Hog prices hit a wall
By Robert Arnason, The Western Producer (Canada)
July 23, 2020
George Matheson has been raising pigs since 1982.
He’s seen good and bad times in Canada’s pork industry, but he’s beginning to lose faith in the future.
“For a young person, I wouldn’t encourage them to go into pig production. And those are pretty strong words from the chair of Manitoba Pork,” said Matheson, who farms near Stonewall, Man. “But unless the pricing system changes, if it was a child of mine — I’d say find something else.”
In mid-July, Matheson and representatives of the other provincial pork organizations in Western Canada had a teleconference with Maple Leaf Foods and Donald’s Fine Foods — which owns a packer in Moose Jaw, Sask. Maple Leaf operates Canada’s largest pork processing plant in Brandon, processing 85,000 hogs per week.
In the meeting, Alberta Pork, Sask Pork, BC Pork and Manitoba Pork told Michael McCain, chief executive of Maple Leaf, that the pricing system for hogs is broken. Producers are getting a slim piece of the pie and farmers are sick of it.
“It’s a system that isn’t working anymore for the producers in this country,” Matheson said.
“It’s still a profitable industry. But the profits just aren’t being shared…. Independent producers, that segment, has suffered far too long…. This is about as low as I’ve ever seen (farmers) as far as their attitude towards pork production…. You keep thinking there’s hope and there should be hope, but it never pans out.”
The groups asked Olymel to be part of the meeting, but the company didn’t participate. The producer organizations said they hope to speak with Olymel in the coming days.
Matheson pegged the cost of production at $185 per pig. Now, many hog farmers in Western Canada are receiving about $135 per pig. That’s a loss of $50 per animal and there’s little indication that things will get better.
“I would say from now until well into 2021, returns for a hog would be about $135.”
Prices are weak because the western Canadian price is based on the United States market, where hog processing plants shut down because of COVID-19, causing an oversupply of pigs.
“It really has to do with price signals,” said Darcy Fitzgerald, Alberta Pork executive director.
“The pricing sends a signal to the (American) farmer, we don’t have enough capacity… so the price goes down. But in Canada we have the exact opposite (situation). We don’t have enough pigs, to begin with, to go into the plants. We’re telling farmers to quit producing but we’re… not producing enough.”
Alberta Pork and the other provincial groups told Maple Leaf and Donald’s Fine Foods that the connection to U.S. prices has become dysfunctional. They want processors to incorporate the U.S. Department of Agriculture cut-out value into the price paid to Canadian farmers. The USDA tracks the value of pork loins, ribs, butts and other cuts of pork.
“They recalculate it back into a carcass value… based on those meat cuts. That gives you an idea of perhaps the wholesale value of that carcass,” Fitzgerald said, explaining it’s an estimate of packer returns on a pig.
Quebec has already adopted such a pricing system. Last year, Quebec legislated a pricing formula where packers must share some of the cut-out value with producers.
“We see Hylife moving that direction, as well,” Fitzgerald said, referring to Hylife Foods, which operates a packing plant in Neepawa, Man.
“There’s about 40 percent of the pigs in Canada, now are operating under a cut-out value system. They use price and part of the cut-out, to (set) value.”
Maple Leaf isn’t ready to adopt such a system, but it is offering a short-term bonus to producers. Farmers who sell to Maple Leaf will receive an additional $20 per pig, for a period of 13 weeks.
Donald’s Fine Foods will offer a minimum floor price...