Critics of a cap on federal support payments to financially stressed hog producers say it is now clear how much the $3 million limit will hurt the troubled pork industry.
The industry was buzzing last week over news that two pork production companies in Western Canada had run into severe financial problems.
Stomp Pork Farms, Saskatchewan’s second largest pork producer, filed for bankruptcy protection under the Companies’ Creditors Arrangements Act.
That’s a federal law that gives a company time to try to work out its financial difficulties with its creditors in order to restructure and remain in business. The company will continue to operate during the process, expected to last up to 180 days.
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federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
Nutri-Health Group, a pork production company in Niverville, Man., fell into even more severe straits.
Cal Funk, company president, said Nutri-Health has closed for good. However, he said most employees will have jobs as divisions are reorganized under affiliated companies.
Stomp, based in Humboldt, Sask., produces 500,000 market pigs annually, employing more than 250 people at 11 barns and two feed mills in the province. The company declined to make a public statement.
The pork industry has been battered by a combination of low prices, high feed costs and a strong Canadian dollar.
However, officials with the Saskatchewan Pork Development Board, which was authorized by Stomp to make the story public, was quick to blame the cap for the companies’ financial problems.
“Governments have encouraged people to invest and these people have done that,” said Joe Kleinsasser, chair of Sask Pork.
“They’re good businesspeople and it’s frustrating that, through no fault of their own, they are denied compensation or help that is available to smaller producers.”
Kleinsasser said large, efficient producers like Stomp and Big Sky Farms in Saskatchewan are “the backbone of the industry.”
It has been estimated that since October, pork producers across the country have been losing $40 to $60 on each animal marketed.
The AgriStability assistance program is designed to provide support payments of around $30 per hog to most producers.
For a big company like Stomp, the $3 million cap limit means its payment works out to only $6 per animal.
If there was no cap, the company would be in line for payments of around $15 million. In a news release, the pork board said the federal government has ignored repeated requests to remove the cap.
A national coalition of livestock industry groups sent a letter March 14 to federal agriculture minister Gerry Ritz and Saskatchewan minister Bob Bjornerud urging them to remove the cap. As of last week there had been no response.
Kleinsasser said it’s imperative the federal government respond so industry stakeholders can plan accordingly.
The government has argued that funds are limited, and if there was no cap for large corporate producers then the amount of money available for everybody else would shrink accordingly.
In a written statement, Ritz said he was disappointed at the news of the struggles experienced by Stomp Farms.
“My colleagues and I are committed to helping family farms no matter how big or small and our government will continue to work hard to help pork producers in Saskatchewan,” he said.
As for the payment cap, Ritz said only that the design of the program recognizes “the importance of accountability to Canadian taxpayers.”
In its statement, Sask Pork said if big, efficient pork production companies are forced out of business, the losses to the national and provincial economies would be “almost incalculable.”
It said large operators have an impact on the livelihoods of thousands of rural people, pay millions in taxes in the province, buy millions of bushels of feed grain and provide economic benefits to small towns across the Prairies.
Bjornerud said Stomp Pork Farm’s woes were not unexpected. His office had been talking to Stomp several times a week as the financial situation worsened.
But he also said there is little the province can do. It implemented the short-term hog loan program shortly after taking office and successfully worked with Ottawa to make targeted advance payments available through AgriStability.
“Evidently, in this case it wasn’t enough,” Bjornerud said of the loan program, which Stomp used.
The province has talked to Ottawa about removing the $3 million cap on AgriStability payments, Bjornerud said. That move would require the support of seven out of 10 provinces and 50 percent of the total value of production.
There has been no interest from other provinces in supporting such a move and Saskatchewan has to consider how much money it could spend if the cap was lifted, the minister said.
He said the province has to weigh the benefits and risks of using taxpayer dollars in such an uncertain situation and it has no plans to bail out the industry.
The minister added he is concerned about the hog operation’s employees and their families.
It would be in the creditors’ best interests to help Stomp restructure and keep operating, Bjornerud said.
“We’ve probably done all we can do.”
