The hog business is back to normal in Manitoba after a week-long impasse when most of the pro-vince’s pigs went to packers in Alberta, Saskatchewan and the United States.
The agency that sells most of the hogs in the province agreed to return to an old pricing formula until Feb. 24 so it could continue to negotiate with packers on a new way to price hogs.
“I guess we entered into a two week cooling-off period, if you will,” said Rene Chabidon, assistant general manager of Manitoba Pork.
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Chabidon said the agency presented packers with a proposal for a new pricing system in early January.
The former pricing agreement ended Jan. 31, and Chabidon said the marketing agency wanted to price hogs differently to reflect the open market conditions that came into play July 1.
Under the previous deal, all four packers paid Manitoba Pork the same price based off the hog market in the U.S. western corn belt. The packers and the agency met to negotiate that formula.
Under the new proposal, packers would submit individual bids to Manitoba Pork.
“I think the fact that we’re trying to deal with them individually rather than as a group is the main stumbling block here,” said Chabidon.
Considered price fixing
But because the agency is only one of several hog marketers in the province, it believes getting together with the processors to decide on a price could be construed as price fixing by other sellers.
The proposal also called for prices to be based off the Chicago Mercantile Exchange’s lean hog index.
“We felt (the index) would just give us a better handle on what average hogs were worth in the U.S.,” he said.
“We’re not looking for us to be the highest market, but we do want to be, in a relative sense, consistent with that North American marketplace.”
By Jan. 31, Manitoba Pork was close to signing offers with at least two plants, Chabidon said. But then negotiations broke off.
The agency offered an interim price, which the smallest processor accepted. The other processors didn’t handle hogs and one issued layoff notices. Packers stayed silent during the standoff, while the labor union representing workers at the plants complained publicly about potential job losses.
The province’s minister of agriculture stepped in on Feb. 5 to get the parties talking again.
Harry Enns said he was caught by surprise, noting producers have been happy with recently strong prices, and processors had been running full tilt.
“I think the processors have to understand that it isn’t the same ball game that existed under the single-selling desk and that they will have to actively compete and bid for continuity of supply to their plants,” Enns said.
Chabidon said farmers were not greatly affected by the impasse because the agency continued to sell hogs to out-of-province buyers.
He noted some farmers had to hold back hogs to get them up to heavier market weights desired in the other markets.
