Feed grain prices in Western Canada are not wholly dependent on the supply and demand in Western Canada.
The dog days of summer are upon us, and with the last remnants of the small-town fairs still in the air, we’re left with fond memories of the circus clowns and second-rate magicians. Disappearing people, never-ending hankies, magic wands that go limp, and sleight-of-hand tricks are all old favourites that seem to dazzle a new crowd every year. The magician is a staple of our summer diet that we just can’t seem to do without.
Apparently that circus hadn’t quite left town when the latest study from the George Morris Centre (GMC) was released. In a wonderfully inventive slam on federal government policy, they have attempted to blame the federal government for the pork industry’s inability to compete in a world market. The latest hog support program is described as “disingenuous” and at odds with the federal support of the ethanol industry. Basically, they lay the blame for falling profit margins on the high feed costs created by a government-mandated biofuel industry. All of this would make sense except for some small overlooked details.
One, the hog industry and the ethanol industry are not necessarily competing for the same acres in Canada. No. 2, feed grain prices in Western Canada are not wholly dependent on the supply and demand in Western Canada.
While the centre’s discussion paper entitled “Opening the Throttle and Applying the Brakes” goes on at length about the cost of feed wheat being driven up in Western Canada, it is conspicuously quiet about how much of that feed wheat was ever fed to hogs.
Buried in the details of the appendix is one chart that describes a typical finishing ration as consisting of 13.3 kilograms (kg) of wheat, 95.5 kg of barley, and 16.4 kg of soy-meal. Oddly enough for a report that was co-authored by an ex-Maple Leaf executive, they make no mention of the vertically integrated contract barns that have consistently continued to use imported American corn.
While they acknowledge that the biofuel industry is a predominant user of wheat and corn, they fail to mention the differences in preferred specifications, a detail witnessed by the creation of a new class of wheat specifically for ethanol production as implemented by the CWB. Barley, the largest single component of the ration in their own study, is not currently being used in significant volumes by any of the ethanol plants currently operating in Western Canada.
In the mid-1980s, I was unhappy with the barley prices at the elevator and attempted to peddle it locally for $4 per bushel. I was unsuccessful because after considering the relative feed values, it was cheaper for my neighbours with livestock to purchase subsidized American corn. The GMC study claims that local feed values have shifted from an American corn price less freight to one plus freight.
While that may be true of posted elevator prices, as you can see the net farm gate price has always reflected a cost plus freight because that neighbour had to pay to have the corn trucked in. Ultimately, it was that cost plus freight that determined the relative worth of my barley. In short, local supply and demand have been overridden by the supply of relatively cheap corn from south of the border. At the end of the day, it is not Canadian federal policy that is influencing our feed prices, but American.
This of course, all assumes that the demand of the biofuel industry is driving our prices higher. The availability of dried distillers grains and dried distillers grains with solvents (DDG/DDGS) are currently creating downward pressure on barley markets. With contract barns including up to 20 per cent DDG/DDGS, the new competitor for barley is a combination of subsidized American corn blended with DDG/DDGS plus freight. The increased crush for canola being utilized in the biodiesel market is also strangely ignored in this report. The byproduct of this process is a meal which can also be used to offset the soymeal usage by approximately 20 per cent. How is this product priced? Oddly enough it is competitive with American soymeal.
Hogs are currently said to be losing about $40/head. That same hog will eat about 12 bushels of barley in its lifetime. That 12 bushels at $3.40 a bushel is $40.80. If the George Morris Centre believes we can solve the problems that have been created in the hog market in the last 10 years with cheaper feed, they need to supply us with free barley to eliminate the current losses. It was the executives of meat-processing companies who convinced governments to abandon single desk selling agencies and ramp up pork production for markets that have never materialized. It would seem that the biggest mistake the federal government made was to listen them.
“Step right up, pick your shell and see which one contains the pea.”
You may win a stuffed toy or a piggy bank. Every veteran circus performer will tell you that true sleight of hand requires a diversion, a position frequented by the “lovely assistant” wearing too much makeup and last year’s lace. If the George Morris Centre is intent on pulling the wool over our eyes so we’ll forget who created this mess, perhaps they should be investing more heavily in bikini-clad models, and less on retired corporate executives. Les McEwan farms near Altamont, Man.