Hog producers pinch pennies as crisis continues

Colin Hatch will only say his company’s sales are down “marginally.” But his body language suggests otherwise.

Like other businesses servicing the hog industry, Elanco Animal Health is feeling the pinch. Low prices, high costs and trade barriers are causing producers to leave the industry. Fewer producers mean fewer pigs and, as a result, lower sales of veterinary drugs for Elanco, one of North America’s largest manufacturers of animal health products.

“Our sense is, it’s getting tighter,” says Hatch, the company’s monogastric business unit manager, when asked for his assessment of the state of the industry.

Wayne Sundby remembers when hog industry trade shows were crowded with farmers eager for a look at the latest

Hog producers /

“It will take years to recover.”

– Karl Kynoch, Manitoba Pork CounciL

products. So far at the Winnipeg Convention Centre the morning the show opened Dec. 3, he’s only seen a couple of producers and they weren’t buying.

Sundby is a regional sales manager for Nuform Building Technologies Inc., which sells concrete building forms for commercial, industrial and agricultural buildings, including hog barns. But he’s had only one hog barn constructed in the last year. That one belonged to a Hutterite colony near Portage la Prairie which obtained a building permit just before Bill 17 froze the construction of new hog operations in much of Manitoba.

Hatch and Sundby were among 170 exhibitors at Hog and Poultry Days 2008 in Winnipeg Dec. 3 and 4. Not a bad number, but still down from the nearly 200 exhibitors who signed up the last time the trade show was in Winnipeg two years ago.

Karl Kynoch isn’t surprised hog industry suppliers feel pressured. The last two years have been the toughest ever for producers and every penny counts. Producers are cutting costs wherever they can, from feed to drugs to genetics.

Kynoch, who raises pigs near Baldur, sees a shift in producers’ future buying habits as a result of their current penny-pinching. He believes they’ll continue to shop around for cheaper generic drugs, lower-cost rations and less expensive genetics in order to save a few dollars.

Previously, producers would manage pigs to maximize production. Now, they’re only meeting their animals’ basic requirements, according to Kynoch, who chairs the Manitoba Pork Council.

“This will stay in their mind-set going forward,” he said. “It will take years to recover. Even if we have two good years in a row, it won’t make up for the last five.”

That said, Kynoch believes there’s light on the horizon for beleaguered hog producers if they can get through the current crisis.

For one thing, futures markets are looking up. Kynoch said the 2009 summer futures are above producers’ break-even point.

Input costs are finally starting to drop. Feed, which makes up the majority of a hog producer’s expenses, has fallen by $40 a hog over the last three months, he said. Fuel costs are also lower, thanks to a steep drop in oil prices.

The decline in the value of Canadian dollar, which was trading around US80 cents last week, helps make Canadian producers more competitive.

Increased slaughter capacity at the Maple Leaf plant in Brandon and Springhill Farms in Neepawa is helping to alleviate the number of pigs diverted from the U. S. market because of the new country-of-origin labelling (COOL) law there.

The Manitoba Pork Council predicts live slaughter hog exports from Manitoba to the U. S. will fall from around 1.5 million head in 2007 to a mere 150,000 in 2009.

Kynoch said he believed the number of producers exiting the business “is getting close to levelled out now.” Last month saw a “very heavy” liquidation of sows. As a result, weanling exports are also falling sharply. [email protected]

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