Canada’s embattled hog industry will shrink significantly over the next couple of years, according to a U.S. livestock analyst.
Meanwhile, he said, the U.S. industry will remain relatively unscathed through 2008.
“The adjustment in this round of the hog cycle is definitely going to come in Canada,” said Steve Meyer, president of Paragon Economics and lead author of the Chicago Mercantile Exchange’s daily livestock report.
“In the next two years the number of sows (in Canada) could go down by 10 to 20 percent; that’s not out of the question. It’s not a pretty picture.”
Read Also
Bond market seen as crop price threat
A grain market analyst believes the bond market is about to collapse and that could drive down commodity values.
Meyer made his comments following a speech to the Saskatchewan Pork Industry Symposium last week.
Low hog prices, high feed prices and a strong Canadian dollar have combined to splash red ink all over hog producers’ books.
As Prairie Swine Centre president John Patience put it earlier in the symposium, the financial pain is for hog growers is “excruciating.”
Canada’s inventory of pigs over 20 kilograms was down 7.6 percent Oct. 1 compared to a year earlier, reflecting increased exports of feeder pigs to the United States.
The breeding herd was 1.4 percent smaller, marking the 10th consecutive quarter of a year-to-year decline.
The 1.56 million head breeding herd is at its smallest level since October 2002 and 4.5 percent smaller than its January 2005 peak.
Meyer said the exchange rate is the over-riding reason for the continued shrinkage in the Canadian industry.
“You’re dependent on export markets and that really hurts you,” he said.
“I don’t see any way around that.”
U.S. hog producers have also had to deal with low hog prices and high feed costs, but Meyer said they have done a good job of forward pricing on a good futures market over the past six months and into next year.
He expects U.S. producers will earn profits in the second and third quarters of 2008 and record losses in the first and fourth quarters.
“Normally it takes a year of losses before we (in the U.S.) start to cut back on numbers, and I don’t think we’re going to see that,” he said.
U.S. producers took the hit the last time the hog cycle bottomed out, he added, while the Canadian industry continued to grow.
The liquidation in Canada is resulting in increased shipments to the U.S., but Meyer said he doesn’t think that will result in pressure for a countervail duty, as has happened in the past.
Five years ago, he said, Canadian producers were making money, U.S. producers were losing money and pigs were moving south.
Pigs are moving south now, but the difference is U.S. farmers are making money and Canadians are in the red.
“I think most people realize we’re probably going to get more pigs from Canada because of this liquidation,” he said. “That won’t last forever as the sow herd gets smaller.”
