The problem with bubbles in the market is that they don’t look like bubbles when you’re being lifted up by them.
They become pretty obvious only when they pop.
Something like that is happening right now in southern Manitoba, where the air that has expanded the weanling hog industry is roaring out the way that the cold front from the northeast is coming in.
Fifteen years ago some Manitoba weanlings were exported to the U.S., but nothing like the millions that have become an annual flow from barns scattered around southern Manitoba since the late 1990s, heading for feeder barns in Minnesota and Iowa.
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The business has made a lot of sense: Manitoba farrowing barn operators produce very high health piglets, and Midwestern U.S. hog producers have access (usually) to cheap corn and soybean meal. If you erase that line on the map that separates Canada and the U.S., southern Manitoba just seems the northern end of the Midwest, rather than an exotic foreign location.
So even in the face of repeated U.S. trade actions, producing weanlings for the American market has made sense economically and common-sensically. Especially when faced with dependably worse pig prices in Canada, basing production on sales to the U.S. has made sense for farmers. However, what seems common-sensical at the time can seem crazy in retrospect. The long talked-about “border risk” to the industry – where the border can be shut suddenly by disease worries, political machinations or legal rulings – has been disruptive before, but the present border crisis is far more extreme and may destroy most of the weanling export industry.
Right now many longtime buyers of Manitoba weanlings and slaughter hogs are cancelling contracts and cancelling future orders, all because of Country Of Origin Labelling (COOL). Rather than just making Canadian pigs more expensive, which is what some of the trade actions did, it is cutting much of the flow of weanlings and slaughter hogs altogether.Â
No one knows whether this situation will last. The industry is in a six month phase-in of COOL, ending April 1, so things then may not be as bad as they seem to be now. Indeed, some analysts expect U.S. packers, feeder barn operators and Canadian weanling producers to find ways to work within COOL and keep the trade flourishing. And with sow liquidation rates running high on both sides of the borders, packers and feeder barn operators in the U.S. may be begging for Canuck piglets just a few months from now.
But for producers I’ve spoken to on both sides of the border, the present situation is one of shock, fear and outrage as a once-sound business now seems like it might have been a dangerous gamble on the border remaining open. No one has wanted to believe that the U.S. market was that undependable, but what’s happening right now shows that comfortable assumptions made in good times about market access might not hold up when the gales of November come early.
