Future looked profitable | First confirmed cases of hog disease in Canada threatens optimism
BANFF, Alta. — The first appearance of porcine epidemic diarrhea in Canada comes as economists begin forecasting profits for the industry for the first time in years.
Low interest rates, reduced feed costs and a declining Canadian dollar are positive signs for the Canadian hog industry, officials and economists said at the Banff Pork Seminar last week.
J.P. Gervais, chief agriculture economist at Farm Credit Canada, called it “moderate optimism.”
The outlook isn’t strong enough to expect producers to take on new debt or see widespread expansion right away, but operations that have struggled are likely to begin repairing balance sheets after several volatile years.
Gervais said operations with 3,000 or more sows have probably broken even over the least three or four years, but smaller producers have lost money for as many as seven.
He said feed costs over the next year will favour producers in Western Canada, where the price of barley has dropped significantly, over eastern growers, who have already seen a dip in corn prices.
“Looking into the future for the next 18 months, profitabilities look really positive,” said Gervais.
PED was the elephant in the room at the Banff Pork Seminar. The deadly virus has devastated American producers, resulting in millions of hog deaths — primarily piglets — and costing producers hundreds of millions of dollars since it first appeared last spring.
The first confirmed cases of the virus were discovered in a barn in southwestern Ontario last week.
“It’s looking like a great 2014 and unfortunately PED might take some of those profits away,” said Claude Vielfaure of Hylife.
Steve Meyer of Paragon Economics said PED has yet to be priced into the market because the first impact on slaughter numbers didn’t appear in December. Cases of the virus, which thrives in cold weather, escalated in the U.S. over the fall. Hogs in that country are carrying more weight, both because of lower feed costs and PED, but it won’t make up the difference.
“We’re just into the losses of pigs from this,” said Meyer.
Meyer had expected futures market prices to rise through the spring to numbers in the high $90s, but he has changed his forecast because of the widespread affect of PED.
“We think we’re going to go well above $100,” said Meyer.
At the same time, Meyer expects American producers to expand the sow herd by two or three percent in the coming years.
A lower Canadian dollar, hovering around 90 cents relative to the U.S. at press time, is expected to see more animals sent to the United States.