As readers of the paper version of The Western Producer will see today when they get their copy from their mailboxes, I have just completed a special report on the crisis facing the hog industry and what the longer term implications are for farmers.
I looked (too briefly) at what seem to me to be the critical underlying issues for individual farmers that need to be addressed when it eventually comes out of the crisis: is the U.S. market still going to be there; does the 1990s-2000s model of high-debt, high-throughput and specialization and standalone operations make sense any longer; do farmers need to choose between biofuel and a livestock industry?
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Worrisome drop in grain prices
Prices had been softening for most of the previous month, but heading into the Labour Day long weekend, the price drops were startling.
Like I said, I could look at these only far too briefly because of the real-world space constraints of newspapers. There’s room for less than 3,000 words in a special report, so considerations of large, complex topics like the State of the Hog Industry need to be narrowed down pretty tightly into something more focused, and even then you always realize you’re just glancing off the surface of a critical and complex situation. Our hope, as always, is to provide readers with some more information and context than they had before so they can begin to understand the issues better than before, and I hope this special report does that.
It’s an awful subject to cover, because there are a lot of the best producers in prairie agriculture going broke, being driven out of a business they’ve built and seeing their life savings go down the drain. Many are upset and despairing. I spoke to a number of hog producers while working on the special report, but most were unwilling to go on the record and be exposed in the newspaper about their situation. They’d talk to me but they didn’t want all their gory details out there in the public. There are a lot of feelings of failure and even shame out there about this situation, even though all they did was invested their (and the banks’) money, worked hard and tried to take advantage of the markets that were supposed to be there.
Marg Rempel, who I profile in the report, is one who agreed to talk on the record and who faces what many face: her equity is draining away; she thinks staying in the business is questionable; she feels awful about what will happen if she quits. It’ll mean an end of full time farming for her and her son, the end of three jobs for local hired people and the end of her farm being something that not only is self sufficient, but also throws big benefits off to the community around it. It’ll become a sideline grain farm – if she quits.
She – and dozens of progressive farmers in the Red River valley and beyond – invested in an industry that any reasonable analysis would say made sense: in the post-Crow world, feedgrains should be comparatively cheap in the middle of North America; the industry was breaking out of a provincial focus and becoming regional, meaning the U.S. Midwest was the new domestic market for southern Manitoba; world populations were growing and eating more protein as they got richer, and Canada was ideally positioned to supply a tiny amount of that demand increase.
A rather troubling trend I’ve noticed recently is for left wing critics of the commercial hog industry to take satisfaction in the struggles of the remaining producers. Although they often couch their statements with protestations that they indeed feel for the plight of the hog farmers, they then lay out arguments that blame the victim of this crisis by arguing that they were arrogant and stupid. They don’t say the words “arrogant” and “stupid,” but that’s what their arguments lead up to. I’ve noticed that a number of leftie colleagues of mine all say the same things when they talk about the issue, repeating the same lines and arguments as if reciting from the Book of Common Prayer. Common ones are “The industry was inherently unsustainable because it grew so quickly,” and “What were they thinking when they based their production on the U.S. market?” It’s sort of like talking to right wingers who watch too much Fox News: they all parrot the same lines based on the same false assumptions, crow over the pains of their enemies, and seem smugly satisfied by the mess.
Was it unwise to assume the U.S. market would be there? Well, I suppose it’s crazy to think any market will ever be there. Perhaps we could all go work for the government, then we wouldn’t have to worry about that messy market stuff. But the North American hog industry, one way or the other, is an integrated industry, as is the auto industry and most of our other industries. If the U.S. shut its border to autos and auto parts built in Canada, half of southern Ontario would go down. Would we then all pipe up and say “See, I always thought it was crazy for us to have factories for more than the few cars Canada needs per year. We should never have built them. This is good, now, because without any factories we are finally sustainable!!!!” (I realize the southern Ontario car industry is in trouble now, but it would be 150 times worse if the border were shut.) Funniest of all is that most of the folks who argue that southern Manitoba hog producers were stupid to build barns based on U.S. demand are the same folks who would encourage farmers to count on supply management. But hasn’t supply management been in the crosshairs of the U.S., Europe, most other countries for years? Don’t we have a federal government that is at least ideologically uncomfortable with supply management? Couldn’t you also argue that it is crazy to count on supply management because it’s inherently unsustainable considering world sentiment? (I’m not saying it is, but it’s a pretty perfect parallel.)
There’s also the bankrupt, zero sum thinking that says that it was unsustainable to expand the industry in Manitoba faster than the North American consumption rate. Wouldn’t everybody else expand too, they say. Let me get this straight: we should never attempt to grow faster in anything than the rate of continental population and consumption growth? It’s probably a good thing for California that it didn’t try to stop the expansion of Silicon Valley because it was expanding faster than the overall growth rate for software consumption. It’s lucky that Alberta and Saskatchewan didn’t clamp down on energy production because their expansion rates were exceeding overall continental use rates. Manitoba, of course, has expanded its hydro power network far more than the average. This must be bad.
Or perhaps comparative and competitive advantage makes it all make sense. Silicon Valley had both in the 1990s and now has the former with software development. It made sense to expand greatly there. Alberta and Saskatchewan have excellent conditions (oil in the ground) for energy development. It’s made sense to expand. And southern Manitoba has a number of comparative and competitive advantages that make it a natural producer of hogs, and weanlings for the U.S. market. I note that many of the schadenfreudiest critics never acknowledge the damage that clinging to Kernel Visual Distinguishability did to the Red River valley’s hog producers, taking away local feedgrain supplies and putting the hog producers on an import basis, forcing much of the conversion to weanling operations. But that’s probably because they liked KVD. There’s no reason production in Manitoba couldn’t grow while it declines in places like North Carolina and Quebec. Development should occur where it makes sense.
I think lying under all of this is the discomfort some on the left have with things that are big and industrial. They must be bad. And farms should be little, simple and take directions from technocrats who tell them what to grow, how to sell it and take most of the business cares away from them, leaving them just focused on production. That’s OK for farmers who want to do that, but for the entrepreneurial farmers of the Red River valley, especially the Mennonites and Hutterites, why shouldn’t they be able to fashion a rational industry based on rational assumptions and not rely on government regulations, ownership or control but instead on their own initiative and determination? Why is that such a threat to some folks’ worldview?
As Rodney King said: “Can’t we all get along?” The present schadenfreude doesn’t suggest we are right now.
