One of Manitoba’s top livestock exports is in a tight spot after market implications of COVID-19 sent the swine market for weanlings into a tailspin.
Hams Marketing put average ISO wean price at US$7.38 as of April 17, a dramatic drop from the end of January, when the company estimated average ISO wean price at US$59.15. Prices began dropping in February, hitting an average US$29.94 by the first week of March. By March 31, those numbers had dropped to US$16.09.
Why it matters: Manitoba ships more piglets to the U.S. than any other province in Canada. The sector says producers are now selling those animals for essentially nothing since the bottom dropped out of the market.
The weanling market has struggled with downward pressure as the sector scrambles for space for finished hogs in the midst of the COVID-19 pandemic.
“Right now, the American market is so topsy-turvy because of all the plant issues,” Manitoba Pork Council general manager Andrew Dickson said. “It’s taking awhile for finisher barn producers in the U.S. to get a clear picture of what’s going to happen four months from now, because if you’re buying the pig today, you’re going to be selling this thing four or five months down the road.”
On April 12, news broke that pork titan Smithfield Farms would be closing its plant in Sioux Falls, South Dakota, a facility responsible for an estimated four to five per cent of U.S. pork production. Reuters reported that the 3,700-staff plant would be closed indefinitely after 238 COVID-19 cases were linked to the facility.
The South Dakota plant joins a growing list of processors to suspend or roll back operations, either due to COVID-19 cases among staff or reduced capacity as social distancing measures slow the supply chain.
“Some of our contacts in the Midwest tell us that the grocery store shelves are almost bare out there,” Dan Goodhue, sales representative with Maximum Swine Brokers said. “Orders to China have been cancelled in order to fill U.S. orders because the demand is strong. The bottleneck’s definitely at the packing plant level and we’re running into that every day.
“The problem that you have is that folks who have available finishing space are maybe leaving those barns empty in order to keep the market hogs longer,” he added.
In Canada, the pork sector was still working through the backlog of finished hogs in the third week of April, following a two-week closure of a major Olymel processing plant in Quebec. The facility reopened April 14.
Market analysts have also warned that consumer demand might dive as those stocking up their shelves stop buying heavily and restaurants remain closed.
Bill Alford, general manager of Hams Marketing, noted that the hog market saw a quick run-up as the COVID-19 epidemic heated up, but that markets were pulling back in mid-April as prices demand for some cuts fell.
“It’s uncertainty, right?” he said. “Nobody knows exactly, and then you’ve got the issue with the packing plant, processors, having to physical distance. It’s slowing down line speeds, so there’s concern that will affect the ability to keep up with the live supplies.”
Despite the low prices, Goodhue warned that the weanling market may be in for more downward pressure, particularly if more plant closures are announced.
“It’s possible that we still haven’t seen the bottom of the futures here,” he said. “At this point, we need to see that tide turn before we can honestly have an idea of when these weanling prices are going to start climbing again.”
Andrew Dickson, general manager for the Manitoba Pork Council, says some producers selling into the cash market are way past selling at a loss. He has heard of some producers taking no payment for their ISO weans, as well as actually paying the transport cost to ship them.
“I’m not saying everybody’s getting that, but a number of them are,” Dickson said. “At some point, they’re not going to do this for very much longer and they may need to euthanize some batches of animals, but nobody really wants to do that. The only reason that would happen is they literally can’t get rid of them.”
Despite rumours to the contrary, Dickson says he has not heard of any culls yet in Manitoba, although Goodhue says the possibility has been raised in Eastern Canada. Dickson did say, however, that producers are putting plans in place for if they are forced to deal with surplus animals.
Those selling under contract are in better shape, Dickson added, although he said even those producers are facing a 30 per cent drop in price.
The downturn in the market threatens to take a significant chunk out of Manitoba’s hog sector, as the leading province in weanling exports to the U.S. The Manitoba Pork Council estimates that the province produces three million weanlings each year, compared to 4.8 million finished animals.
The continuing COVID-19 pandemic has created more questions than answers for future of the market.
Producers are accustomed to averaging market lows and highs throughout the year, Dickson noted and, although current markets are less than ideal, he says the sector is more concerned about whether the current situation spells a trend for 2020.
It will also largely depend on when social distancing restrictions in the U.S. lift, reopening the hospitality sector, both Dickson and Goodhue noted.
“The demand for the meat protein is there. It’s the labour situation that’s the biggest impediment right now,” Goodhue said. “Moving forward, depending on producers’ capacity to weather the storm, that’s going to be the biggest issue.”
“Hopefully this thing will turn around by summertime and they will get back to more normal pricing structures,” Dickson said. “The challenge we have is, the way these barns are structured, there’s only so much capacity in the system. They can’t hold these baby pigs for very long. The only way to delay things is to take them from ISO weans, when they weigh about 12 pounds, keep them in nursery barns until they weigh 30-35 pounds and then try to sell them later on.”
That option is less than attractive however, given the additional investment in labour and cost, he added.