PMU ranchers are feeling for steady ground as the industry producing the most commonly prescribed drug in the United States tries to cool down a shaky market.
The U.S.-based company that manufactures Premarin from the estrogen in pregnant mares’ urine is cutting production by 10 percent for the third year in a row.
Ayerst-Organics in Brandon, Man. responded to the dip in demand by offering its 483 producers in Manitoba, Saskatchewan, Alberta and North Dakota a buyout to help ease them out of the business.
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Norm Luba, head of the North American Equine Information Council, said although the number of menopausal women taking Premarin to cope with side effects rose six percent for the third consecutive year, doctors are now prescribing only half the dose.
New medical research found .625 milligrams of Premarin did the same job as the previously prescribed 1.25 mg.
When demand for the drug nearly doubled in 1992, Ayerst increased production by bringing in new producers and offering 40 percent more contracts.
But that balance was upset when doctors dropped the dosage.
“It is a stabilization of the industry which is really happening,” Luba said.
In response, the company is offering buyouts to ranchers who want to get out of the business.
“The company recognized the fact that a further leveling off of the industry causes management concerns on the part of the ranchers,” Luba said.
Reducing production to the level of demand should stabilize the market, he said.
Charles Knockaert is hoping the plan works.
The southwestern Manitoba PMU rancher said producers are feeling the pinch supplying a company which has cut production 34 percent in three years.
“It makes our belts real tight,” said the Bruxelles farmer who will have 90 mares in his barn this year rather than 100.
“We just have to hang on and hope it gets better.”
Choices are clear
Producers who want to exit have two choices: The company will pay farmers half of last year’s contract to get out of the business, or offer an incentive for producers to buy each other out.
Knockaert said it’s too soon to say how many producers will take up the offer.
To help cushion the blow, Ayerst said last week producers will get a six percent price increase for the third year in a row, Luba said.
The company also announced a plan to take over the cost of transportation paid by producers to ship their product to the Brandon plant.
“They’re looking at the efficiency of the system and saying why should a truck from Alberta be coming through half-full to come to Brandon,” Luba said.
He added that transportation costs account for about 3.4 percent of producers’ overall costs.
Manitoba has 269 of North America’s 483 PMU producers. Nearly 80 percent of the Premarin made in Brandon is sold in the U.S.
