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Winnipeg Free Press - PRINT EDITION
Producers stare down dismal bottom line
Phil Hossack / Winnipeg Free Press Niverville-area hog producer Jason Falk says his business at this point revolves around surviving the nine months until prices start increasing.
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JASON FALK runs a hog operation near Niverville with about 13,000 finishing pigs.
But with prices declining and input costs skyrocketing, the father of five asks himself the same question every day -- "How much longer can I last?"
Hog producers across the country are facing steeply rising feed prices and a drop in market prices.
"It is a very challenging situation," said Falk, who doesn't grow profitable grain crops to prop up his hog losses. "It's not as simple as closing the doors. These barns are specially designed for animals. We can't just sell the pigs and turn the buildings into commercial space."
He said downsizing has crossed his mind, but he hasn't made any firm decisions about the future.
"It's like watching a train wreck," he said. "There is nothing you can do about it. We have pigs in the barn and we have to grow them out. It's not we can like sell today and clear out the inventory."
Falk said it's all about surviving for another nine months when prices should get stronger.
He may be able to make it until then -- but others are not so lucky.
Leonard Esau of Steinbach is cutting his losses and selling off the herd.
"I've been producing hogs for 30 years and I made money for 25 of them," he said. "But the last five years, things have just gone down hill. Even if someone gave me pigs, I still could not make money to cover my costs."
Esau is in the process of selling off his 4,500 finishing hogs.
He sold his sows earlier this year.
The industry that grew rapidly last decade in Manitoba -- and topped off at 9.4 million hogs produced in 2007 -- has been besieged by a number of negative economic and environmental issues.
Last year, the number of hogs was down to eight million.
"We're like the lepers in the Bible," Esau said. "No one wants to have anything to do with us now."
The current round of economic problems began in June when grain prices spiked. Then pig prices started to fall because of a glut in supply as producers dumped their stock onto the market.
The October-November pig prices are about $120 a head on the futures market. Esau said his costs are close to $180 a head, and he notes some other frightening figures for a producer.
"When I started 30 years ago, we could get about 72 cents per pound," he said. "Now, the price is about 62 cents per pound. We used to buy corn and barley at $100 per tonne. Now barley is $275-plus and corn is $300-plus."
With credit lines tapped out and federal government stabilization programs ineffective after several years of losses, many producers face a financial crisis at least until prices are expected to firm up next summer. (Currently hog-futures prices for next June are at $170.)
Esau can't wait until then. He financed a major renovation of his barns a few years ago and, with poor economics over the last few years, there's no credit room to weather this storm.
Producers such as Falk and Esau finish their pigs to market size. Manitoba is also a hotbed for weanling producers who export the baby pigs to be finished in barns in Iowa and elsewhere in the U.S.
Lorne Voth is a pig broker who helps sell the two million-plus weanlings that are exported annually from Manitoba to the U.S.
He said those weanling producers started exiting the market in April because they were the first to feel the effects of pricing.
Weanling producers need to get about $42 per head to make money -- and the current price is around $8 a head.
"Some of those producers are moving 1,000 per week, so they are burning through $30,000 to $40,000 of cash every week," Voth said. "It's brutal."
Republished from the Winnipeg Free Press print edition September 18, 2012 A3
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