There may be light at the end of the tunnel, but not every western Canadian pig producer is going to reach the other end.
Dickson Gould expects there will be fewer producers in the Canadian hog business by spring when he hopes prices will turn around.
“I see smaller growers and grain producers with hog operations getting out or concentrating on other lines of business,” he said.
Swine producers in Western Canada are losing $30 to $60 per hog and this is expected to continue through the winter and to at least May, said Gould.
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He heads Progressive Livestock Management, an 11 member hog producer co-operative with 30,000 sows in Manitoba. He spoke to the Prairie Swine Centre in Saskatoon at the research group’s annual lecture.
Feed prices for barley and wheat, the staples of the prairie hog feeding system, have jumped by $68 and $80 per tonne, respectively, said Gould.
“Ironically, American corn is now our cheapest feedstock.”
He said his group has advantages over other prairie producers because its barns are within 130 kilometres of some of America’s lowest priced corn and they are close to slaughter facilities in Brandon.
“Every advantage you have will make a difference whether or not you survive in this market,” he said.
The North American oversupply of hogs is caused by diminished price signals in the hog production cycle combined with higher feed costs and a jump in the Canadian dollar to par with the U.S. currency.
The last time there was overproduction was 1998 when prices tumbled and many smaller or newly established producers left the business.
Gould said Canadian hog packing isn’t as competitive as in the United States because of higher wage costs, less access to foreign workers and a lack of double shifting. The packer problems also affect producer profitability.
“Maple Leaf doesn’t have any interest in selling fresh pork into the international marketplace. They want to follow (American processor) Hormel’s lead and sell only branded products,” he said.
The result is fewer markets for Canadian hogs, said the Niverville, Man., producer.
To survive, Gould said, producers need to be located as close to a double-shifted processor as possible.
The high loonie created a $6 to $7 per animal cost advantage to feed Canadian pigs in the U.S., said Gould.
In the second week of October, 194,000 Canadian hogs were shipped to the U.S., up 20,000 over October 2006.
High trucking costs are also adding to the red ink on Canadian producers’ balance sheets.
Gould said shipping younger, lighter animals to finishing barns close to U.S. slaughter plants is one way to reduce costs.
“Right now you may want to consider paying your contract finisher here something and ship to the U.S. instead,” he said.
Gould hoped this strategy will keep finishers operating here until prices improve.
He said producers should be taking advantage of Paylean and circovirus vaccination to keep feeding, illness and death costs in check.
Gould said the hog business in Western Canada will improve over time.
“We go through these adjustments from time to time. Not every producer will get through it, but we survived 1998 and the industry will get through this too.”
He said the last time North American prices took this hard a hit, it was American producers who left the industry. He said this time those losses will happen in Mexico and Canada.
He said barn building costs have been out of step with those in the U.S. since 1993.
“China is developing a huge market for pork. They are the world’s leading producer and the largest market and with its rapidly expanding middle class, the need for pork at profitable prices will be back,” he said.
“China is losing a large amount of its production. It takes place in backyards and with 1.3 people per acre (in China) that production is disappearing.”
Gould said major U.S. pork marketers are saying the American consumer isn’t shy about spending more money for pork and that it is possible to pass on higher costs to the consumer.
“Processors and retailers can’t survive without us. They know that and I see them beginning to pay more,” said Gould.
