Desperate hog farmers explore all options

In a lengthy article posted on its website in September, Alberta Pork says the balance of power between packers and hog producers is out of whack. | File photo

This year’s pricing crisis 
prompted some producers to talk about a return to single desk marketing

A prairie producer group is talking openly about a return to a single-desk system, where farmers pool their product and sell it through one authority.

In a lengthy article posted on its website in September, Alberta Pork says the balance of power between packers and hog producers is out of whack.

“The negotiating power now resides with the packer. With very little government oversight on economic practices, packers have used this power to their advantage,” Alberta Pork says.

“How can producers unite? The notable and most effective option is to bring back the single desk…. A return to the single desk could shift the balance of power back to producers, resulting in a hog price that is more consistently favourable, though government support for this concept may be long gone.”

Alberta hasn’t had single desk marketing for pigs since 1996. In the last 24 years, a handful of hog farmers maintained that abandoning the single desk was a mistake. But in 2020, more producers are talking about it.

“Now, we have a lot of people coming back to us, saying, how can we have single desk again?” said Alberta Pork executive director Darcy Fitzgerald. “I’m sure at our (annual general meeting) in November we’re probably going to see a resolution come forward…. If it does come forward and we see a lot of people talk about it, we’re going to have to address it.”

Hog producers are thinking about a different pricing system because pig prices were in the tank for much of 2020. Early in the summer, producers were getting about $135 per pig — $50 less than the cost of production.

Prices were down because the western Canadian price is based on prices in the United States, where an oversupply of pigs has depressed values. Meanwhile, western Canadian packers are exporting a massive amount of pork to China, Japan and elsewhere.

In the first eight months of 2020, Canadian pork exports were $3.3 billion, up from $2.8 billion from the same period in 2019.

“Sounds like there’s some money being made here. But not for the producer,” Fitzgerald said.

Provincial pork associations in Western Canada met with Olymel, Maple Leaf Foods and other packers in the spring and summer to negotiate a better price for pigs that reflects the value of pork.

They had some success.

Olymel adjusted its pricing formula and Maple Leaf provided a $20 per pig bonus for 13 weeks if producers agreed to a one-year contract.

The changes are welcome, but some say it doesn’t change the balance of power between packers and independent producers.

“I do know it’s a conversation among some producers…. Every time we go into a period of extended low prices, a number of producers start talking about getting more power. They have fond memories of how the single-desk marketing system worked. Whether those memories are a true recollection of what actually happened is another matter,” said Andrew Dickson, Manitoba Pork general manager.

Manitoba’s single-desk system for pigs also disappeared in 1996 and Saskatchewan’s in 1998.

In Alberta, a number of hog farmers are now more vocal about the single desk. Others say it’s unrealistic because the packers control a huge share of hog production on the Prairies.

“Here (in Alberta), Olymel probably owns more than 50 percent of their own slaughter capacity. I don’t think that (a single desk) is going to fly,” said Stan Vanessen, who operates a farrow-to-finish operation near Picture Butte, Alta.

“They (the packers) would rather just take more ownership of hogs.”

The situation is similar in Manitoba. Maple Leaf and Hylife are vertically integrated, where they operate hog barns and processing plants.

As well, the pork industry isn’t defined by provincial borders. Pigs raised in Saskatchewan are shipped to Olymel or transported to Maple Leaf in Brandon. To be effective, a single desk that includes all of the Prairies might be necessary. Persuading three provincial governments to pass legislation creating one marketing agency would be a challenge.

Nonetheless, hog producers in Western Canada are intrigued by what’s happened in Quebec.

The province has adopted a regulated system of marketing pigs, where prices are based on the cut-out value of pork — the market value of the loin, butt, rib, ham and belly.

“It’s almost like a public utilities board,” Dickson said. “They regulate the terms and conditions of the contract, negotiated between the producers and processors in the province.”

The system has split the Canadian market, where pig prices are completely different outside of Quebec.

“We always look at those pricing charts,” Vanessen said. “This summer when prices were so low… there was a $100 difference between the price we were getting for hogs and the price in Quebec.”

The question is how to achieve a Quebec-type system on the Prairies and what comes next. Should producers continue to meet with packers and lobby for a fairer pricing system? Or, should they join forces and sell as a group?

“For example, Hutterite colonies in Alberta currently make up more than 40 percent of the industry’s core producers and own nearly half of all sows on-farm. If colonies were to form a marketing co-operative, then this could increase their bargaining power,” Alberta Pork wrote on its website.

Such possibilities will likely be discussed this fall, when provincial associations hold their annual meetings or fall updates.

Alberta Pork’s AGM is scheduled for Nov. 26.

In the meantime, pig prices have climbed in the last couple of months, thanks to an outbreak of African swine fever in Germany. ASF has devastated the pork industry in China, Vietnam and parts of Eastern Europe. In 2019, China’s hog herd may have declined by 30 percent or more.

“The prices have been rising steadily,” Vanessen said. “There is opportunity (now) for producers to lock in some profits in the short term.”

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