Dozens of Alberta hog producers will be forced out of business when pork processing giant Olymel reduces the price it pays Alberta producers by $12 a hog, said officials with the province’s hog marketing organization.
Few pork producers can withstand the cut because the
industry is already struggling to make a profit with a high
Canadian dollar and high feed grain prices.
“It’s absolutely significant. I’m worried about the industry now,” said Jim Smith, chair of the Western Hog Exchange.
At the beginning of July, Olymel told its producers the price drop would take place as individual producer’s contracts come up for review through the year. Instead of a price based on the Iowa and Minnesota markets plus $1, the contract will be Iowa-
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Minnesota minus $11.
(See Producers slammed, page 2)
Hog prices are already about $10 below the $140 per hog breakeven level. Dropping the price a further $12 will force many producers to assess their viability.
“This will mean an exodus of hog producers at a totally unprecedented rate. It’s extremely unfortunate. It’s an extremely serious situation,” he said.
In 2003, there were 1,500 hog producers in Alberta. Now there are 800 with producers leaving each week.
Mack Rennie, general manager of the Western Hog Exchange, said since the announcement he’s received hundreds of calls from producers who can’t believe the price cut.
“They’re not even mad, they’re in shock,” said Rennie, who believes the price cut will make a shortage of hogs at Olymel’s Red Deer plant even more dramatic.
“I don’t think this is the right move.”
John Middel, a pork producer from Rocky Mountain House, said he put his 650-sow-to-weanling barn renovation project, worth $100,000, on hold when he heard about the price drop.
Even though Middel’s pigs are sold at three weeks of age and not as finished animals, he knows the lower price will eventually filter down to him.
“There’s no point going into debt when the industry isn’t going to be there,” said Middel, who wonders why the provincial government hasn’t been working with hog producers to find a solution.
“The government has to do something to show they have faith in the hog industry,” he said. “In a short-term crisis like this, there needs to be some revenue injection to bring the price up.”
Sector ignored
Preugschas said hog producers are the forgotten part of agriculture. There is very little romance in hogs. The government’s latest fascination with biofuel has hurt their industry by driving grain prices higher.
Expensive feed is only one factor hurting farmers, he said. High labour costs and a shortage of labour at the packing plant and the farm have caused troubles in Alberta agriculture. Add a high Canadian dollar and there is little relief in sight.
“Unfortunately our government has turned a blind eye to the plight of our industry. It’s extremely disappointing,” said Preugschas. “We’ve fallen on deaf ears with the government.”
Alberta agriculture minister George Groeneveld said the provincial government does care about the hog industry, but needs to find a long-term solution.
“We try and help the hog producers as much as any of the other industries. We certainly are supportive of our hog people,” said Groeneveld. The minister said a $12 price cut by Olymel was excessive.
“This may seem harsh, but is Olymel a friend to the hog producers or not?” he asked.
Groeneveld said farmers have the Canadian Agricultural Income Stabilization program to help them cope with the lower hog price.
“The CAIS program would pretty much take care of them in Year 1 and possibly Year 2. There is that backup there that has to give them some comfort,” Groeneveld said.
After the Olymel announcement, officials from the Maple Leaf processing plant in Brandon met with Saskatchewan hog producers and offered them a contract only $1 less than what Maple Leaf offered producers in the spring, not the dramatic decrease like Olymel.
“On the heels of the Olymel announcement it was quite a pleasant surprise to many of the producers at the meeting,” said Don Hrapchuk, general manager of Saskatchewan Pork International.
“Many were expecting a more dramatic reduction in hog prices in light of what Olymel offered.”
Hrapchuk said Olymel’s lower price would put Alberta producers at a significant disadvantage to Saskatchewan and Manitoba producers.
Officials with Olymel didn’t return phone calls.
