Hog Producers Crawling Back To Break-Even Point

Hog prices have finally returned to profitable levels but it’ll take years for pork producers to recover from their worst financial crisis in recent history, an industry official says.

Repaying massive debts racked up over the last three years will be a tough job for hog producers who haven’t already left the industry, predicts Andrew Dickson, Manitoba Pork Council general manager.

“There’s small amounts that they may be able to pay off. But there’s no way they can pay off the accumulated debt from the last three years in just one decent year,” he said.

“It’s underway, but it’s in very small amounts to start with.”

Most producers can only service their debts right now, not pay them down, he said.

The last few years have seen a massive shakedown in the hog industry, particularly in Manitoba, once the country’s largest hog producer.

As of July 1, 2010, the province had 760 hog farms, half as many in 2003, Statistics Canada reported.

Trade barriers resulting from the U. S. country-of-origin labelling rule have sharply reduced Manitoba’s live swine exports. The number of slaughter hogs shipped to the U. S. is a third of what it was before COOL. Weanling exports last year were just above three million animals, down from five million.

Fortunately, market prices are back above producers’ break-even point and forecast to stay there until next year. Dickson said current prices are between $145 and $160/cwt and projected to remain strong until June 2011.

But a change in economic factors could plunge producers back into a money-losing situation, Dickson warned.

A major concern is the Canadian dollar, currently hovering near par with its U. S. counterpart. Dickson said producers lose $1.20 to $1.40 an animal for every cent the dollar goes up.

Another big concern is the price of feed, which makes up over half of a hog producer’s costs. Widespread flooding across the Prairies this summer has reduced crop yields and raised fears of a feed grain shortage.

“If feed costs climb dramatically, then that’ll take all the profit out of the industry and we’ll be back into downsizing again,” Dickson said.

Fortunately, producers can always import U. S. corn, although the Midwest corn harvest is also struggling in wet conditions, he said.

On the bright side, Canada’s pork exports are steady, despite the robust loonie.

Here at home, consumer demand for pork is strong because of surplus supplies and competitive retail prices.

Although many Manitoba hog barns ceased operating during the downturn, Dickson said one or two have since reopened – another encouraging sign.

But producers worry the added costs of incoming provincial regulations could hurt their recovery.

New provincial regulations taking effect in 2013 will restrict the amount of manure farmers apply to their land to the rate at which crops can absorb phosphorus.

A University of Manitoba study estimates the regulations will add another $20 million to the hog industry’s annual production costs.

Also in 2013, all livestock operations will be banned from spreading manure on fields in winter. Currently, small operations with fewer than 300 animal units are exempt from the ban.

Dickson said 60 small operators in the Red River Valley alone have to decide if they can absorb the cost of building expensive overwinter manure storages. [email protected]

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There’ssmallamounts thattheymaybe abletopayoff.”

– ANDREW DICKSON, MPC

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