U.S. packer shutdowns sideswipe Canadian hog farmers

It is cruel irony that Canadian hog prices are hammered lower even as the slaughter pace in this country is surprisingly resilient and pork exports are booming.

The Canadian industry is suffering collateral damage from the severe slaughter decline in the United States, caused by outbreaks of COVID-19 at several plants.

U.S. hog slaughter in the January to March quarter had been running ahead of last year, but then it started to crash in April.

From the start of April to May 9, the U.S. slaughtered about 16 percent, or 1.9 million head, fewer than it did in the same five week period in 2019. In the week to May 8, things were particularly, bad with slaughter 25 percent lower than the same week last year.

The back-up in the supply of market-ready animals caused the price of hogs to plunge, and the reduction in pork production caused the price to jump..

And all this trouble washed across the border into the Canadian market, which follows U.S. price trends.

The weekly average Maple Leaf Signature 4 price at the start of April was about $166 per 100 kilograms, but as of the week ending May 1, that had declined to about $142, although the price had recovered to almost $169 by May 9.

This decline came even though the slaughter pace in Canada handled COVID problems much better than in the U.S.

In the five weeks to May 2, some Canadian packers suffered COVID-related shutdowns, but overall they slaughtered only 1.3 percent fewer hogs than they did in the same period in the previous year.

The number of hogs reaching market weight in the period was a little larger than last year, so there was a small back-up, but nowhere near the problem in the U.S.

Overall, for 2020 to May 2, federal slaughter in Canada was still ahead of last year’s pace by three percent.

The situation is far more dire for producers who raise isoweans for export to the U.S. In spring, 300,000 to 350,000 a month would be shipped to be fed-out in the U.S., but that market has dried up and those pigs are almost worthless.

Before COVID, optimism was rising in the industry because the long awaited boom in pork exports to China was finally starting to happen.

The fight against African swine fever in 2019 had wiped out a huge portion of China’s herd and it was importing pork, but from June to early November China halted Canadian pork imports. It said the reason was inaccurate documents accompanying meat from Canada’s ractopamine-free certification program, but many in Canada also believed it had much to do with the house arrest in Vancouver of Huawei Technologies chief financial officer Meng Wanzhou, awaiting hearings on an American request to extradite her to face charges in the U.S.

Meanwhile, U.S. pork exports to China were severely limited by high tariffs from the U.S.-China trade war.

But this year, those obstacles are removed.

In the January to March quarter, Canadian pork exports to China by volume were up almost 40 percent to 148,295 tonnes. Because a lot of the volume was higher-value cuts, the total value has more than doubled to $442 million.

That made China the largest importer of Canadian pork this year.

The increase pushed the volume of pork exported to all countries up by almost 13 percent to 371,593 tonnes and the dollar value up by more than 27 percent to $1.302 billion.

The U.S. has data for January to April. In that time it exported 291,609 tonnes of pork to China, up 358 percent over the same time last year.

That helped push up U.S. exports to all destinations to 721,567 tonnes, a 72 percent increase over last year.

Indeed, China is buying pork from all over the world.

In the January to March quarter it imported 951,000 tonnes of pork, almost double the tally last year in the same quarter.

Even with the imports, China is short of pork because of the decimation caused by African swine fever.

The shortage was made worse in February when large parts of the country, including slaughter plants, were in COVID shutdowns.

The country and its packing plants are reopening, but still the value of a pork carcass is about three times the U.S. pork cutout, according to the Dimsum.blogspot.com website.

China’s pork production in the first three months of this year was 10.4 million tonnes, down 4.2 million tonnes from 2019 at the same time, Dimsum said.

China’s agriculture ministry forecasts 2020 pork production at only 39.3 million tonnes, down 3.3 million tonnes from 2019 and a whopping 14.7 million tonnes from 2018, the last normal year.

Obviously, continued huge, record imports are desperately needed, and even then they will fill only about a quarter of the production shortfall.

However, they will require smooth trade, which is far from certain given the extremely volatile relations China has with many countries, including the U.S. and Canada.

The ability to export to China also depends on the ability of Canada, the U.S. and other exporters to keep their pork packers not only open but processing at near capacity.

That too is far from certain.

And that likely means what should be a great year for hog and pork producers will be disappointing because of COVID plant disruptions, particularly the severe problems in the U.S.

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