THE possibility of another hog price crash at the end of this year has
sparked some grumbling in the United States about the number of
Canadian hogs coming into the country.
While nothing is clear yet, the situation is troubling enough that
Canadian hog producers should review their risk management programs and
plan for the possibility of tough times ahead.
Many hog industry analysts say the number of hogs ready for market in
the U.S. in the fourth quarter will about equal the country’s slaughter
Read Also
Agriculture needs to prepare for government spending cuts
As government makes necessary cuts to spending, what can be reduced or restructured in the budgets for agriculture?
capacity, estimated at 2.17 million per week. If market ready numbers
surpass slaughter capacity, prices could collapse in a repeat of 1998.
This would be a calamity because many hog producers on both sides of
the border are still suffering financially from the 1998 collapse.
When looking for ways to head off this problem, some Americans can’t
help but notice Canada’s growing hog industry has increased exports to
the U.S. by almost 30 percent since 1998, climbing to 5.18 million in
2001.
That’s only about five percent of annual U.S. hog slaughter, but when
the difference between normal seasonal lows and a market meltdown is
measured in a percent or two, some Americans are wondering if there is
a way to limit Canadian imports.
A few are looking for evidence of subsidized Canadian production to
support a trade challenge.
Canada has established its modest farm support programs to conform to
its international trade commitments.
But as is clear from the experience of dealing with the North Dakota
Wheat Commission and the Ranchers-Cattlemen Action Legal Fund, the
absence of wrongdoing doesn’t prevent being dragged through American
trade courts.
Sometimes the White House is able to reign in noisome trade complaints,
but that seems unlikely based on the current administration’s actions
on softwood lumber and steel.
So the best strategy for Canada’s pork industry is to try to head off
this problem before it builds momentum.
The Canadian Pork Council has already met with its American and Mexican
counterparts to discuss the possibility of a fourth quarter price
crash. They agreed to encourage packers to increase slaughter and to
try to stimulate consumer demand.
This co-operation must continue and in future meetings Canadians should
impress upon the Americans that currency differences and the U.S. farm
bill encourage increased hog exports, not Canadian subsidies.
Regardless of border issues, it would be rational for individual hog
producers to try to limit their risk going into the fourth quarter. By
managing production, forward pricing and making contracts with packers,
producers can avoid repeating the winter of 1998-99.
