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Hog producers continue operations despite losses

Canadian hog producers are still losing money as feed prices are high and values are low. But they’re continuing to operate because they’re optimistic they can turn things around as hog prices are expected to move higher in the spring.

"Based on the futures market in the U.S., we could see prices improve in the spring, back into break even and profitable levels," said Brad Marceniuk, a livestock economist with Saskatchewan’s agriculture ministry in Saskatoon.

Canadian hog prices generally follow along with the activity experienced by U.S. hog futures prices, Marceniuk said.

One reason economists are projecting higher prices is that hog production is expected to be lower in 2013 in both Canada and the U.S.

"What is happening is that a few of the operations across Canada and the U.S. have closed their doors," Marceniuk said. "So, because of that, production overall will be decreasing in 2013."

The U.S. Department of Agriculture is due to release its production report on Dec. 28, which will show how many hogs were lost during the summer, which in turn will influence the futures market Canadian prices follow.

"There’s a lot of expectation that the sow numbers will be lower in the U.S., and that should translate into lower pork production in 2013, and that would help pork prices improve," said Marceniuk.

Canada’s production numbers won’t be released by Statistics Canada until early 2013, he said. But, they too, are expected to be lower, which would be supportive for prices.

The main reason production will be down is because some operations have had to close their doors since they were losing too much money.

Farmers are producing lighter pigs, which will also contribute to lower production. Marceniuk said some farmers may normally produce a 120-kilogram hog, but now they’ll produce a 118-kg pig instead.

"Because of the higher grain prices, we’re starting to see some of the pigs going to market a little bit lighter," he said. "And so that’s also going to contribute to lower pork production for 2013."

Though hog producers will mostly likely get more money for their pigs in the spring, it is still unknown how much profit they will make because it will all depend on where feed grain prices move, he said.

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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