“Nothing is going to change until we can stimulate demand.”
– SCOTT MCKINNON
Canada’s hog and cat-t le herds shrunk to their smallest levels in more than a decade as the livestock industry reels from rising costs and export barriers, Statistics Canada said Feb. 16.
The country’s hog herd fell 4.5 per cent year over year to 11.63 million head on Jan. 1, the smallest it has been in 12 years. The cattle herd slipped 1.3 per cent to a 15-year low of 13.015 million head.
The reduction in cattle is due to beef cattle ranchers downsizing their herds, while the supply-managed dairy cattle herd changed little year over year.
Ranchers and hog farmers have suffered from a surge in feed grain prices since 2007 due to increased ethanol demand, StatsCan said. The appreciation of the Canadian dollar and implementation of the U. S. country-of-origin meat labelling law last year have also cut sharply into livestock exports.
Given the circumstances, it’s surprising hog farm-e rs aren’t cutting back more quickly, said Andrew
Dickson, general manager of the Manitoba Pork Council. Farmers are earning $127 per finished pig, well below the break-even level of $140, Dickson said.
Farmers actually need about $160 per slaughter pig to account for their average debt load, Dickson said.
Despite the downsizing, farmers continue to keep hog packer Maple Leaf Foods in Brandon, Manitoba, well enough supplied to run two production shifts as the U. S. labelling law discourages U. S. packers from buying foreign livestock.
Feed companies, however, have suffered from farmers slashing herd sizes, Dickson said.
Downsizing of the beef herd will likely continue into 2011 or 2012, said Scott McKinnon, market analyst for Canfax in Calgary, Alberta.
“Obviously we have an overcapacity in the feedlots and packing plants and that’s going to play a part,” he said. “Nothing is going to change until we can stimulate demand.”
The industry needs to see a global economic recovery that would revive demand for beef, McKinnon said.
The cattle herd shrunk 4.3 per cent in Alberta, but grew 5.7 per cent in the adj acent western province of Saskatchewan. The increase there likely reflects Alberta farmers feeding their cattle elsewhere to cope with drought conditions, McKinnon said.
Unlike the cattle industry, the hog sector is carrying out a planned downsizing to turn around its long-term decline, aided by government incentives to farmers ceasing production.
Cheap retail pork prices in Canada have kept consumption high, Dickson said. Downsizing and that strong demand should stabilize or increase store prices later this year, he said.
Dickson said the Canadian industry’s downsizing does not have a major impact on Chicago live hog futures, which have gained nearly 13 per cent from a year ago.
Chicago live cattle futures have risen 11 per cent in the last year.