Manitoba hog producers are hoping that the “made in Manitoba” price soon becomes something other than the discounted price they’re used to.
If the OlyWest hog slaughter plant is built in Winnipeg, farmers will no longer be captive sellers.
“There’s definitely going to be a nice competitive edge to the market,” said Karl Kynoch, chair of the Manitoba Pork Council.
“Packing plants are in a competitive world. They’ll pay what they have to to get the hogs.”
Many Manitoba hog farmers have grumbled for years about unattractive prices, which are generally the U.S. Midwest price minus transportation costs from Manitoba.
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With only one major packer in the hog-rich province, Maple Leaf’s Brandon plant, there has been little to narrow that Canada-U.S. basis level, they say. There are far more pigs produced in the province than can be slaughtered there.
Producers were encouraged a few years ago when Schneider Corp. followed Maple Leaf’s lead by announcing its own large new plant for Winnipeg, but those hopes died when Maple Leaf took over Schneider.
With Maple Leaf owning the major plants in Manitoba and Saskatchewan, in Brandon and Saskatoon, Manitoba producers can’t play one packer against another to get attractive prices.
“There are plants in Manitoba and Saskatchewan that have different names, but they’re all Maple Leaf,” said one hog industry source.
With Manitoba prices roughly equivalent to U.S. prices minus the basis, millions of pigs have flowed south. In 2004 the province exported about 3.6 million feeder pigs and 1.3 million slaughter hogs.
If the OlyWest plant is built and bids up prices by reducing or eliminating the basis discount, many pigs may stay in Canada, producers say.
“I’m looking at potentially keeping some of our pigs back (for feeding) in the future,” said Grunthal, Man., producer Lauren Wiebe, who now exports 100 percent of his weanlings to U.S. buyers.
If the basis improves, he plans to build feeder barns and supply the local slaughter market.
“It’ll be good for everyone if we get competitive bids for our pigs,” said Wiebe.
While grumbling about the Manitoba basis is common among Manitoba farmers, Alberta producers have less to gripe about, said Western Hog Exchange manager Mack Rennie.
Healthy competition between the Olymel plant in Red Deer and the Maple Leaf plant in Saskatoon keeps prices perky.
“Some of the prices I’ve cut with the packers have been U.S. price-plus,” said Rennie. “I have no complaints.”
Years ago, Alberta prices were also commonly discounted, but the Red Deer plant has grown and recently added a second shift, resulting in stronger bids.
George Morris Centre researcher Al Mussell said a new Winnipeg plant should increase competition and reduce the attraction of the U.S. market.
“Usually the effect of that is to support the basis for hogs the same way it would for cattle or any other cross border arbitrage,” said Mussell.
Kynoch said now that fuel prices have skyrocketed, Manitoba farmers need to sell closer to home.
“If we can keep them here rather than shipping them down to Sioux Falls, we’re going to save a huge amount of money in fuel,” said Kynoch.
Former Manitoba Pork Council chair Marcel Hacault said he won’t count on the OlyWest plant until it is actually built.
He was present for the Schneider announcement that raised everyone’s hopes.
“Everyone was pretty excited about that,” Hacault said.
“It sure would be nice to have options. Now it’s only Maple Leaf or the U.S., and with the way the U.S. has been treating us …”
