WINNIPEG – The ongoing trade battle between China and the United States, along with the general uncertainty in the global trade market is starting to put a damper on Manitoba pork prices.
In Canada, the formula price used by domestic farmers is based on the national base price in the U.S. That price is determined by a formula used to calculate values in a number of key U.S. States.
In other words, Canadian prices follow U.S. prices, even if the pork is sold in Canada.
U.S. daily average slaughter weight prices for cash hogs have been dropping lower over the past couple of weeks, and that trend is starting to be felt here.
The Signature #5 (Maple Leaf) Index 100 daily price quote for Aug 10 in Canada, was down C$18.68 per hundred-kilograms (ckg) to C$146.84 ckg.
According to Andrew Dickson, the general manager of the Manitoba Pork Council, it’s a nervous time for the industry.
“Pork is moving but it’s going at a lower price so producers are getting less money,” he said.
Back in January, a Manitoba producer could have locked in a delivery price for the October contract of C$154 per animal.
Today, if you were going to ship that same animal in the same month you’d be lucky to get C$123 per animal.
“Who knows how much worse it could get?” he said, noting that at the end of July the price for an animal for delivery in December was just C$104 ckg.
Dickson said that amount of money wouldn’t even cover the cost of production, which he estimated at C$140 or more.
“The feed alone would be C$90 to C$100,” he said.
Much of the problem can be traced to over-supply, he said. Four to five years ago market opportunities for North American hog farmers were looking very promising. As a result more processing facilities were built in anticipation of higher production.
However, that plan seems to have run into a brick wall as newfound protectionist measures are roiling world markets.
“With Mr. Trump deciding to renegotiate NAFTA (North American Free Trade Agreement) and pulling out of TPP (Trans-Pacific Partnership) it has upset the apple cart,” said Dickson. “Now how will it be sold?”
China currently regards Canada as a friendly trading partner but Dickson is worried about recent speculation the Canadian government is thinking of putting tariffs on foreign imports of steel and aluminum.
“If we’re importing steel and aluminum from China they’re not going to be happy if we suddenly put tariffs on their products,” he said, adding pork could be one of the products caught in the crossfire.
Dickson said he has talked to his counterparts in the U.S. who are equally concerned about the situation.
“Going into this winter a lot of producers are going to lose money raising pork in the U.S. and by extension into Canada.”