Aggressive marketing appears to have kept independent hog producers from backing up despite COVID-19 cases piling up at Maple Leaf Foods in Brandon.
Contingency measures have come with a cost, however, and those costs have hog sector leaders eyeing potential AgriRecovery funds.
Why it matters: Pork tanked earlier this year due to a glut of hogs in the U.S. and now paying extra to divert hogs to Alberta adds insult to injury for some producers.
Cases of COVID-19 were first confirmed among workers at the Brandon processing plant in early August. A total of 83 cases were connected to the facility by Aug. 31, the province reported.
Union UFCW Local 832, which represents workers at the processing plant, has repeatedly called for the plant to be closed for cleaning, worker testing and to give time to bring cases under control.
The Brandon area has been a hot spot for the novel coronavirus since early August.
The province has maintained that there is no evidence of workplace-based transmission and the plant has stayed open. However, high absenteeism and workers in self-isolation have put pressure on the production line.
Maple Leaf did not respond to questions on a potential backlog — the plant can typically process up to 15,000 pigs a day — however, the company used a provision in its workers’ bargaining agreement to force nearly 500 workers to come in for overtime Saturday, Aug. 21, the union said.
Two sources in the pork industry said workers also did overtime on Aug. 29. The company had not confirmed this as of Sept. 3.
Manitoba Pork Council general manager Andrew Dickson said he had no details of a potential backlog as of Sept. 1, but he wasn’t getting “panicked calls.”
Cases at the Brandon plant began to affect producer deliveries around the August long weekend, said Bill Alford, general manager at [email protected] Marketing, a co-op that represents independent producers across the Prairies.
For the two weeks following, Alford estimated 8,000 pigs were diverted away from Brandon to Olymel in Red Deer, Alta., and to the HyLife Foods plant in Neepawa, Man. The majority went to Alberta, according to Alford.
“We took the approach to dig a hole and not create a mountain through this,” he said. “We aggressively sold in advance not knowing when things would return, I guess, more to normal capacity at Brandon.”
As of Sept. 1, Maple Leaf hadn’t returned to normal but was “tracking up,” Alford said.
While diverting hogs prevented producers from seeing backlogs in their barns, hauling to Alberta brought extra costs. Alford estimated additional freight and shrinkage costs added up to about $15 per head, plus the loss of a $20-per-head temporary COVID-19 relief premium Maple Leaf has offered.
“It doesn’t take long to be a significant number,” Alford said.
The Manitoba Pork Council has asked [email protected] Marketing to track costs, in order to gauge if it’s worth asking for relief funds through AgriRecovery, Dickson said.
In May, the federal government announced up to $125 million in AgriRecovery initiatives to help producers facing additional costs because of the pandemic, including $50 million each for the cattle and hog sectors.
On May 29, the province announced it had signed on for beef set-aside funds through that initiative.
However, Dickson said he didn’t know if the province and federal government would see producers’ losses over two weeks as significant enough to warrant relief.
The federal and provincial governments are usually extremely reluctant to use AgriRecovery, Dickson said.
The bigger impact of the pandemic on hog producers has been the hit to the American hog sector, as Canadian pork prices are based largely on those in the U.S.
“The whole food-service industry has gone sideways down there. The demand for pork dropped,” Dickson said.
This, combined with several U.S. pork plant closures due to worker COVID-19 cases, caused a glut of American hogs. Prices dropped to encourage greater consumption and export.
American producers are losing money on their hogs but in Canada, where there is no glut, Canadian producers are also losing their shirts.
“It’s sending all the wrong signals,” Dickson said.
Demand for Manitoba weanlings over the border also dried up as the barns that would normally take them filled up, forcing producers to sell at a loss. This has trended slightly upward lately, Dickson said, but not into profit range.
Hog prices are usually highest in summer, Alford said. This summer, they’ve stuck around autumn levels.
On Aug. 14, the Index 100 average price was $158.36 per 100 kilograms, compared to $193.38 per 100 kilograms last year, according to provincial data.
Dickson estimated that a 600-sow, farrow-to-finish operation stood to lose around half a million dollars because of the market situation.
“Eventually, sooner rather than later, we’d really like to see a positive income,” said Rick Bergmann, a hog producer near Steinbach and chair of the Canadian Pork Council.
“Right now we’re in a small boat in a big body of water that has big waves on it, so right now we’re just hanging on — and hopefully we’ll see the shore and the sunshine, but right now it’s a difficult challenge for producers,” he said.
The Canadian Pork Council recently called for changes to the federal/provincial AgriStability income stabilization program. The council proposed that AgriStability raise its compensation rate to 85 per cent from 70 per cent.
AgriStability currently pays 70 per cent of the difference between a producer’s production margin in a given year and his or her reference margin, triggered when the former drops below 70 per cent of the latter.
Several agricultural groups have previously asked for the reference margin to be raised to 85 per cent from 70 per cent, along with other reforms to the program.
Bergmann told the Co-operator he understands that some years will be good, and some will be bad. He’s got fire insurance and life insurance, and wishes AgriStability was a better insurance program.
“Right now, the program doesn’t give that confidence,” he said.
Provincial agriculture ministers are slated to meet in October, and Ag Minister Blaine Pedersen has said he expects to discuss AgriStability then.
Bergmann said he hopes ministers come out of the meeting with strong action items to give producers more confidence.