Hog sector future looks sunny, but past storms not forgotten

The stars are starting to align for Western Canada’s hog producers, providing the best opportunity for growth in more than a decade.

Can producers organize for sustainable growth and avoid the boom and bust of the late 1990s and 2000s?

Growers today are enjoying the effects of a weak Canadian dollar, growing demand from China and elsewhere, removal of the U.S. country-of-origin requirements and the end of the hog barn moratorium in Manitoba.

Maple Leaf Foods, one of the two major pork packers in Canada, has completed a billion-dollar reorganization and modernization and is starting to again post respectable profits.

The federal government has recognized agriculture as a potential key driver of the economy, setting a goal of increasing Canada’s agri-food exports from $55 billion to $75 billion annually by 2025.

The hog and pork sector can be part of this growth, providing new demand for feedgrains and creating jobs and economic growth with a lot of it in rural areas.

Yet many in the industry remember the late 1990s when boosters proclaimed the time had come for Canadian pork. The outcome was disappointing for many.

The federal government ended the Crow Benefit grain transportation subsidy in 1996. The expectation was that Western Canada’s cheap feedgrain would make it one of the lowest cost regions in the world to feed pigs and produce pork.

The weak Canadian dollar — below US70 cents — provided an export incentive.

Massive investment poured into new large barns, much of it from small local investors with provincial governments supporting the push.

Maple Leaf built its big hog slaughter plant in 1999 in Brandon. The hog plant at Red Deer expanded in the late 1990s and Olymel bought it in 2001.

But soon the industry encountered problems. The expansion in Western Canada coincided with U.S. herd growth, leading to overcapacity and weak hog prices. The 1997 Asian currency crisis slowed pork demand from that critical region.

The new companies that owned barns rarely made a profit and mounting debt forced them to sell out to larger operations at discount valuations. Many local investors suffered major losses.

The Canadian hog herd topped out in 2005 at about 15 million head.

A series of huge challenges followed. The Canadian dollar rose to parity in 2007. The cost of feed grains soared.

Disease outbreaks hurt productivity, H1N1 swine flu hurt demand and a listeriosis outbreak at Maple Leaf resulted in 22 deaths. The United States brought in COOL.

Things got so bad that in 2009 the federal government had to intervene through two emergency programs to offset losses and try to reduce the size of the industry.

Between 2006 and 2011, the number of farms with hogs fell by 36 percent and the herd decreased almost 16 percent.

The last four to five years have seen better producer profits and gradual rebuilding of the herd.

Where to go from here? The stars might be realigning, but producers no longer have stars in their eyes.

They are already engaged in a huge and costly rebuilding program to meet the 2024 goal of eliminating crates and having all sows in group housing.

Herd expansion will likely be more cautious this time. But with high herd health and welfare, a quality product and the decision to eliminate the use of ractopamine, Canadian pork can make inroads in world markets.

Bruce Dyck, Barb Glen, Brian MacLeod, D’Arce McMillan and Michael Raine collaborate in the writing of Western Producer editorials.

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