The Canadian dollar is up and U.S. pig prices are down from a year ago.
But Manitoba-born weanlings continue to pour into the American market.
For major hog producer Claude Vielfaure of Manitoba’s Hytek, the high Canadian dollar means that it’s better to ship pigs south as young as possible.
“If you finish them in Manitoba, it’s going to cost you more than selling them at a lower weight where the exchange doesn’t affect you as much,” said Vielfaure. “If you’re selling at $40 (for a weanling) versus $150 (for a slaughter hog) there’s less of an exchange hit for you.”
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Some have speculated that the rising Canadian dollar in the past two years would keep more hogs at home.
But as of Aug. 5, the United States Department of Agriculture reported that 3.47 million feeder hogs had entered the U.S. from Canada, up from 3.08 million in the same period last year, a 13 percent increase.
With Canadian packers already running at capacity and far short of shackle space for all of Canada’s pig production, the question isn’t whether pigs will flow south, but at what age.
“It makes complete economic sense to me,” said University of Missouri hog market analyst Ron Plain about the number of Canadian weanlings going to the U.S. Midwest.
“You don’t have enough capacity in Canada to slaughter all you produce, so they’re going to come south sooner or later. Your production is going to come south as either weanling pigs, slaughter hogs or pork. With a strong Canadian dollar, when’s the best time to ship it south?
“The answer is: when it’s least valuable. So ship them south as young pigs.”
The rise of the Canadian dollar has been hard on prairie hog producers who drastically expanded the industry in the 1990s and early 2000s, when the Canadian dollar was generally dropping in value against the U.S.
But for the past few years, the loonie has been rising. Farmers have found some advantages when buying U.S. feed grains, which partially compensates for the negative impact on hog prices.
But there has been no direct way for producers to lower debt costs and labour expenses, which are set in Canadian dollars.
Vielfaure said the loonie’s rise has been the greatest challenge, but producers are focused on lowering costs and increasing efficiency.
“It’s a slow process of adjusting,” said Vielfaure. “You’re always shopping around and pushing people to give you a better price on the supplies you’re using.”
