Low supply should lift prices, but herd expansion unlikely

Profitability improving Alberta Pork chair positive about industry outlook despite rising cost of barn construction

Five years of losing an estimated $16 per pig have drastically reduced the number of hog producers on the Prairies, along with the number of pigs.


Now the market wants pigs and producers can make money on pigs, but there aren’t any additional pigs to be had.


“Is there a shortage of pigs in Western Canada? Yes,” says Alberta Pork chair Frank Novak.


“Some estimates would say that the processors in Western Canada now are short about 30,000 market hogs a week.”


His remarks came on the same day that the Maple Leaf Foods slaughter plant in Brandon announced reduced production, which some attributed to a shortage of hogs and a general trend of plants operating at less than capacity.


Novak told Lethbridge area hog producers May 27 that profits of $40 per market hog are possible this year, but it would take another year of similar per pig returns for producers to regain the position they held five years ago.


“Are our meetings happier than they were this time last year? Absolutely,” he said.


“But all of us know exactly how deep the hole is and how much climbing we’ve still got to do. And once we get back to even, then of course we get to work on … everything else that we didn’t spend money on just to try to keep things going.”


That includes barn construction or improvement, equipment upgrades and maintenance.


Novak said that financial position and the higher costs of building barns in Canada will likely prevent any expansion of hog numbers in the near future.


However, he expressed cautious optimism about future prospects if Asian pork demand grows as expected and trade deals establish favourable trade terms.


“It might just be that we have a chance here to come into a period where we can actually make some money for multiple years,” said Novak.


Industry sources have told him it costs $400 per animal to raise market hogs in China, where concerns are growing about an adequate protein supply for a more affluent population.


“Clearly they cannot compete with us in terms of cost of production, and when you put that together with all their other economic pressures, their environmental pressures, their disease pressure, the Chinese and other people in Asia are very nervous about having enough protein,” he said.


Challenges in maintaining and increasing production include aging infrastructure.


“We need capital,” he said.


“Somewhere we’re going to have to find hundreds of millions of dollars in Canada to rebuild barns, to replace barns and do things like that so we can keep the supply going.”


Labour shortages, the looming threat of porcine epidemic diarrhea virus infection and increased costs for code of practice compliance are other challenges, Novak said.