A pork plan that works

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( DALE CUMMINGS / WINNIPEG FREE PRESS )

Enlarge Image

( DALE CUMMINGS / WINNIPEG FREE PRESS )

No government in Canada is in a good financial position to be risking multimillion-dollar rescue packages to a pork industry some say has some way to go to adjust to the global realities of supply, demand and input costs. Manitoba's industry is suffering from the dramatically rising feed prices that have threatened hog producers across Canada. They are asking governments, again, to step up with a rescue plan.

The federal government in the past has extended loan guarantees so the banks would continue to lend money during other trying times for producers. It put up $75 million, for example, three years ago to get some producers out of pig production, hoping to cut supply that was contributing to low prices. Some left, but the effect on pig production was not substantial.

In the last five years, pork producers have weathered repeated shocks to their costs and revenues. Those that export to the United States, Manitoba's largest pork customer, were hit in 2009 by the country-of-origin labelling law for non-American meats that caused a massive shift away from importing Canadian livestock and meat products. The rising dollar has put pressure on export sales, and rising feed costs -- especially of corn -- hit producers in 2009.

Corn prices are at record highs now, and that has rocked producers, such as Puratone in Niverville, which has sought bankruptcy protection. Other independents are said to be teetering, looking for government assistance of either bridge financing or loan guarantees to get them through the next nine months -- hoping next year the corn will grow.

Manitoba's pork industry is huge, the largest in Canada in terms of exports and production. It was the largest form of cash receipts in the agriculture sector after canola in 2011. That was a good year, with relatively good prices, and it continued until about June this year, when the effects of the drought that hit the United States very hard meant feed costs -- between half and two-thirds the cost of raising a pig -- spiked.

But for a bailout plan to make sense, the Selinger government needs to see how, and how long, producers here will get back into the black. Manitoba's pork production is better integrated than in other provinces largely because of powerhouses such as High Life and Maple Leaf, which slaughter and process their pork into table meats. This means those operations can pass on costs directly to the consumers, who see slight increases to the prices on the grocers' shelves.

There is the belief that more integration is necessary, that perhaps co-ops would be better protection for producers. It is said that all of the past market bumps have made Canada, and Manitoba especially, very efficient in pork production operations.

The industry now says this is a short-term rescue, that if the feed costs go down -- the drought can't last, can it? -- that, as with 2011 when producers made money, the industry will return to profit. The Manitoba Pork Council, in fact, says generally the finances of producers are in good shape and are making good payback to loan programs of the past.

Indeed, despite the alarmist tenor Manitobans have heard since Puratone made its move, the scare seems premature. The Manitoba pork industry has not yet put its proposal before the federal or provincial governments. It has been seeking meetings with provincial officials, including the agriculture minister, Ron Kostyshyn. The question for the industry is evident -- what is the projection, the return-to-black plan that assures a financing package or loans that are guaranteed by the treasury repaid?

This shakeup, as with others, may very well see some producers fold. It is unlikely, this year, to see the industry kill off so many sows that it can't rebound on production when prices rise. The Selinger government's job is to assess carefully the industry's need and, if one is warranted, craft a short-term rescue plan to help keep good, viable businesses afloat.

Republished from the Winnipeg Free Press print edition September 19, 2012 A6