Credit without lender | The levy idea involves no federal money and so avoids potential trade disputes
PORTAGE LA PRAIRIE, Man. — The Manitoba Pork Council has developed a plan it says will help preserve the province’s hog industry.
About 175 producers gathered inside a Portage la Prairie theatre Nov. 7 as pork council chair Karl Kynoch explained the details of a stabilization program for Manitoba hog producers.
The program is a line of credit producers can access via the pork council. However, if hog farmers want to sign up for the program they must pay a $5 dollar levy on every hog they sell.
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“This is a totally new program. We’re trying to do what we can for the producers. In reality, they don’t want another loan… but cash injections (from government) are not on the table,” Kynoch said, during a break at the Portage meeting.
“So we’re trying to offer them the access to some dollars to be able to pay the feed bills and to get through to the higher prices next summer.”
Hog producers in Canada have been hemorrhaging money for months, as the drought in the U.S. Midwest this summer propelled feed corn prices to record highs.
In September, Manitoba Pork estimated that producers were losing $40 to $50 on every hog sold.
Kynoch provided an example on how the program might work, in which production costs are $175 per hog and market returns are $145 per animal, based on cost and price averages.
Under that scenario, a producer would receive a payment of $30 per hog, minus the $5 levy. So, if a farmer marketed 1,000 hogs, he would receive a net payment of $25,000.
Once markets improve and hog farmers are making profits, producers continue to pay the $5 levy on every marketed hog until they pay off the stabilization account.
When the loan account reaches zero, the $5 levy is returned to the producer.
“If you join the program, you would have to come to the pork council and sign the papers (saying) we can keep the levy,” Kynoch told the producers in Portage.
“(But) you have to remember that the levy is refundable.”
Andrew Dickson, Manitoba Pork general manager, said the program provides access to credit without going through financial institutions.
Manitoba Pork staff and directors came up with the idea of a levy, partly because it avoids potential trade disputes.
“It’s not a subsidy,” Kynoch said. “The payment is a loan…. So this program is not countervailable. It’s green to trade.”
The federal government is putting no direct money into the program, but if the Treasury Board supports the concept, it will guarantee the line of credit, which will probably be capped at $75 million.
Ideally, Kynoch wants the program to be running by February.
He added the program would be backdated to Sept. 1 or Oct. 1. That way, producers can get their hands on cash immediately, once it becomes available.
“That’s very crucial because the industry is just out of cash right now. Sept. 1 is when the producers started into heavy losses and that’s what we need to cover,” he said. “The guys just need some dollars to continue on and get through to profit.”
