RED DEER – Since 1998, Alberta pork producers have had only two profitable years.
And this year, when there was some expectation of profit, many Canadian commodities are in a sinkhole, said the chair of Alberta Pork.
High costs for energy and feed, the impact of bovine spongiform encephalopathy and a stronger loonie have all hurt the pork industry this year, said Bill Wildeboer at a producer meeting Nov. 13.
The pork producers board approached Alberta agriculture minister Shirley McClellan and her staff throughout the year pleading for aid to cover some of the damages.
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Most recently, they asked for $10 per hog marketed between June 1, 2002 and March 31, 2003, a program that would cost $30 million.
“The answer was no, the assistance programs that we have should suffice,” said Wildeboer.
However, pork profit margins have been falling since 1998 so potential payouts are smaller each year.
Most recently the rising Canadian dollar has concerned exporters like the pork industry. As of Nov. 14 the Canadian dollar reached its highest level since 1993, at nearly 77 cents US.
For every one percent change in the dollar, there is a one percent change in hog prices. Currently, this works out to a $7 loss per hog.
“Anyway you slice that, we are losing money and we are losing a lot more today than we were a year and a half ago,” Ontario pork producer Clare Schlegel said at the pork meeting.
Kevin Grier, senior market analyst for the George Morris Centre, said Canadian price discovery has been more challenging this year. Canadian prices are based on the U.S. price, exchange rate and local supply and demand.
However, these prices are determined by a small live market. Only about 15 percent of American hogs are sold on the live spot market while the rest are sold under contract. The situation is similar in Canada as more producers move toward contracts and formula pricing.
Next year, American hog slaughter numbers should be down slightly and prices should be profitable.
But Canadian producers, besides facing lower prices, might have to deal with country-of-origin labelling. This could add costs to Canadian producers and there is the bigger risk that American packers may refuse Canadian hogs because of the added expense of sorting and labelling foreign animals.
More than half of what Canada produces is exported as live animals or pork products.
In 2002, Canada marketed 28 million hogs, of which 22.3 million were processed domestically. The rest were exported.
