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Ottawa Considers Hog Options

The federal government may consider stretching the parameters of its farm safety net programs to help a hog industry in financial free fall, but industry hopes of a billion-dollar bailout package are fading.

“They’ll stretch the programs as much as they can in terms of interpretation,” said Andrew Dickson, Manitoba Pork Council general manager. But special financial assistance is not among them.

“We’ve been informed that, if they’re going to do anything, it’s going to be within the current suite of programs,” he said.

That would rule out a Canadian Pork Council request for emergency producer payments of $30 a hog, based on 2008 deliveries, to help cover financial losses.

The CPC put its request to Agriculture Minister Gerry Ritz a month ago. The actual value of the package is not known but has been reported at $1 billion. One AAFC official reportedly put the amount at just over $800 million.

“People do not understand how bad a shape our industry is in right now.” – JURGEN PREUGSCHAS, CPC

NO TO BAILOUT

In a statement to the Co-operator, Ritz confirmed the government is not considering a bailout package.

“Per-head payments are counterproductive because Canadian pork producers depend on export markets and trade retaliation would cause more harm than good,” he said.

“We understand that pork producers are facing some real challenges and we’re going to continue to stand shoulder to shoulder with producers and help them weather the storm. We’ll continue to work with farm leaders and provincial governments to improve existing programs to make sure they’re hitting the target,” Ritz said.

That could mean redefining some basic underpinnings of AgriStability, such as reference margins and Olympic averages. It could also include extending short-term payments into longer-term loans through another government agency.

Agriculture and Agri-Food Canada bureaucrats “about as senior as you can get” are looking at options for tweaking existing programs to flow as much money as possible to Canada’s financially strapped hog producers, said Dickson.

LOBBY UNDERWAY

The pork council is asking producers to lobby their MPs for the aid anyway. “There is a fair amount of political pressure being exerted at this point in time,” said Jurgen Preugschas, CPC chair.

But Preugschas admitted early signs for an industry bailout are not encouraging.

“The feedback we’re getting from the legislators is, yes, we understand your plight, we have a lot of sympathy for your plight and we realize something needs to be done. But we’re not quite prepared to give you what you’re asking for and maybe we need to take another look at it and see what we can work out.”

Preugschas, en route to a CPC board meeting in Montreal last week, painted a grim picture of an industry that has been hemorrhaging red ink for nearly three years with no real relief in sight.

Producers, unable to bear the losses any longer, are closing their barns and exiting the business. If many more leave, production could fall enough to put Canada’s pork exports in jeopardy, Preugschas warned.

Canada exported 634,489 tonnes of pork in 2008, 9.4 per cent more than in 2007, according to Statistics Canada.

“If we don’t do anything to assist our industry at this point in time, we won’t have to worry about trade because there won’t be any. The trade will all be coming in, not going out,” Preugschas said.

“People do not understand how bad a shape our industry is in right now.”

LOSSES TOO LARGE

Even if producers did receive $30 a hog, it wouldn’t help very much, said Gerry Friesen, who sits on both provincial and federal farm mediation boards.

Friesen recently dealt with one hog producer whose operation lost a million dollars’ worth of equity over the last four years. A $30/pig payment would cover only 20 per cent of his total losses.

Preugschas said producers had hoped to reach profitable margins this spring. But a strengthening Canadian dollar and fallout from the H1N1 swine flu knocked the props out from under market prices. Preugschas said producers in his own province of Alberta are losing $40 on each slaughter hog they sell.

It’s unclear how much more the federal government could help hog producers through existing programs.

Ottawa has already advanced $313 million in loans to 1,800 producers across Canada through its advance payments program (APP) . Livestock became an eligible commodity for APP in June 2006. Advances were increased from a maximum $25,000 to $400,000 in cases of extreme hardship in February 2008. In January 2009, the deadline to repay cash advances was extended to September 30, 2010.

CASH ADVANCES

Targeted advance payments (TAP) under AgriStability were offered in 2007 to producers in Manitoba, Saskatchewan, Alberta, Quebec, Nova Scotia and New Brunswick. TAP payments in 2008 went to Manitoba, Saskatchewan, British Columbia, Quebec and New Brunswick producers.

But those are cash advances which have to be repaid. They do not deal with AgriStability’s structural problems, such as declining reference margins, said Ian Wishart, Keystone Agricultural Producers president.

“It didn’t deal with declining margins when the grain sector was in trouble, it’s not dealing with declining margins in the cattle sector and it’s not dealing with declining margins in the pork sector,” he said.

Wishart said KAP supports short-term aid for hog producers but wants the government to fix long-term margin problems with AgriStability. [email protected]

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