Contracts with buyers should help hog producers endure the next few months while waiting to learn whether the new antidumping duty on hogs will be lifted.
“I’m hoping this goes away before most of them expire,” said Perry Mohr, chief executive officer of Manitoba Pork Marketing.
However, those selling into the spot market are more vulnerable and some analysts are predicting that Canadian producers will ultimately end up bearing the brunt of the preliminary antidumping duty imposed this month on exports of live swine to the United States.
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Brad Marceniuk, Sask Pork industry analyst, was among those predicting that the duty will depress Canadian prices for market weight hogs. He speculated that Canadian packers might try to drop prices by as much as $20 per animal, which would be equivalent to the duty on market weight hogs exported to the U.S.
“I really think there’s going to be a bit of a game between the packers and Canadian producers in the short term. It’s hard to say where the price will fall.”
The outlook for weanling export prices is even less clear. There is strong demand for weanlings from Canada in the American Midwest, making it difficult for importers there to try to discount prices.
The duty on early weaners weighing around 50 kilograms amounts to $6 per head.
The antidumping duty could be lifted this April if the U.S. International Trade Commission determines that Canadian hog imports have not harmed American producers. The money would then be refunded to those referred to as the importers of record.
There were no signs last week that the duty was stemming the flow of hogs south, although there was a report from Manitoba Agriculture that weanling producers in the province were holding back supplies to see what the market would offer.
“Pigs are going to keep going south,” said Jason Manness, Maple Leaf’s procurement director for Western Canada. “Producers are fairly confident they are going to win next spring and therefore we are not seeing a backlog of Canadian hogs.”
Manness said most of the pigs that Maple Leaf buys are under contract with producers. When asked whether the packer might try to take advantage of the current situation, he replied: “Most pigs we buy are on contract. That contract is based off the U.S. market, so if the U.S. market goes up or down, so does our price to Canadian producers in Western Canada.”
Contracts between producers and packers can run anywhere from one to five years. There are contracts that guarantee the producer both a market and a price, while others guarantee only a market for the pigs.
There were reports last week of a slight drop in the price of slaughter hogs, but that was attributed to things like the value of the Canadian dollar and some squeezing of packer margins in the U.S., prompting packers to lower their bids.
“That’s not related to anything other than the forces of the market,” Mohr said.
