
when, or if, XL Foods' Lakeside beef processing plant in Brooks,
Alberta, can reopen after E. coli contamination of its products
sickened 15 people in Canada and prompted the recall of millions
of pounds of beef.
The Canadian Food Inspection Agency, which pulled privately
held XL Foods' operating license on Sept. 27, said "any change
in management or ownership at XL will not affect our
JBS USA, a subsidiary of Brazil-based JBS SA
, said late Wednesday it had signed a deal with XL
Foods to manage the Brooks plant and had an option to purchase
the Canadian and U.S. operations of XL Foods for $50 million in
cash and $50 million in JBS SA shares.
The company, which would not assume XL Foods' debt or
liabilities, said it would examine events carefully to work out
what went wrong at the plant, which can process up to 4,500 head
of cattle a day.
"We're going to have to sit down with XL and understand what
has occurred in that facility to date and bring our expertise to
assist in that situation," JBS spokesman Cameron Bruett said on
"We have a very successful food safety track record and
robust food safety program and we think that will be an asset to
Agriculture Minister Gerry Ritz, who has been under fire for
the government's handling of the beef recall, also suggested
nothing will change in the review timetable.
"Canadian consumers can be assured that the Canadian Food
Inspection Agency will enforce the same rigorous food safety
standards at Lakeside facility regardless of the management,"
Ritz said in an email statement.
US GOV'T AUDIT
Meanwhile, Canada's food safety system will come under
scrutiny from the U.S. government, which found inconsistent
application of meat safety rules in an audit three years ago.
The U.S. Agriculture Department said the audit was planned
before XL's beef recall began a month ago.
USDA audits of food safety systems typically require four to
six weeks for visits to plants, labs and government offices and
are followed by months of report-writing.
In its last review, USDA said Canada failed to apply
meat-safety rules consistently. As a result, Canada struck
export approval for three out of 23 plants USDA had visited.
The situation indicated a "system weakness to maintain the
country's standards in a broad and consistent fashion," said the
audit. The Canadian Food Inspection Agency undertook significant
steps, particularly to improve the training of inspectors, to
improve its system, said USDA.
"If these actions are effectively implemented, the system
weaknesses should be remedied," said the report.
As part of the 2009 audit, three plants were barred from
exporting products to the United States and three others were
threatened with delisting, out of 23 plants inspected. None of
them were identified by name.
The 2009 audit was the last in a series of audits that ran
from 2006-08 and was an "equivalence verification" audit to see
if Canada's rules resulted in meat and poultry products equal to
U.S. safety standards.
JBS HIT BY BEEF RECALL IN 2009
JBS has also produced beef contaminated with E. coli. The
USDA's Food Safety and Inspection Service in 2009 recalled beef
produced by JBS Swift. Twenty-three people in the United States
JBS responded by assembling a top-notch food safety team
that still advises the company, said Steve Kay, editor of
California-based Cattle Buyers Weekly.
"What they do will absolutely diffuse the whole issue and
all the controversy surrounding the recall because their focus
will be 150 percent on satisfying CFIA's requirements and
enhancing the food safety systems currently in the plant and
getting it back up and running by early next week if they can,"
JBS will decide whether to buy the XL operations within six
months, Bruett said.
In Canada, JBS, the world's sixth-largest exporter of beef
and veal, would go toe to toe with Cargill Ltd,
which operates two big beef plants of its own.
"Canada has an excellent cattle herd," Bruett said. "Our
strategy as a company is to have a global platform both in
processing and in distribution."
The temporary shutdown of the XL plant has forced ranchers
and feedlots to hold back cattle from the market or to export
to U.S. slaughter plants.
Western Canadian feedlot operator Brad Wildeman said he
would be sorry to see a Canadian cattle company disappear, but
sees benefits from JBS's arrival.
"They have a lot of expertise at running plants and second,
they're a world trader, so in the longer term our ability to
build export markets is going to be important for us."
JBS is the third biggest beef producer in the United States,
after Tyson Foods Inc and Cargill.
"This whole deal with picking up XL assets, which is
eventually what they are going to do in six months, reveals
JBS's opportunistic acquisition strategy and strengthens their
hand in North America quite considerably," Kay said.
Bruett would not say when the company began discussions with
XL Foods, which is privately owned by Nilsson Bros. JBS shares
in Sao Paulo rose 3.8 percent in afternoon trading.
The union also cautiously welcomed the deal. "JBS is going
to have to prove they can come in here and run the plant, and in
order to do that they'll need to reach out to the workers who
know best what's needed at the plant," said Doug O'Halloran,
president United Food and Commercial Workers Union Local 401.