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Long-Awaited Hog Recovery Finally Happening

Relief is finally in sight for Manitoba’s beleaguered hog farmers after a financial battering that’s lasted nearly four years.

Producers can expect to see profit margins of $20 to $25 a hog for most of 2010, beginning this spring, according to a Manitoba Pork Marketing Co-op outlook.

The expected average fixed forward contract price from May 1 to Nov. 27 is $146 a hog, producers at a co-op district meeting last week were told. That’s better than the three-year average of $128 a hog or the five-year average of $136 per animal.

It’s welcome news for hog farmers accustomed to losing up to $50 per animal from a combination of low prices, high costs, food safety scares and trade woes.

Now comes the hard part: burrowing out from under a mountain of accumulated debt.

“It’s going to be an uphill battle,” acknowledged Perry Mohr, the co-op’s CEO.

It’ll take at least three to five years of sustained profits for producers to recover from the financial storm of the last 3-1/2 years, Mohr said as the co-op began its annual round of district meetings March 2.

While expressing guarded optimism, Mohr warned producers have had their hopes dashed before. The industry was poised to recover 12 months ago until the H1N1 flu arrived on the scene. Dubbed “swine flu,” the virus caused consumers to avoid pork, market prices fell and herd liquidation continued.

But barring unforeseen setbacks, underlying economic factors make an industry recovery look real this time, Mohr said.

The number of pigs in Canada is the lowest in a decade, due partly to government programs helping producers leave the industry and resulting in lower supplies for increased demand.

A program to reduce the national sow herd by 10 per cent removed 128,225 sows by paying producers $225 per animal to idle their barns for three years. Another 339,190 pigs have been removed under a separate hog transition program after three rounds of tendering. One more round is scheduled.

The Canadian swine herd is 4.5 per cent lower than it was a year ago, Statistics Canada recently reported. The U. S. herd is down two per cent. As a result, pork supplies are down 7.2 per cent from last year, Mohr told the meeting.

Corn and soymeal prices are trending lower, also aiding producers’ profitability. Pork demand, which slumped during H1N1, is expected to increase 3.5 per cent in 2010.

Consumers often choose pork during a recession because it’s less expensive than beef and there’s lots of cheap pork around, said Mohr.

The world recession itself appears to be easing, enabling consumers to improve their spending power. But there are also some factors which could dampen recovery, he cautioned. Competing meat supplies could prove a challenge. Poultry supplies could increase after China recently imposed import duties. Cattle inventories are not shrinking as fast as previously thought because of lower feed prices.

The Canadian dollar continues to trade strongly against the U. S. dollar, which is negative for prices. The U. S. country-of-original labelling rule has disrupted many weanling contracts with American finishers. At least two major U. S. packers have stopped buying Canadian slaughter hogs because of the rule.

Despite the industry downturn, the Manitoba Pork Marketing Co-op finished 2009 with its best year ever, the meeting heard. MPMC issued two pool price rebates worth $600,000 or roughly 50 cents per hog marketed. That offset the levies which producers paid to the co-op and essentially meant they marketed for free in 2009, Mohr said. [email protected]

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