A 'perfect rainbow' for the pork industry

Thursday, April 3, 2014

After years of poor prices, good times may be returning and pork producers may be heading for their best year in decades

by CLARE SCHLEGEL

Unbelievable, simply unbelievable. As I sit and write this column, in early March, the current market hog price is around $2.05 and cull sow prices are approaching 90 cents a pound for jumbos. And, at current futures prices with the Canadian dollar at 90 cents, summer prices will be around $2.45 a kilogram at 100 index. I am told 25-kilogram weaner prices are in the $2.25-a-pound range. If this situation continues, producers will have their best financial year perhaps since the 1970s – perhaps even the best year ever.

After years of poor prices, after years of having neighbours wonder why anyone in their right mind would continue to raise pigs, this situation seems almost impossible. Who can ever forget the horrendous years from 2005 to 2010 or all the personal carnage (farmers losing their farms, losing their marriages, and even some their lives).

First, we had the circovirus days in 2004-06, where our hogs became sick without a cure.

Then the Canadian dollar rose from a low of 67 cents US to $1.05. Instead of getting $160 Canadian for a market hog when U.S. farmers were receiving US$100, we now received C$100.

If that was not enough, feed costs doubled in a short period of time. While, historically, it cost around $50 to finish a market hog, it was now $100. Also, at that time a vaccine had been developed which solved the circovirus disease issue – good for our hogs, but terrible for price as it resulted in seven per cent more hogs.

Producers across North America were forced out of business, with approximately 50 per cent of the decrease happening in Canada in spite of the fact that the U.S. hog business is six times larger than Canada.

So where are we now? Let's look at some of the happenings:

1. The Canadian dollar has weakened. It's nowhere close to the previous 67 cents, but back to around 90 cents. So today, our price is $2.14 a kilogram, where at par it would be $1.94 – around $22 per pig higher value.
2. Feed costs, while still high, are moderating. They have dropped around 25 per cent from their peak of about $400 a tonne average here in Ontario to around $300 (historic norms would be around $200).
3. Hog supply is lower after years of no expansion, either in Canada or the United States. And the hog supply is now threatened, at least through the summer months, by the PED disease, with some experts thinking by three to five per cent shrinkage.
4. Volumes are low and prices are high for other competing protein supplies (beef and chicken).
5. So is it possible that, after the "perfect storm" of recent years, we will have at least a reasonable period of good times, which we could call our "perfect rainbow"?

Some of us are doubters since, at various times over the previous few years, better times looked to be returning and never did. Perhaps we can move from being second class citizens in our farming communities to again being at the "top of the podium."

Back in the early 2000s, when I first started visiting with the minister of agriculture in Ottawa as your representative on the Canadian Pork Council, the hog industry was considered the star performer. Maybe, just maybe, we can return to that level. BP

Clare Schlegel is a past-chair of Ontario Pork and past-president of the Canadian Pork Council. He has traveled around the world on behalf of the industry and worked closely with Canadian government.