The hog industry is like a seesaw when it comes to price and profit.
There are times when the balance is tipped in favor of producers, as it is now with prices being paid for hogs.
And there are times when the seesaw tips the other way, as it did in the fall of 1998. Then packers earned profits while farmers took the sting of hog prices that fell as low as $60.62 per hundred kilograms.
Michael McCain, president and chief executive officer of Maple Leaf Meats, said the industry is changing in Canada and there should be fewer ups and downs in prices.
Read Also
Agriculture ministers agree to AgriStability changes
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
Fewer producers are using spot pricing and more are opting for long-term supply contracts, where the price for a hog can be set even before the animal is born.
Greater control
McCain said he believes vertical co-ordination, a term his company used when buying the Landmark Group, will also soften the ups and downs of hog prices.
Maple Leaf bought the Landmark Group last September and gained ownership of the largest feed and swine production network on the Prairies.
McCain said producers in that network would not be committed to selling hogs to Maple Leaf, but the $150 million deal was a sign the company was prepared to invest heavily in Western Canada’s hog production.
Through the Landmark Group, a group of independent producers can act as one, McCain said. Improved genetics, nutrition and seed capital are all available through that network.
In a May 26 interview, McCain said his company is looking for more joint investments, signaling that Maple Leaf wants to further extend into other aspects of the hog business.
May 26 was the day Maple Leaf officially opened its new $120 million hog processing plant at Brandon, Man.
The plant, which started production late last summer, handled only 32,500 hogs during the last week in May.
That was below the 45,000 a week that the plant can slaughter with a first shift going at full capacity. The company last fall said it wanted to reach full capacity on the first shift by March of this year.
McCain said limited hog supplies were the reason his company last month decided to scale the plant’s production back from five days a week to four. However, he noted that high hog prices also had an effect.
“It’s mostly light supply,” he said, “but it is a combination of both.”
McCain said the company’s investment in the Landmark Group made “some” difference to the availability of hogs but he didn’t elaborate.
