The threat of American antidumping and countervailing duties on Canadian hogs has thrown all hog price forecasts out the door.
Although the toll of years of inadequate prices was becoming evident in the announcements of hog production company bankruptcies, the hog market had seen glimmers of optimism of late.
The beef trade upsets caused by BSE and poultry trade bans caused by avian flu were opening opportunities for increased pork exports.
Demand in the United States was hot. American plants so far this year have slaughtered 3.4 percent more hogs than last year.
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The country-of-origin labelling law that threatened to obstruct entry of Canadian livestock to the U.S. was sidelined.
But all the optimism was sucked way March 5 with the trade complaint launched by the U.S. National Pork Producers Council.
There is no guarantee the U.S. Department of Commerce and International Trade Commission will find trade injury, but it seems they usually find something to complain about.
If tariffs are imposed, they would affect the one-quarter of pigs born in Canada that wind up in the U.S. as either feeders or slaughter animals.
Canada doesn’t have the slaughter capacity to handle that number and severe herd culling would be likely.
It is troubling to paint such a bleak outlook and it prompts the question: why were Canadian producers increasing their operations when American producers were reducing theirs?
While the economists and trade lawyers will look at Canadian farm support programs and exchange rates for explanations, the driving force has more to do with psychology.
In western Canadian farming, the dominating psychology is that the basic structure of agriculture must change. Elimination of grain transportation assistance and weak support for the grain industry has forced farmers to invest heavily in livestock to add value to grain. Investment in livestock is not driven by prospects for immediate profitability, but by an interest in the long-term viability of rural communities. They might be building when immediate market signals are against it, but the longer-term prospect is bleaker if the barns don’t get built.
While American farmers believe their government’s support is inadequate, the situation in the U.S. is not desperate enough to provoke farmers into a structural change.
In Canada, it is.
