The roller-coaster ride for hog producers has once again taken a steep downward plunge.
“Prices really started to slide a couple of months ago,” said Marcel Rupert, who has an 800-sow farrow-to-finish operation north of Drumheller.
And they may have a ways to go. The price of feeder pigs is a leading indicator in the hog business and those prices have dropped by nearly three-quarters this year, according to the latest U.S. Department of Agriculture data.
“Prices tend to drop in late summer because you’re looking at finishing those pigs out in December and January when there’s not a price for the slaughter hogs,” said Ron Gietz, pork specialist with Alberta Agriculture. “So there is a definite seasonal pattern to it but combined with this, we’ve been having a downward trend on the lean hog futures, so the overall market has been dropping as well.”
The American swine herd has rebounded from the porcine epidemic diarrhea (PED) outbreak, which has killed an estimated eight million pigs since May 2013. Cheaper feed prices — corn prices are down 60 per cent since 2012, according to USDA data — has also driven herd expansion.
But it’s not just a bigger herd that’s behind the latest price drop.
“The biggest problem in all of North America is that all the slaughter plants want heavier and heavier pigs,” said Rupert, who is also an Alberta Pork director. “Every kilogram more on the pig is more meat on the market.”
Rupert said he is fortunate because his pigs, which are raised without antibiotics in a loose-housing barn he built nearly 20 years ago, go to a small processing plant in B.C. and the meat is sold as a specialty product.
“We ship a way lighter pig than the other guys, around 84 kilograms,” he said. “The other guys are all sitting around 100 kilograms.”
Heavier hogs are more profitable for slaughter plants because it improves efficiency, but bad for animals, producers, and consumers, he said.
“It goes against everything,” said Rupert. “You get fatter pigs so the quality of meat is going down. The room for the pigs in the barn is not enough so you get less space in the barn and it’s more cruel to the pigs. It’s not as good for transport because heavier pigs don’t transport as well. And then the biggest problem is that the pig price goes down.”
Hog producers in Canada, including Rupert, are still recovering from years of poor prices, which only rebounded when the PED outbreak in the U.S. drove prices sharply higher.
“2014 was probably the best year ever for hog production because of porcine epidemic diarrhea,” said Gietz. “If you didn’t get that virus, it was golden. 2015 was a pretty good year, too. In 2016, we started out OK. It was OK for the first half of the year, let’s put it that way. Now it’s not looking great at this point.”
The drop in the loonie continues to shield Canadian producers and they’re hoping it stays low, said Rupert.
“That lets us compete against the U.S.,” he said. “But if the Canadian dollar comes up again, over 90 cents, then the whole competition is gone and we can’t compete.
“In the U.S., they can produce quite a bit cheaper because there’s not as much distance as here. They’re closer to the slaughter plant, closer to the feed source. It’s quite an advantage for them.”
There are also a couple of new slaughter plants being built in the U.S. and that should help producers on both sides of the border, he added.
“That will help prices,” said Rupert. “One of the problems right now is that there are not enough slaughter plants in the States. They expanded (the pig herd) in the States and there’s not enough space for slaughter. That’s a big thing right now, which pushes the price down.”
Unlike our neighbours to the south, the Canadian swine herd size is flatlining, and not as a result of PEDv, said Gietz.
“It’s just more indication that there’s a lot of caution out there,” he said. “It’s very expensive to expand. It costs millions of dollars to expand a unit or replace a unit. So the industry is very cautious, and rightfully so.”
– With files from Reuters