Pork Producers Mull Ethanol And COOL Offset Subsidies

The Canadian Pork Council may ask Ottawa to reimburse hog producers for financial hurt caused by U. S. ethanol subsidies and country-of-origin labelling.

The idea emerged from a CPC brainstorming session on how to help the country’s beleaguered producers.

The CPC is looking for short-and long-term strategies to help hog farmers through their worst financial crisis in memory. Ethanol and COOL offsets are central to a short-term solution, said Karl Kynoch, Manitoba Pork Council chairman.

U. S. government subsidies to ethanol plants artificially boost corn prices and raise the cost of other feed grains. Because feed is a hog farmer’s single-largest cost, Canadian producers say ethanol is a big reason for their financial troubles.

As well, COOL is wreaking havoc on Canada’s pig sales to the U. S., especially in Manitoba, where the bulk of live hogs and weanlings go south of the line for either slaughter or finishing. U. S. plants either refuse to accept Canadian hogs or price discount them.

“Ethanol and country-of-origin labelling have cost, and are still costing, this industry a significant amount of cash. That’s completely outside the control of producers,” Kynoch said after returning from last week’s meeting in Ottawa.

Up to now, Canada’s pork producers have carefully avoided the idea of ad hoc government support payments for fear of U. S. trade retaliation.

But their situation is so dire that producers are now willing to consider the previously unthinkable, Kynoch said. “We’re looking at all the options, inside and outside the box.”

Kynoch stressed nothing is final and it’s premature to attach a price tag to the CPC’s plan.

The pork council will hold small group meetings over the next two weeks to flesh out a proposal to take to the federal government later this spring.

As for long-term strategies, Kynoch said council representatives agreed on three main ones: improving farm safety net programs for livestock producers, increasing pork-packing capacity at home and developing more high-yielding feed grain varieties.

Meanwhile, producer groups across Canada are collecting data to show that hog producers are losing vast amounts of money because of low prices, high costs and trade barriers. The Manitoba Pork Council has put out a call to its producers for information on their financial state. The CPC recently commissioned a study from the consulting firm Meyers Norris Penny on hog producers’ operating costs.

Kynoch discussed the CPC’s deliberations during the Manitoba Pork Council annual meeting in Winnipeg this week.

Also scheduled to speak at the meeting was Steve Meyer, a U. S. industry analyst and president of Paragon Economics.

In an interview, Meyer said he expected market conditions for Canada’s hog producers to improve toward the end of 2009 and into 2010. In the meantime, however, producers on both sides of the border continue to bleed red ink.

Meyer said U. S. hog producers lost an average of US$2/cwt per carcass during the first quarter of 2009. But that’s an improvement over 2008, when producers lost US$21/cwt per carcass.

Meyer said recent sow herd reductions, especially in Canada, will eventually increase the demand for pork and raise market prices. But he said the North American sow herd needs to shrink by another two to four per cent before improvement can take effect. [email protected]

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