Many in Western Canada’s hog industry fear more bad news could be on the way after Manitoba’s Nutri-Health Group collapsed into bankruptcy last week.
The Niverville-based company, which operated feed, genetics and weanling marketing businesses, was hammered by a “perfect storm” of adverse market conditions, according to former president Cal Funk, who was out of a job as of last week.
Beginning last fall, feeder operations in the United States began reneging on contracts, leaving Nutri-Health’s brokering arm in a tight spot as it tried to keep up with its obligations to local weanling producers to sell their 700,000 isoweans per year.
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“It just got worse and worse throughout the fall and into winter,” Funk said.
Early in the new year, losses on the weanling side proved too much for the company to bear and it folded in late March.
“I hope not, but it wouldn’t be surprising that there might be others experiencing the same thing. It’s just a really tough time,” said Funk, who added that the spot price for weanlings last week was down to $5 from $40.
Besides high feed prices, the rising Canadian dollar and low meat prices, the looming uncertainty surrounding country-of-origin labelling (COOL) played a role in the company’s failure.
“The jury is still out on what the final outcome of COOL will be, but it’s definitely sending some ripples through the system,” said Funk.
About 48 of the company’s 55 employees will be employed with allied firms as various interests are spun off.
Meanwhile, in neighbouring Saskatchewan, Stomp Pork Farms announced it would seek bankruptcy protection. Stomp is the second largest hog operation in the province. Bankruptcy protection is designed to buy a company time to work out its financial difficulties while it restructures and attempts to turn the business around.
Back in Manitoba, Manitoba Pork Council chair Karl Kynoch said he fears that Nutri-Health is just the tip of the iceberg.
“Right now the value of an isowean pig is zero,” he said. “A lot of guys can’t even find a home for them anymore. Even if somebody buys them for zero, they still have to pay $3 to $4 freight.”
The federal program to cull sows introduced in February and retroactive to November 2007, came too late to head off the problem, Kynoch added.
If U.S. buyers continue to shy away from Manitoba’s production of 15,000 weanlings per day, the only option will be to “humanely dispose” of the animals because feeding them in the province would be a money-losing proposition.
The provincial hog herd is headed for a major reduction, said Kynoch, who added the industry’s future depends on the upcoming U.S. farm bill and whether COOL is enforced in September.
Manitoba agriculture minister Rosann Wowchuk said the government has known for a long time that COOL would have serious effects.
Provincial government funding to upgrade waste water treatment facilities serving pork processing plants in Brandon and Neepawa was aimed at increasing slaughter capacity to reduce dependency on the U.S. market, she said.
“This is an issue that I have raised with the federal minister of agriculture that we have to intensify our lobbying efforts to make people aware of the consequences of (COOL) on our producers, the packers in the U.S. and on U.S. producers,” she said.
“We anticipated that it would be a reduced price, but if they aren’t buying any, then that’s a problem.”
Wowchuk said $60 million in loans has been made available to the industry, as well as funding to support efforts to tap new markets such as China, which is experiencing massive food cost inflation.
“The U.S. is a very important market to us, but we have to diversify that and look for other places where we could sell our product.”
The demise of Nutri-Health Group, and news that Stomp Pork has sought bankruptcy protection, indicates the “severe pressure” facing the industry.
Provincial support has been offered in the form of loans to avoid the risk of trade action by the U.S., said Wowchuk. She added that payments under the Canadian Agricultural Income Stabilization program have been flowing to hog producers along with funds from the new AgriInvest program.
