Saint John plant closure could affect milk prices, says N.B. dairy farmers group

The closing of the Saputo plant in Saint John presents a logistical nightmare for some dairy farmers in the province and could eventually lead to higher milk prices, according to the chair of Dairy Farmers of New Brunswick.

The dairy giant announced Thursday its plant in the city's north end will close in January 2021, eliminating about 70 jobs. The company blamed a drop in net earnings in a release of its latest quarterly results.

Paul Gaunce, board chair of the non-profit collective that markets raw milk, said losing the company's lone fluid milk processor in the province will hit his organization hard. 

"It's a sad day for New Brunswick," he told Shift New Brunswick on Friday.

"It's quite a substantial volume of milk that we'll have to send somewhere else to get processed."

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The only other plant of its kind in the province is in Miramichi, and that's owned by rival corporation Agropur. Gaunce said the plant likely couldn't take on the extra product and, even so, Agropur would then have to take over the entire New Brunswick market.

He said the next best option appears to be Dartmouth, N.S., or Victoriaville, Que. Add the fact that milk is a perishable product and it further complicates the transportation equation.

His members will work on logistics over the next 12 months, he said.

Farmers pay for the transportation of raw milk to the processor, meaning Gaunce's 30-kilometre journey into Saint John is going to become a lot longer and a lot more expensive.

"The logistics of trying to find enough trucks with enough time to get to those plants when you add that distance on … it's a totally different ballgame," he said.

That cost will likely be passed on to consumers in the next couple of years, he said.

Consolidating the business

Montreal-based Saputo also announced Tuesday its plant in Trenton, Ont., will be closing in September, affecting about 210 employees.

Saputo and its competitors have been acquiring smaller dairy outfits around the world but also consolidating and streamlining operations in Canada through a series of plant closures.

Saputo, which distributes products under brands like Baxter, Scotsburn and Milk 2 Go, closed three plants in Sydney, N.S., Princeville, Que. and Ottawa in 2016 and 2017 as well as two Alberta plants in 2014.

The original Baxter's Dairy company, which was purchased by Saputo in 2001, has operated in Saint John's north end since 1931. 

The company said closing its Saint John and Trenton plants is part of ongoing measures "aimed at improving its operational efficiency and right-sizing both its manufacturing footprint and sales force in Canada."

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"Over recent years, Saputo has maintained efforts to pursue additional efficiencies and decrease costs while strengthening its market presence," the company said in a release. "This decision is part of the Company's continual analysis of its overall activities."

Saputo reported third-quarter net earnings of $197.8 million, a 42.2 per cent decrease, while overall revenues climbed to $3.891 billion, an 8.8 per cent increase.

It said it will continue diversifying its product portfolio by pursuing more plant-based opportunities.

Support for affected workers

Saint John Coun. John MacKenzie, whose ward includes the plant, said Friday the news is "devastating" for the 70 workers and their families and it will create a "ripple effect" throughout the north end community.

"When you lose that number of job opportunities in a community, everybody suffers, the coffee shops, the grocery stores," MacKenzie told CBC News. "It's just a trickle-down effect."

Saputo said employees not offered relocation opportunities will be provided with severance packages.