Concerns grow about prolonged pork market downturn
Tuesday, August 26, 2008
by GEOFF DALE
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“Swings in this industry are not unusual,” says Ontario Pork director of communications and consumer marketing Keith Robbins. “But the duration of this cycle is impacting producers.
“Normally there is a considerable amount of ups and downs but the bad times are balanced out with the good times. An extended long period that goes beyond an anticipated return of better prices translates into your equity being eroded, which means you’re not likely to last until a rebound.”
John Van Dorp, a hog producer and president of the Oxford County Federation of Agriculture, agrees many are wondering out loud just how much longer they can remain in the business.
“Everybody is anticipating an end to this cycle, so some are in the process of re-mortgaging while others with even deeper pockets just plan to stay in,” he says. “But there are many of those who can’t do either.
“Those financially strapped were probably thinking about getting out anyway and these prices are just helping them to make that decision. On the other hand, there are producers out there already expanding their farms in anticipation of the end of this cycle.”
In recent weeks prices have been hovering in the $1.65-$1.70 per kilogram dressed range – considered by some to be reasonable. The average contract closing price is averaging around $145 per 100 kilograms.
Robbins says while the price cycle has historically taken place over a four year period – dipping from peaks to valley – this has changed largely due to outside factors like the increased value of the Canadian dollar and higher costs for corn and feed prices.
“As this feed prices increase, so does the cost of raising a pig,” he adds. “Meanwhile U.S. agricultural policies are encouraging the production of more fuels through ethanol. As a result corn is enjoying a higher value on the feed side of the business.”
Many producers looking for a way to exit the industry found a route in April when the federal government announced a $50-million cull breeding swine program funded by Agriculture and Agri-Food Canada and delivered by the Canadian Pork Council.
With qualified producers receiving $225 per breeding swine and reimbursement for slaughter and carcass disposal costs, the program focused on helping the industry restructure by facilitating the reduction of Canada’s swine breeding herd (sows, boars and pregnant gilts) by about 10 per cent.
With a reduction of between 46,000-48,000 sows from their herds, it's clear Ontario producers are, to date, the largest users of the program.
As for sticking with the program Van Dorp says it’s not a matter of whether producers want to stay in or opt in.
“This is a three year program,” he points out. “They have to stick with it or else they will be giving the money back to the government.
“What’s the problem with the industry? This is all about free trade and world competition over prices – issues we have never really had to deal with in such a fashion.” BF
Important Note: © Copyright AgMedia Inc. Copyright for this article like all material on this website belongs to AgMedia Inc. Links to this site are welcome but this material may not be reproduced in whole or in part in any other publication or on any website.