The American hog industry risks shooting itself in the foot by pursuing what the president of the Canadian Pork Council describes as “crazy trade challenges.”
The United States Department of Commerce last week announced it will impose preliminary antidumping duties on live Canadian hogs exported to the U.S.
The duties were expected to come into effect as early as this week, making it more expensive to ship live hogs across the border.
Clare Schlegel, president of the Canadian Pork Council, said American producers who rely on weanlings from Canada to fill their finishing barns will also suffer because of the duties, as will U.S. processors who need finished Canadian hogs.
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“The Canadian pork industry is very displeased with this finding,” said Schlegel. “It is bad for Canada as it means increased cost for doing business in the United States. It is also bad for the United States because Canadian hogs have filled gaps in the U.S. system.”
The U.S. Commerce Department investigated four Canadian hog exporters who were required to provide detailed information about their sales and costs. From that investigation, the commerce department concluded that three of those four exporters did dump swine into the U.S. market.
As a result of those findings, an average duty of 14.06 percent is being imposed on exports of Canadian live hogs to the U.S.
Based on recent hog prices, Schlegel said that would work out to at least $5 per head on early weaned pigs destined for the U.S. and $20-$25 per head on market hogs shipped for slaughter.
More than seven million live hogs are shipped from Canada to the U.S. each year. The majority are piglets to be fattened for slaughter on American Midwest farms.
The antidumping duty could cost Canadian hog producers as much as $60 million a year, Schlegel said. Fighting the trade action could cost up to $15 million.
He expects exports of Canadian hogs to the U.S. to continue, at least in the short term, despite the difficulties caused by the duties.
“That level of hog movement cannot be changed overnight. … The competitive position of the United States and Canadian industries will go down, but the flow of hogs will probably continue.”
The situation again prompted concern with the rules that regulate trade. Manitoba Agriculture minister Rosann Wowchuk described the current free trade agreement as dysfunctional and said it needs to be reviewed.
Although the pork council wants the trade rules revisited, Schlegel said changes would not happen soon enough to deal with the current situation. The U.S. Commerce Department will make a final decision on dumping margins early next year, according to the Manitoba Pork Council.
The commerce department determined last August that there were no illegal subsidies being paid on Canadian exports.
The U.S. International Trade Commission still has to decide whether Canadian hog exports have injured the U.S. industry, a decision that is expected in either March or April. If the ITC finds no injury, the case will be dismissed and the duties refunded.
Kevin Grier, senior market analyst for the George Morris Centre at Guelph, Ont., expects live hog exports to the U.S. to continue. He predicted packers will react to the antidumping duty by paying less for hogs sold on the spot market.
Schlegel said if the antidumping duties are kept at or near current levels, it could force many more hogs to be finished and slaughtered in Canada, putting the Canadian and American hog industries into direct competition with each other.
“We could see, in Canada, additional finishing barns being built and additional processing plants being put in place, causing a huge overproduction in the entire North American industry. Neither the U.S. nor Canada would profit in that situation.”
Karl Kynoch, chair of the Manitoba Pork Council, said the American duties on hogs will have a “profound effect” on Canada’s exporters.
He was commenting on the finding of the U.S. commerce department that three out of four Canadian exporters that were investigated were dumping hogs below the cost of production.
“Although I am pleased that one of the Manitoba companies investigated by the commerce department was absolved of dumping charges at this stage, I am frustrated that the single-weighted margin of 14.06 percent is being imposed on all other Manitoba and Canadian exporters,” Kynoch said.
