A federal program that pays Canadian pork producers to mothball hog barns for three years is expected to issue its first cheques soon.
The hog farm transition program is a $75 million initiative designed to reduce Canadian pork production and lower North American pork supplies.
Canadian Pork Council public relations manager Gary Stordy said 261 bids were received during the first tender and 74 were accepted.
The successful bids’ weighted average was $765.52 per animal unit equivalent, or AUE.
Successful bids ranged from a low of $300 per AUE to a high of $997.
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An AUE is a measurement that compares sows, weanlings and market hogs at different stages in the production cycle. It is used to determine a producer’s overall animal inventory.
As a result of the first auction, 127,000 animals will be taken out of production, which includes 45,000 weanlings up to 30 kilograms in weight, 60,000 feeders from 31 kg to market weight, and roughly 22,000 sows.
Stordy said successful bids came from all parts of the country, although a province by province breakdown was not available.
He expected about 600 producers to register for the next auction, set for Dec. 9. Fewer then 300 were registered for the first auction.
Stordy said the pork council is addressing registration problems experienced during the first tender.
Many producers who registered for the first tender failed to properly complete their forms, which forced the first tender date to be delayed by two weeks.
“The applications are moving much better now, mainly because we’re getting more comfortable with the forms,” Stordy said.
“We’re trying to work out some of the bugs and producers have a lot more time to fill the forms for the second auction. Unfortunately, with the first auction, there was a tremendous amount of pressure placed on the producers because (the process hadn’t) been properly communicated…. Some producers thought the full $75 million was available through the first auction, so you can imagine the pressure they were feeling.”
Neil Ketilson, general manager of the Saskatchewan Pork Development Board, said producer response to the bidding process is hard to gauge.
“The bidding system is new to everybody so it’s difficult for people. If you’re desperate to get out of the industry … what do you have to bid in order to accomplish that?”
Ketilson, who helped devise the bidding system, said first-tender bids were variable, which may reflect the different debt loads facing producers.
“You need to bid enough so that when you retire your herd, you don’t have any more debt because if you have debt left and your barns are sitting idle, how do you pay that debt?”
Ketilson said some producers might be able to make a clean break from the industry for $300 per animal unit while others who carry a larger debt might require more.
Conversely, producers who are efficient might be less inclined to leave the industry.
“I’m sure the people who bid $300 in the first round are disappointed but perhaps they’re already getting out of production and ($300 per AUE) is OK for them,” he said.
“For those that got nearly $1,000 (per AUE), if you’ve got 600 (animal units) on your farm, then that $600,000 might be enough to get you out of the industry and retire your debt. Every situation is different.”
When details of the hog transition program were devised, industry insiders hoped the $75 million program would reduce the Canadian hog herd by the equivalent of 250,000 sows.
Producers whose bids were not accepted in the first tender can submit new bids in subsequent tenders.
