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Hog Sector Needs Support

The onslaught of negative consumer perceptions around H1N1 Influenza A has added to the Canadian pork industry’s situation.

High feed costs, a strong Canadian dollar, low hog prices, the economic crisis reducing access to credit, and Country of Origin Labelling have, over the years, undermined Canadian pork producers. The onslaught of negative consumer perceptions around H1N1 Influenza A has added to the Canadian pork industry’s situation. While the Government of Canada has supported this industry, this is an extraordinary situation that needs immediate assistance.

Canada cannot afford to risk losing this industry. The pork sector’s impact on the economy is significant and helping this sector now will allow for greater returns in the future. The Canadian pork sector generates approximately 70,000 jobs, but these jobs are now at risk. The industry is also integral to Canada’s exports as nearly two out of three hogs born in Canada exported as either live hogs or pork products. In 2008, exports of live hogs and pork products alone generated 42,000 jobs, $7.7 billion in economic activity and $2.1 billion in wages and salaries.

The last three years have seen an unrelenting wave of losses for farmers. Canadian hog producers have been losing money on every hog they ship since the fall of 2006, according to the Canadian Pork Council. In 2007, feed costs increased at the same time as the Canadian dollar increased, which affected hog producers negatively. In the fall of 2008, the United States implemented its Country of Origin Labelling (COOL) legislation. Canadian producers have seen a significant drop in the export of both beef and hogs to the U. S. and charge that COOL is to blame. Since January 2009, exports of live hogs are down 40 per cent compared to the same period last year. On an annual basis, this represents a loss of $250 million worth of exports.

Hog prices tumbled with the news of H1N1 Influenza A virus – unfortunately named “swine flu” in the early days and still reported as such, and many export markets closed their borders. The likelihood of profitability for hog producers in 2009 has evaporated due to negative consumer perceptions around H1N1 Influenza that has softened consumer demand and caused market disruptions.

Although some hog farmers can make some use of programs like AgriStability and AgriInvest as core business risk management programs, there are issues with such programs, according to the Canadian Pork Council. The eroded reference margins provide no support for producers. The situation is even worse for farms that had production losses, for farms reaching program payment caps, and for diversified farms.

The Cull Breeding Swine Program and emergency advances under the Advance Payments Program, two new assistance tools announced by the federal government in February 2008, were welcomed by producers. The emergency advances are shortterm loans, however, and full repayment will be required by September 2010. The Canadian Federation of Agriculture was disappointed that the government’s

$50-million Slaughter Improvement Program was not a grant as previously announced, but a loan that cannot be leveraged. Recently, fearing trade challenges, the federal government rejected a hog industry plea for a per-head payment on 2008 marketings which could have translated to approximately $900 million to the pork industry.

Trade in live hog exports has declined significantly and producers are currently most concerned about immediate shortterm farm survival, which has led the industry to seek immediate financial assistance. Hog producers globally are facing difficult situations and many are asking their governments for help. CFA continues to meet and discuss with its members including CPC and PEIFA on how it can continue to support their efforts in pushing for immediate financial support for the hog industry. Now more than ever, it is important for the federal government to realize the importance of this sector’s economic impact and the real challenges it is facing.

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