The number of hogs in Canada has been on a steady decline over the past five years with no end in sight, industry officials say.
“Given the current status of the hog industry in Canada, there does not appear to be an expansion on the horizon that would see an increase in hog output,” Martin Rice, executive director of the Canadian Pork Council, said. “There may be a small drop in the level of annual decline, but that is about it.”
Rice said Canada was still undergoing a negative year-to-year change in Canada’s hogbreeding population with the quarter-to-quarter decline also intact.
“For a while, it looked like that the year-to-year, quarter-to-quarter, percentage drop was starting to slow, but that did not last,” Rice said. “As of October 1, 2008 we were looking at Canada’s breeding herd declining by over seven per cent to eight per cent on an annual basis, but the quarter-to-quarter decline began to back off,” Rice said. Canada’s year-to-year decline had begun to back off until the first of this year, when the year-to-year change dropped below five per cent.
Rice said as of April 1, 2010, the decline jumped again and was closer to six per cent.
“So the contraction in Canada’s hog-breeding herd has not begun to turn around yet,” Rice said. He said the hog industry is currently dealing with a lot of individuals who are managing four to five years of accumulated losses and who are still in the process of downsizing, if not getting out of the business altogether.
“There are a few hog operations in Canada that have begun to solidify their finances but there are also operations who are still dealing with a very low flow of equity,” Rice said.
Rice said that Canada’s financial institutions also appear unwilling to fund expansion of the hog industry at this time. “Financial institutions are not going to be willing to fund any expansion until they see the equity returns improve to over 50 per cent,” Rice said. “Not many hog operations have over 50 per cent of their financial returns coming back as capital rather than in debt.”
If there is to be a turnaround in Canada’s hogbreeding herd there will need to be a period of profitability that will reduce operating credit and ensure that the long-term credit can be serviced, he said. Rice estimated that the downtrend in Canada’s hog-breeding herd will likely continue over the next two to three years.
“We will have shaken a lot of the uncertainty out of the hog marketplace during the time frame,” Rice said. He said the increased potential for more feed grains being available in Canada does not automatically suggest that hog operations will be able to expand.
“Cheap feed will help hog producers stay in business, but it does not favour new hog production investments,” Rice said, noting that those operations still have to face other capital costs.
Canada’s hog-breeding herd peaked in January 2005 at 1.63 million head, Rice said. As of April 1, 2010, it was down to 1.3 million, a decline of more than 20 per cent.
The decline of pigs on-farm was even faster, although at a six-month lag. Canada’s pig inventory hit a peak of 15.2 million head July 1, 2005. Those numbers were down to 11.7 million as of April 1, 2010. “So in less than five years, that was a decline of 24 per cent,” Rice said.