For many of Alberta’s long-suffering hog producers, a short-lived bout of profitability may actually be the final straw.
“What could have been a beautiful year for the pork industry is starting to turn into a crisis,” said Darcy Fitzgerald, executive director of Alberta Pork.
“Until we get further into the fall, we won’t really know how bad it’s going to be.”
After five years of prices that didn’t cover costs — sometimes far, far below break-even levels — producers saw prices dramatically improve earlier this year.
“Right now, the pricing that producers are receiving is very good. That’s the silver lining,” said Brent Bushell, general manager of the Western Hog Exchange. “If we have a scenario this fall where prices do stay higher than they typically would normally, I think we can stickhandle through.”
But that’s a big if.
First, prices typically decline once the summer barbecue season ends. And second, high feed prices — fuelled initially by strong demand and now by drought — aren’t likely to come down any time soon.
“I think this is going to be a really telling year — 2021 is really going to be the year where we actually see if the western Canadian hog industry has a future or not,” said Bushell.
Feed costs have been high for a while and the situation isn’t getting better, noted Fitzgerald.
“Producers are feeling the high costs right now, and they have been since August of last year,” he said.” It’s been steadily going up. It’s already hard to find certain grains and the feeds they want to access, so they’re all pretty concerned about what the feed costs will look like this fall once the harvest is completely off.”
The drop in hog pricing usually happens toward the end of September and lasts for about six months. If that happens again this year, the whole western Canadian pork industry will be facing a “perfect storm,” said Fitzgerald.
“In the fall, prices tend to come down, so if we’re facing high costs and falling prices, we really truly will be in trouble.”
A shrinking sector
Even if a producer decided to hang on in hopes of better days ahead, the decision may be out of their hands if they need to put capital into their operation.
“Based on what the last five or six years have delivered for a profit model, I can’t go to a bank or find a lender that will lend me money to build or repair a barn,” said Bushell.
And many pork producers simply don’t see the benefit of investing in an industry that isn’t making them any money — and that’s already affected the amount of productive capacity in the province.
“We are losing barn footprint. We’ve been losing it for a long time,” said Bushell.
The hoped-for solution is a new pricing model based on the value of the pork from a pig — a pricing structure that Quebec adopted in 2019 and has made the hog sector in that province profitable.
“We have to get into a pricing system where the processors and the producers both share in both the profits and the losses throughout an average year,” said Bushell. “That will create an incentive and spur producers to either maintain their existing barns or expand their barns.”
But that has yet to happen, despite requests from the western Canadian pork industry to Canada’s biggest packers.
“It’s a combination of the producer and the packer working together so that they’re sharing the value of the pig,” said Fitzgerald.
“If the packer and the producer could sit down together and make sure they can both stay in business, I think we’d be in a much better place.”
In the meantime, Fitzgerald hopes pork producers will see the same kind of government support as the cattle sector has been promised.
“We saw some pretty fast action on the part of the government to help out the cattle industry. That would be good for us too,” he said, adding Alberta Pork has been in conversation with government about this.
“We recognize that the immediate hurt was happening with grazing animals, but I think the government knows we start to see our hurt once we get into the fall and we’re in competition for feed.”
And while AgriStability may help some producers down the line, for others, that help may come too late.
“As much as we can say we have AgriStability, the hurt is happening when it’s happening,” said Fitzgerald. “It’s not like they can just weather it for six months and then look for a cheque in the future. We lose people when we can’t immediately address it.”
Some smaller independent producers have already bumped up their exit dates and plan to leave the industry, he said.
“I don’t want to preach doom and gloom that there won’t be a hog industry. There may be a hog industry, but it may look completely different,” said Bushell.
“People in the world are going to continue to eat pork. I think the challenge is going to be whether that includes independent producers at all.”
That will lead to increased integration, with fewer, larger operations, and “consumers will get what they never wanted,” said Fitzgerald.
“We talk about local and wanting to buy from a farmer, but our pocketbook doesn’t say that,” he said. “Our pocketbook says they’d rather have one big monster corporation supply us with whatever it is we need. Slowly that’s where we’re headed, where the small independent farm disappears because they can’t make it.”
That’s already starting to happen in Western Canada, he added.
“It’s really scary if you think about it,” said Fitzgerald. “This is one of the lowest-cost places to raise pigs in the world, so if you can’t afford to raise them here, what’s going on in the world? Something’s broken if the place that’s one of the most efficient in the world can’t do it.”