Manitoba’s once-dramatic hog industry expansion has almost ground to a halt as a series of obstacles emerges in its path.
Farmers are facing a crippling exchange rate, expensive feedgrains and threats of U.S. trade protectionism, all of which have undermined profitability and could become long-term problems, say hog producers.
A gleam of light at the end of the tunnel is the promised expansion of the Maple Leaf Foods Brandon plant to a second shift in 2005. Olymel Foods in Red Deer also has tentative plans to move to a second shift.
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Pig producers are hoping the increased demand from either packer will raise prices and expand marketing opportunities for prairie producers.
But skepticism runs across the hog industry.
Some believe Maple Leaf will not be able to keep enough pigs on the eastern prairies to support a second shift.
Others fear an expansion in Brandon will cause contraction elsewhere, shuffling slaughter capacity but not creating any new demand for pigs.
“No one knows what (adding a second shift in Brandon) would do. I sure don’t,” said Rick Bergmann, a Steinbach, Man., hog producer and manager with Spectrum Feeds, a company that organizes contract production for Olymel.
“People are cautious about expecting too much.”
A few years ago, a number of analysts and governments were lauding Manitoba and eastern Saskatchewan as the cheapest and best place in North America to produce a pig.
Hog industry expansion was hoped to fill in the financial void left by the end of the Crow Benefit.
The area was expected by some analysts to have the lowest priced feedgrains in North America. That would encourage hog and cattle feeding, the logic went.
But since the 1990s, a string of bad luck has fallen on the eastern prairies.
In the Red River Valley, the heart of Manitoba’s hog production region, fusarium has ravaged feed wheat and barley crops and created a feed deficit. Farmers had to import corn rather than rely on local feed supplies.
Instead of paying the lowest feed prices in North America, Manitoba hog producers are paying the same price for corn as producers in Iowa and Minnesota Ð plus shipping.
As the Canadian dollar’s value has soared, the price of pigs has plunged. Bergmann estimates hog prices are now $25 to $30 lower because of the change in the exchange rate between the Canadian and U.S. dollars.
That means it is cheaper to feed hogs in the U.S. Midwest, a major reason why more than two million Manitoba weanlings are exported each year. For Maple Leaf’s second shift to work, that outflow has to be stanched.
“Theoretically we have enough pigs that we could keep the Brandon plant operating full-bore at two shifts,” said University of Manitoba agricultural economist Ed Tyrchniewicz.
To keep those now-exported wean-lings in Manitoba, Maple Leaf will have to offer prices that make it more attractive to keep and a feed a hog here than sell it into a lower feed cost area.
No one knows whether Maple Leaf will try to pay producers to keep hogs on the Prairies.
The company has been trying to produce many of its own pigs through its subsidiary Elite Swine Inc.
How far this production will go remains to be seen.
Tyrchniewicz said independent producers wanting to expand may have a hard time convincing investors to risk their money.
“An investor will look at it pretty pragmatically. If the prospects aren’t there for turning a profit, they aren’t going to invest in a hog barn, even if you can get it (approved),” said Tyrchniewicz.
If independent producers and Elite Swine choose to expand slaughter hog production in Manitoba, it won’t be easy.
Hog barn approvals are hard to get in many municipalities, and recently a number of projects by various proponents in Manitoba, Saskatchewan and North Dakota have been abandoned due to local opposition.
If producers can’t get approvals for new feeder barns, they may choose to convert some sow units into feeding operations. That would increase the number of slaughter hogs available for Maple Leaf, but reduce the total number of pigs produced in Manitoba.
Tyrchniewicz said if Maple Leaf moves to a second shift, prairie packers might find there isn’t room for them all. A fight for pigs between Olymel, Maple Leaf and Mitchell’s Gourmet Foods in Saskatoon will pressure them all, let alone the smaller plants.
“If we’re going to remain dependent on export markets, I’m not sure we can afford three large hog processing facilities on the Prairies,” said Tyrchniewicz.
Perry Mohr, general manager of Manitoba Pork Marketing Co-op, said Manitoba producers would benefit if Maple Leaf expands its production in Brandon and keeps killing hogs at two other plants in Manitoba that it is using.
But if it ends slaughter at those other plants, producers may not see much difference.
“That remains to be seen,” said Mohr.
Major expansion at any prairie packer could lead to higher prices for producers, but farmers aren’t letting themselves get too hopeful.
Since late 1998 they have seen their hopes dashed too many times.
“It’s been a bad five years,” said Bergmann.
