RED DEER, Alta. – For the first time in 39 years of farming, Ralph Smith will not pay income tax.
This mixed farmer sells about 1,000 finished hogs a year off his farm in Fort Saskatchewan, Alta., and has never experienced anything like the price declines of the last quarter of 1998.
Yet his story is not all gloomy.
He had the foresight earlier in 1998 to lock in a price for about half his hogs through the Western Hog Exchange, a hedging program run by the Alberta Pork Producers Development Corp.
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By hedging he escaped some of the worst of the fall’s downturn. By continuing to watch the futures market he has seen a price upswing in the second half of 1999.
Besides hogs, Smith grows cereals, canola and commercial hay. He learned about hedging when he sold his canola.
Not many producers use hedges, which he feels could have provided a cushion to lessen the impact of last fall’s price wreck. He expects more farmers will be willing to use futures markets if they survive the current downturn. He wished he had done more himself.
“If we had done it a year ago we probably could have hedged in a profitable margin.”
Cutting costs
He also uses other ways to cut costs. He feeds his own barley and peas to his hogs and buys weanlings from Unipork Genetics. The little pigs arrive at his farm at about 50 pounds. They are healthy and grow into uniform market hogs. The weanlings are sold at a formula-driven price.
He usually pays about $50 for a 50-pound weaner pig, but recently they have been only $20 apiece. However, in early January he was still selling a 240-lb. pig for $46. That is a big loss compared to when he used to average $20 per hog profit.
“I don’t know if we’ll ever do that again,” he said.
Safety nets don’t work for him. Government-encouraged hog expansion and promises of aid leave him skeptical.
On the other side of the country, Quebec farmers pay insurance premiums into their own pro-vincial safety net, but the program isn’t enough to bail out all, said Edouard Asnong, president of the Canadian Pork Council.
“It’s a good program but you can’t survive on it,” said Asnong, a Quebec hog producer.
The Quebec voluntary farm income stabilization program is rated as commodity neutral. Producers pay a premium and payouts are triggered based on increases in the cost of production and changes in the market price. It averages the year’s prices based on the cost of production of 80 percent of the best producers.
He has to wait until April to see if there is a payout. That can stabilize income but doesn’t guarantee good money.
“Prices are so low nobody can put enough money aside to prevent a crisis like we are in,” he said.
The cost of production in Quebec is about $135 per hog and the average producer was getting paid $45.
“No producer can survive that kind of situation. No business can do something like that,” he said.
