Alberta hog farmers are considering steps or taking action already to reduce their production, to show packers that the current pricing system is failing farmers.
This week, the leaders of Alberta Pork met with six commercial hog producers in the province. The farmers had questions about Alberta Pork’s ongoing efforts to increase pig prices in Western Canada.
As part of the meeting, the farmers asked Alberta Pork to support their decision.
“Alberta Pork will support producers wishing to make production reductions by (bringing) awareness of the initiative to others, including other producers, packers, and the media,” the organization said in a statement. “While Alberta Pork supports all legal approaches to encourage pricing reform, the organization will not ask producers to damage their operations against their will for overarching strategic considerations. That choice rests with each individual producer to do what they feel is best for their farm and the industry.”
Darcy Fitzgerald, Alberta Pork executive director, said some hog producers are already downsizing their sow herds.
“We had a meeting… with a group of producers in Alberta who are starting the process of reducing their breeding herd. It’s because they don’t receive enough money (for their pigs) and they’re desperate.”
For much of 2020, representatives of the provincial pork associations in Western Canada have been in talks with the major packers — Olymel, Maple Leaf Foods, Donald’s Fine Foods of Regina and others — to boost the price paid to hog farmers.
Those efforts became more serious last spring, when pig prices were around $135 per pig — about $50 less than the cost of production.
“It’s a (pricing) system that isn’t working anymore for the producers in this country,” said George Matheson, Manitoba Pork chair and a hog farmer in Stonewall, Man., in July.
“It’s still a profitable industry. But the profits just aren’t being shared.”
The price of western Canadian pigs is based off the United States price, but for the first half of 2020 the American hog market was in the tank — because of packer closures related to COVID-19 and a backlog of production.
Meanwhile, packers in Western Canada needed more pigs because of booming exports to China, but prices remained low because of the American market.
Data from Alberta Pork suggests the pricing issue is systemic.
Over a five-year period, from 2015 to March 2020, the average price was around $174 per hog.
“Using a cost of production of $185 per hog over that same time, the net loss would have been more than $11 per hog,” Alberta Pork said. “While each producer’s circumstances and costs may differ, the average accumulated losses for this example were close to $1 million for a commercial farm.”
With prolonged losses and little hope for the future, investment in Western Canada’s hog industry has dried up. Farmers aren’t building new barns and some are considering exiting the business because of the market uncertainty and frequent periods of weak prices.
Western Canadian pig prices did rise in the second half of 2020, but they’re still lower than prices in Quebec. Last year, the province of Quebec legislated a pricing formula where packers must share some of the cut-out value with producers. The cut-out value represents the wholesale price of pork cuts, such as the loin, butt and belly.
Some producers in Alberta are pushing for a pricing system similar to Quebec.
Alberta Pork and the other provincial associations did get some results, from their conversations with packers. Olymel, which has a processing plant in Red Deer, adjusted its 2021 contract to include cut-out value and set a floor price of $160 per pig.
Maple Leaf Foods paid producers an additional $20 per pig for 13 weeks in 2020, but the company hasn’t been willing to incorporate cut-out value for pigs delivered to its packing plant in Brandon or Lethbridge, Alta.
Earlier this week, six commercial #hog #farmers submitted a united request to Alberta Pork, asking three critical questions regarding our work on the topic of hog pricing. Read our responses and find further references: https://t.co/WW9QklZsVE pic.twitter.com/a00sfTiIIL
— Alberta Pork (@albertapork) February 12, 2021
The Olymel contract isn’t perfect, but it “represents a positive step in the right direction as it relates to equitable pricing,” Alberta Pork said on its website.
Darcy Fitzgerald, Alberta Pork executive director, said Maple Leaf has become a significant obstacle to pricing reform in Western Canada.
“Olymel is the only packer, of the one that we’ve spoken to, that has made a change,” he said. “We have had extra discussions with Donald’s Fine Foods. We’re hoping they’re going to make some changes…. I think the one processor that needs to pay attention to all this is Maple Leaf. (It) is having a very large effect on a large number of colonies and independent producers.”
Maple Leaf is likely aware that some of its suppliers are cutting production. That should be a strong signal to the company that their supply chain is at risk, Fitzgerald said.
“I think it’s time for a packer, especially one like Maple Leaf who is so big and has such an influence on all these producers, to step up and do something about it.”
The Western Producer contacted Maple Leaf Foods for comment.
So far, they have not responded.