Strategic blueprint foresees slimmed-down hog industry

Hey there, time traveller!
This article was published 10/7/2009 (4295 days ago), so information in it may no longer be current.

Opinion

The Strategic Transition Plan released by the Canadian Pork Council last week is a radical departure from previous efforts to engage the rest of Canadians in sharing the pork industry's ongoing financial pain.

"It is understood that it is not in Canada's interest to simply prop up the industry in an attempt to maintain the status quo," the document says in its introduction.

The multi-faceted strategic plan that follows is remarkable in its acknowledgment that it needs to reassess the assumptions that led to the worst crisis the industry has seen in 60 years and its acceptance of its own responsibility for ensuring it doesn't happen again.

Up until recently, calls for public help from the hog industry have been all about tiding producers over until the rest of the world smartened up. The new plan is about transforming the sector in line with market realities.

"It will be based on tough assumptions about key operating variables. For example we will assume that the U.S.-Canada exchange rates will be closer to parity than to their historic lows; feed grains will remain stubbornly high and live hog prices will be constantly under pressure. The strategy will therefore be focused on succeeding in a difficult business environment."

That is precisely opposite to the assumptions that drove the industry's rapid growth over the past two decades.

This is not to suggest the industry has done everything wrong. On the contrary, Canada's exports of pork since the mid-1990s have increasingly diversified away from its previous focus on the domestic and American markets. However, a significant proportion of the pigs produced in this country, chiefly from Manitoba, were exported as livestock to U.S. feeders -- a phenomenon that made the industry vulnerable to market disruptions.

Productivity gains were notable as well. Producers increased sow productivity; pig production grew by 79 per cent with only a 23 per cent increase in the sow herd. But that productivity growth couldn't be sustained. A disease called circovirus began surfacing in barns in 2005 and spread rapidly through eastern Canadian operations, despite the industry's best efforts at biosecurity. Affected barns suffered high rates of mortality and poor performance.

The loonie soared, the U.S. implemented country-of-origin labelling legislation, and ethanol's huge appetite for corn drove up feed prices. Then hysteria about H1N1 affected pork consumption.

As a result, producers are losing $40 per pig sold and they are, quite simply, losing their shirts -- despite relatively large sums of money from government support programs designed to offset short-term profitability downturns.

The council divides those left in the sector into three categories: producers who want out without losing everything, producers who are hanging on simply because they entered this downturn without a lot of debt, and those who would like to take advantage of this opportunity to expand.

But there is still the matter of who will pay the cost of digging out and who will be left to reap the benefits of the newly transformed industry once the bleeding stops. The council's plan calls on taxpayers -- no surprise there -- on the basis that doing nothing could have consequences that reach far beyond the hog barn. "It would be damaging to Canada's interests in terms of its economic prospects and rural viability if the productive capacity of the Canadian hog industry was to implode. It could recede to a level that threatens too many direct production and processing jobs, export sales and the exploitation of new technology development opportunities."

The council wants money to pay people to leave, loans for those who want to stay in until prices recover, and extensions on existing loans and advances.

It's just a hunch, but it's highly likely this transition will all but eliminate the last of the independent producers, leaving the sector in the hands of producers owned by the packers or with direct links to them.

In return, the council is promising to deliver Canadians a "right-sized" industry by 2014 that produces fewer hogs and focuses first on meeting domestic needs, with exports second. It is proposing a lower dependence on the U.S. market for both live hogs and pork.

It is also promising to pay more than lip service to the competitiveness issues, as well as to disease, environmental and welfare concerns. It says it is ready to act on the impact that liquid manure storage, and methane and nitrous oxide from soil application of liquid manure, are having on global warming. "The technology exists for the industry to harness GHGs and produce renewable electricity and heat energy. We will help facilitate the investment in these technologies."

It all sounds good on paper. But will governments buy in?

Laura Rance is editor of the Manitoba Co-operator. She can be reached at 792-4382 or by email:

laura@fbcpublishing.com