The first go-around of a government program to help financially troubled hog producers leave the industry has nibbled at the edge of the problem, but not taken a big bite out of it.
Seventy-four producers filed successful bids to receive $10 million in return for idling their hog barns under the $75-million Hog Farm Transition Program.
The weighted average of the successful bids was $765.52 per animal unit equivalent (AUE). Accepted bids ranged from a low of $300/AUE to a high of $997/AUE, the Canadian Pork Council reported.
The tender, conducted Nov. 4, removed nearly 22,000 sows, 45,000 weaners and 60,000 hogs from the market.
The CPC provided the information verbally to the Co-operator Monday morning.
Fewer than a third of bidders were successful because the money in the tender simply ran out, said Gary Stordy, a CPC spokesperson.
“There was only $10 million available for this auction and producers were aware of that going into this, so they had to bid accordingly,” Stordy said.
The federal program, administered by the CPC and retroactive to April 1, 2009, aims at reducing swine numbers and restoring market stability by offering financial incentives for producers to shut down their facilities for at least three years.
But industry officials suggested last week’s tender involved mostly producers who have already left the business or are doing so.
“I can’t tell for certain but I would suggest that most of these facilities were already empty,” said Perry Mohr, Manitoba Pork Marketing Co-op’s CEO.
“The bids are low, in my opinion, and they’re reflective of someone that’s probably already out of business and is just trying to get something.”
A second tender, originally scheduled for Nov. 18, will now be held Dec. 9.
Judging by the first tender, the $75 million will be gone long before the industry feels the program’s desired effect, said Mohr.
“If we’ve already chewed up $10 million and only got 22,000 sows, it’s going to be a grind to achieve the goals they want with the money available,” he said.
“Ten million dollars is gone. That’s all we know.”
Stordy stressed the program was never intended as an exit strategy for producers. Most financial support will come from a special loans program, in which the federal government partially guarantees bank loans to viable operations.
“At the end of the day, we’re not trying to force people out of the industry,” Stordy said. “We are encouraging people to look toward the loan program. The hog farm transition program is intended to catch producers who may not be eligible for the loans or who have had such difficulty that they’re on the verge of losing their homes.”
NO SILVER BULLET
Andrew Dickson, Manitoba Pork Council general manager, agreed the transition program is not a silver bullet for beleaguered hog farmers.
“It’s a small program that will help some producers but the big program is going to be the loan guarantee program, he said.
Dickson said lending institutions began signing agreements with the federal government last week. As of Monday, however, a specific list of participating institutions had yet to be posted on the Agriculture and Agri-Food Canada website.
Dickson said last week’s tender achieved one thing: it may have set a benchmark price for future tenders.
“I would suggest that’s a figure they need to be thinking about.” [email protected]