What is the difference between pigs and cows?
It’s a dumb question, you may say. Cattle are ruminants, meaning they have four stomachs, while pigs are monogastrics with one stomach.
From my observation, cows are more aloof while pigs are more social. Another difference unique to North American pigs is they are one directional, moving south to the United States but not north to Canada. Several weeks back the front page of The Western Producer featured a story on American cattle coming to Canada to be slaughtered because basis levels were stronger north of the 49th. It is heartening to see some livestock priced competitively in Canada.
In the pork business that is unheard of. In Western Canada, the pricing model is based off the American price with a negative basis. Simply put, we operate on a discounted price to the U.S.
The Alberta price for pigs being purchased by Red Deer-based hog processor is based off the Iowa- southern Minnesota daily price (ISM). American pork analyst Ron Plain recently stated in his commentary that the Aug. 17 afternoon ISM price was the lowest reported price since Dec. 26, 2002. Ouch. He then goes on to say that, fortunately, most producers don’t use that pricing report anymore. While it may be fortunate for American producers, it is unfortunate for us Alberta producers because that is what our price derives from.
The Alberta price for hogs for Aug. 27 was $1.03 per kilogram dressed pig. My return on a 275 pound (125 kg) live pig is $1.03 x 125 x 80 % x 110 index = $113.30.
Average feed costs in Alberta for August was $118 to feed that one pig. Average cost of production is about $175 per pig shipped. That one pig lost $61.70. Multiply that by say a liner load of 220 pigs and the loss for one week is $13,574 for the independent producer.
To be fair, prices are not great in the U.S. either. They are poor. However, a discounted poor price makes for a terrible price in Western Canada.
These prices and the futures prices are telling us that Western Canada is not the place to raise pigs; get out while you can. These prices are screaming, “get out! Get out!”
That is starting to happen. I recently heard of another colony make the difficult decision to shut down their barns. Typically, these decisions are made around the kitchen table with little fanfare. There is no picketing of packing plants, no dumping of pigs on the legislature grounds, only a grim acceptance of a decision that has to be made.
Does it have to be this way?
In the July Canadian Pork Market Report put out by Kevin Grier, he states that the Canadian cutout, which is the carcass value, has become much stronger relative to the U.S. cutout. In other words, Canadian processors buying Canadian pigs are doing better relative to U.S. processors than they have been historically.
We can do better in the pork industry. If processors want to continue to buy pigs from independent producers, now is the time to offer a better price and stop the barns from shutting down.
Our producer organizations such as Western Hog Exchange or the provincial pork councils want to work toward a solution.
Give us a reason to stay in the pork business. The time to address this problem is now so that next spring there will still be pigs to fill the plants. Maybe in the future, we will see pigs that learn how to travel north.
John Middel produces pigs near Rocky Mountain House, Alta.