Winnipeg Free Press - PRINT EDITION

Long-suffering hog producers see profits ahead

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MANITOBA hog farmers are no longer looking for some light at the end of the tunnel -- they're about to start basking in it.

Thanks to a combination of rising hog prices and falling feed costs, many of the province's slaughter-hog producers should start turning a profit in 2014 after four or five years of most industry players either breaking even or losing money, an industry official said this week.

"If nothing goes wrong... 2014 should be a good year for the hog industry," Andrew Dickson, general manager of the Manitoba Pork Council, said.

Dickson said with hog prices up $10 to $12 per hog and feed costs down $20 to $30 per animal, MPC officials are hoping producers can make a profit of $18 or $19 per pig in 2014. That's a whole lot better than the $20 to $30 loss per pig most were absorbing in 2013, he added.

'I'd say the engine is out of the tunnel, but we've got a long way to go before the rest of the train is out. You've got all of that debt you're dragging behind you'

A spokesman for a local Hutterite colony that has been raising slaughter hogs for the past 17 years is also upbeat about the prospects for at least the first half of next year.

"Looking forward, it looks as good as I've seen it," said James Hofer, barn manager for the Starlite Colony near Starbuck.

Hofer said the price for slaughter hogs on the futures market is the highest he's seen, for this time of year, since Starlite entered the business. Earlier this week, it was $180 for pigs that will be delivered to market within the next 30 weeks, he said, and if it costs about $160 to raise that pig, that's a $20 profit.

But how long this rosier picture lasts is probably anybody's guess at this point.

Dickson said feed costs are down because grain and corn prices are down. In the case of corn, futures prices are off by about 40 per cent from a year ago, thanks in part to a bumper crop this year in Canada and the United States and reports the U.S. government might reduce the required amount of ethanol in gasoline. Corn is used to produce ethanol.

And if it's another good crop in 2014, prices will likely remain soft. But if it's a poor crop, that will likely drive grain and feed prices back up again, reducing producer's profit margins.

But Dickson said what happens with feed prices over the longer term isn't the only thing farmers have to worry about these days.

After years of losing money, a lot of producers are now saddled with heavy debt loads and aging barns and equipment that eventually must be replaced.

So getting back to the analogy about the light at the end of the tunnel, "I'd say the engine is out of the tunnel, but we've got a long way to go before the rest of the train is out," Dickson said. "You've got all of that debt you're dragging behind you."

As a rule, hog barns need to be replaced every 25 to 30 years, Dickson said. And while the average age of hog barns in Manitoba is now about 16 years old, quite a few of them are closer to 20 years of age, he added.

"So that's the big challenge we've got right now. And (replacement) costs are probably 25 per cent higher than they were seven or eight years ago."

Hofer said the Starlite Colony was able to weather the recent storm better than some producers because it's a family-owned and family-run operation, and it has its own feed mill and soymeal mill. All of those things have enabled it to reduce its production costs and still turn a profit.

"It has allowed us to stay competitive and still be in the game," he added.

murray.mcneill@freepress.mb.ca

Republished from the Winnipeg Free Press print edition December 14, 2013 B6

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