WINNIPEG (Reuters) – Canadian hog farmers continued a four-year herd shrinking trend in the first quarter, but the pace slowed as higher hog prices and lower feed costs boosted profits.
Statistics Canada said farmers reduced the national pig herd 2.1 percent from a year earlier to 11.635 million head as of April 1, the lowest in at least eight years, but that’s a fraction of the nearly 12 percent reduction in late 2008.
Many of Canada’s hog farmers have suffered from years of unprofitability due to a stronger Canadian dollar and trade restrictions on Canadian pork tied to H1N1 flu.
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However, improving hog prices and weaker feed costs have allowed more farmers to earn profits lately.
Chicago lean hog futures have nearly doubled in value to about 88 cents US per pound since mid-August amid tight supplies and strong demand for pork.
Chicago corn futures have risen over the same period but are down 15 percent in 2010.
“What people who supply the industry tell me is that the (farmers) who are there now are the ones that have staying power,” said Kevin Grier, senior market analyst at the George Morris Center in Guelph, Ont. Mixed farmers, who grow feed crops for their hogs, have weathered the industry’s problems better than some, he added.
Manitoba Pork Council president Karl Kynoch said it is too soon to say the downsizing trend is leveling out. Farmers who have agreed to cease production in exchange for government funding are still in the process of emptying their barns, he added.
However, Kynoch said improved prices and lower feed costs have brightened the outlook for hog farming.
“Some of the guys are starting to get more enthusiasm,” he said.
“Things are looking better than they have the last three years.”
Canada’s sow inventory dropped 5.7 percent to 1.3 million head as of April 1, Statistics Canada said. The number of sows expected to farrow in the second and third quarters has dropped 2.1 percent and 3.6 percent, respectively, from the previous year because farmers have committed to removing 131,000 sows from production in exchange for government funds.
Those incentives to exit the industry may also be visible in the number of farms reporting inventories to Statistics Canada, which shrunk 11 percent to 7,150 farms from a year earlier.
Canadian hog exports, which have been hit hard by a meat labelling law in the United States that raises U.S. packer costs when processing foreign hogs, fell 20.5 percent to 1.4 million hogs from a year earlier.
Grier said hog slaughter has been stable at 5.5 million head for each of the past three quarters because of long-term contracting by packers and reduced flow of hogs to the U.S.
However, he said packers are starting to feel supply pressure.
