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'Dismal situation' hits hard here

No relief expected until next summer

Hey there, time traveller!
This article was published 13/9/2012 (1805 days ago), so information in it may no longer be current.

AN unprecedented convergence of negative factors is cutting a swath of financial losses throughout the hog industry in Manitoba.

And there's no relief in sight until next summer at the earliest, and only then because so many producers will have succumbed to losses and the lack of supply ought to eventually bring prices up.

Puratone Corp. filed for bankruptcy protection in a Manitoba court this week, putting the future of Manitoba's third-largest producer in jeopardy. The filing came the same week Big Sky Farms, Saskatchewan's largest hog producer and the second-largest in the country, was placed into receivership after having gone through its own restructuring three years ago.

While many of the factors are affecting the entire North American industry, Manitoba is particularly hard-hit because of the large percentage of Canada's total hog production based in this province -- close to 30 per cent.

Andrew Dickson, general manager of Manitoba Pork, says it costs about $170 to raise a hog to market size, but prices are only about $150 and are still coming down.

"You have to keep feeding the animals," Dickson said. "You can't turn the lights off and turn them back on when the prices are better."

And industry conditions are going to get worse before they get better.

That's partly because struggling producers who are exiting the market are selling off breeding sows, pushing more animals into the market and driving down prices even more.

"Right now, the sector is working itself out and it is a dismal situation," said Derek Brewin, an associate professor of agribusiness and agricultural economics at the University of Manitoba. "Those companies that are selling lots of hogs don't have to sell too many for it to be devastating."

Brewin said the economic debacle for hog producers is unfortunately not an uncommon scenario when input prices go up. Herds are culled, and with the decline in supply, prices do eventually rise.

"But there have been unprecedented losses in Manitoba," Brewin said, "Grain prices have been on an upward trend since 2006."

Karl Kynoch, a hog producer and chairman of Manitoba Pork, said there are disheartening stories throughout the industry.

"I spoke to someone last week who is 65 and has been raising hogs all his life and he's selling off his herd and now has to go out and get a job driving a truck," said Kynoch.

He said the Manitoba industry is poised to lose about $150 million over the next six to eight months and discussions are taking place with the federal and provincial governments about coming up with solutions.

"But it is very complex because any financial assistance to producers might be met with countervailing action by the U.S.," he said.

Manitoba exports about 43 per cent of its hogs at some point during their finishing, most to the United States.

The industry plays a major role in the provincial economy, generating close to $1 billion in cash receipts for producers. Kynoch said every 26 breeding sows are responsible for one direct or indirect job in the province.

Puratone has about 28,000 breeding sows and if it were to shut down, it could place about 1,000 jobs in the province at risk.

Fortunately, the cloud of uncertainty hanging over Puratone and Saskatchewan's Big Sky are not expected to have any impact on production levels at Manitoba's largest hog-processing facility -- the Maple Leaf Foods Inc. plant in Brandon -- or at HyLife Ltd. in Neepawa.

Maple Leaf spokesman David Bauer said each company supplies less than 10 per cent of the 85,000 hogs the Brandon plant processes each week, and Puratone was still shipping hogs to the facility as of Thursday.

He said if Puratone shipments should cease, the plant's other suppliers, including Maple Leaf's own hog barns, should be able to make up the shortfall.

"We do have contingency plans in place... We have every intention of remaining at full capacity at this time."

Bauer also expressed confidence Canada's hog production industry can weather the storm.

"The industry has been through challenging times before, and it will make it through this period."

That sentiment was echoed by Don Janzen, president of HyLife.

"HyLife is also challenged," he said, "but, together with our financial partners, (we) remain confident and optimistic with regard to the future of our industry."

The hard numbers on a Manitoba agricultural heavyweight

HERE'S how Manitoba's hog industry shapes up, by the numbers:

  2004 2005 2006 2007 2008 2009 2010 2011
Pig farms 1,380 1,290 1,180 1,100 910 830 760 735
Pigs on farms (millions) 2.89 2.94 2.98 2.97 2.72 2.53 2.61 2.62
Pig production (millions) 8.30 8.97 9.10 9.45 9.15 8.85 8.00 8.05
Avge price (per 100 kg) $184 $166 $148 $141 $139 $133 $152 $172
Hogs slaughtered in Man. (millions) 4.36 4.42 4.27 4.44 4.81 5.24 5.32 5.37
Exported (under 50 kg) (millions) 3.29 3.63 4.07 4.48 4.38 3.48 3.04 3.16
*Exported (over 50 kg) (000s) 1,250.6 1,284.8 1,247.3 1,513.6 1,117.7 481.8 451.8 428.

* less Sask. hogs exported as Manitoba in 2005-07, but not in 2008-11


-- source: Agriculture and Agri-Food Canada, Manitoba, Agriculture, Food and Rural Initiatives, Manitoba Bureau of Statistics, Manitoba Pork, Statistics Canada, author Janet Honey's estimates

Read more by Martin Cash and Murray McNeill.


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Updated on Friday, September 14, 2012 at 9:02 AM CDT: corrects table

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