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Canadian Feed Advantage Returns

Canadian hog farmers look to return to profitability later this year, slowing the pace of herd downsizing as high hog prices outweigh the negative effects of a surging Canadian dollar, industry analysts said Jan. 20.

Hog farmers have suffered from several mostly unprofitable years because of high feed costs, a strong dollar and the United States’ country-of-origin meat labelling law (COOL).

But Chicago live hog futures are one-third higher than a year ago, while forward contract prices in Canada from packers like Maple Leaf Foods and Olymel LP touched five-year highs in the past year as farmers reduced their herds and pork demand remained strong.

“We’re losing money now, probably going to lose money for a few more months, but summer of 2011’s probably going to be profitable (in Canada and the United States),” said Ron Plain, agricultural economist at the University of Missouri. “The economics are probably not good enough to cause us to want to expand the swine herd, but they’re not bad enough to cause a large reduction.”

Plain said times are tougher in Canada because the Canadian dollar is at par with the U.S. currency.

Chicago Board of Trade corn futures gained more than 50 per cent in 2010 as the stocks-to-use ratio in the United States fell to a 15-year low.

Western hog farmers may have a feed edge for now, but barley prices eventually rise to stay in line with corn, Plain said.

Hog farmers in Canada and the United States have reduced herds in the past few years, with the Canadian herd falling to a 13-year low of 11.9 million head at Oct. 1.

But Canadian hog production is now stabilizing.

Pork demand has remained strong, with exports thought to have reached a record high in 2010 and domestic demand steady even as retail prices rise, Fulton said.

COOL, the U.S. labelling law that Canada and Mexico have challenged before the World Trade Organization, has made importing livestock more costly for American processors.

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