Support for single desk said driven by low profitability and higher prices in Quebec resulting from its pricing model
Alberta pork producers last week voted 68 percent in favour of pursuing a single-desk system for selling their pigs.
The vote shows the depth of frustration among producers as they continue to lose money on every hog while packers record major profits.
The resolution that passed Nov. 26 directed the board to pursue a system similar to that of Quebec “to give producers across Alberta the ability to obtain a fair price for their pigs that allows for profits over and above our cost of production, creating producer profitability and allowing for future growth of the industry in Alberta.”
Alberta Pork chair Brent Moen said data from hog organizations in the four western provinces show hog producers have had a negative return on investment for the past five years, illustrating the depth of the problem.
“I think the reason that independent hog producers are asking for a single desk concept is driven by two things, frankly. The first is an extreme lack of profitability and actually losses in the industry over the last number of years, in an environment when the retailers are making an exceptionally good margin off of meat, pork in particular.
“Packers … have not suffered financially through this downturn and yet hog producers have actually got one of the lowest prices for the year, in history, and are losing a substantial amount of money.
“I think the industry is just getting tired. They’re seeking a new alternative, a new way to try to get some transparency into valuing the pig.”
The second driver is that Quebec producers get an estimated $35 more per pig than those in the West due to their pricing model. There, a regulated system markets independent producers’ pigs based on the value of the cutout.
In contrast, western Canadian pig prices are based on a United States market model that Moen described as antiquated. He said Canadian packers need to recognize that producers will exit the business in greater numbers, thereby reducing packers’ ability to operate efficiently and at a profit, unless things change.
Alberta Pork executive director Darcy Fitzgerald said figures show Canadian pork processors increased pork sales by $400 million in 2019 over 2018 and in 2020, by the end of August, had exceeded 2019 sales by about $550 million.
Before last week’s annual meeting, Moen said Olymel announced an encouraging price adjustment with a floor price of $1.60 per kilogram, which would provide producers with about $170 per pig.
However, cost of production is an estimated $185 per pig, said Moen. Though welcome, the floor price means producers will lose less money per pig.
In the depths of the price downturn this spring, when the pandemic wreaked havoc, processors including Donald’s Fine Foods and Maple Leaf also increased prices for several weeks but those have since expired and have not been renewed, Moen said.
Retailers have also profited on pork, he added.
“It’s sort of disturbing when you think about the fact that the consumers in Canada rely on pork producers to provide their protein and yet they don’t realize that through this pandemic, they have lost huge amounts of money at the same time that the retailers have been raising pork prices.”
Moen said hog organizations have formed a Canadian coalition with which to pursue solutions. That will involve negotiations with packers.
“This problem is not just Alberta. This problem is basically all of Canada with the exception of Quebec so we have a couple of initiatives going.”
“We would much sooner hammer out a fair and positive solution to this than to take this through media and through government and create more challenges. We could have a virtual single desk … where producers could simply say, ‘OK we are going to sign over our contracts… over to one representative body,’ and that body or board of directors, I’ll call it, their responsibility will be to negotiate with packers and to arbitrate a fair and reasonable price.”
Moen said many hog producers face the prospect of replacing older barns in the near future, given that about half are almost obsolete. Without prospects of profitability, many will choose to quit the business.
Could single-desk hog marketing return to #Alberta? Producers at Alberta Pork’s AGM voted to explore the possibility of a new system that could generate better returns for #farmers, who have been losing money over the past five years. Read more: https://t.co/gjOVaD76ko pic.twitter.com/DPnasBSHoz
— Alberta Pork (@albertapork) December 2, 2020
For Canadian producers, 2014 was the most lucrative year ever experienced. Prices were driven up by massive U.S. losses from porcine epidemic diarrhea (PED). The same scenario of profitability would likely have occurred in 2018-20 when China suffered major losses from African swine fever.
However, the U.S.-China trade war reduced U.S. producer profits and since Canadian prices are U.S. based, Canadians lost money also. American farmers received government money to offset their losses. Canadians did not, noted Moen.
Pricing is a thorny issue, but “I think the problem can be fixed,” he added. “It’s about fairness.”
Alberta, Saskatchewan and Manitoba have each marketed pigs from a single desk in the past but they were abolished in the mid-1990s.