Hog farming has been a tough slog for years, but matters have improved slightly since the beginning of the pandemic, says the executive director of Alberta Pork.
Unfortunately, soaring input costs are running in parallel with higher hog prices, and the industry remains in decline, said Darcy Fitzgerald.
There are now an estimated 300 commercial hog farms in Alberta, down from around 500 a decade ago.
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“We’ve seen a trend towards the independent producer becoming a contract finisher for the integrators or larger farms,” said Fitzgerald. “But we have seen some pricing changes. Some processors have made changes to make pricing better than it was in the past. If you look at pricing and what the returns are, I’d say the last three years have been better than the previous 10.”
That’s because global demand for meat is strong and consumers are willing to pay more for a quality product, he said. Also, there are a limited number of countries that can produce and export pork because many have been affected by African Swine Fever.
“I don’t want to say we are sitting pretty, but we sit in a good position to be able to supply pork to other countries,” said Fitzgerald. “Now, it would be much better if we weren’t delisted from China and China was buying more of our products.”
Feed costs have shot up, surpassing $200 a tonne compared to about $150 a year ago, said Fitzgerald, adding the war in Ukraine makes the situation worse.
“Then you must add in all your minerals and vitamins and everything else. Around $185 per pig was the cost of production a couple years ago. Now we are up in the $225 to $230 range. That increase in price needs to be there to cover those costs. It’s not to say there aren’t people making money and there aren’t new hog farms going up.”
Fitzgerald said the U.S. Department of Agriculture has data going back 52 years that shows who makes money in the pork industry in that country and the figures are likely similar in Canada.
“There used to be a time when the producer made the lion’s share,” he said. “The packer made a little bit less and the retailer made the least amount, but we still made money off selling the product. Fifty-two years later, it has completely gone the other way around. It’s almost a flat line for producers in terms of dollars.”
The cost of labour is another concern for farmers, as is the recent rise in Canadian interest rates.
“The cost for borrowing money will be quite high,” Fitzgerald said.
Looking ahead
“It’s all predicated on pricing and expense,” said Fitzgerald. “If you have a happy balance and you’re making a good margin, then you encourage people to enter the business. You encourage people to renew and build and move along like any other industry.”
Alberta Pork is basing its business plan on finding new revenue streams for producers, lowering expenses and enhancing the pork industry’s image regarding the environment and lowering greenhouse gas emissions.
The carbon tax is a major concern, he said. The tax was introduced in 2019 at $20 per tonne of carbon dioxide equivalent emissions. It is being raised annually (it is now $50) and is slated to reach $170 by 2030.
“One hundred and seventy dollars a tonne for a tax is crippling for an industry that needs to heat farms and dry grain,” said Fitzgerald. “It doesn’t seem like we have a fair system. And it’s not just heating a barn. You must blow air out of a barn, too. You must release that moist air or else the pigs will get sick as well.”
Mending the often-adversarial relationship between packers and producers is another key to vitality in the pork industry.
“At the end of the day if they work together, they really should seek a better price from the retailer, especially in the domestic market,” he said.
As for new blood in the business, Fitzgerald said some people are starting small hog farms just to see what they can and can’t do.
“I’d say in the last three years business has changed quite a bit and it has been more profitable and has been more positive,” he said.
Lethbridge area hog farmer Stan Vanessen echoes Fitzgerald’s concerns.
The federal carbon tax has added a layer of frustration for pork producers, and applying it to on-farm use of natural gas is “a real sore spot for producers,” he said.
“It seems like that’s a cost that just keeps going up,” he said. “And there’s no return for us paying that cost. Obviously, we are trying to do our part to reduce our carbon footprint, whether that’s with solar panels or trying to reduce energy usage in the barns. But at the same time there is a limit.”
Despite the challenge of skyrocketing feed and energy costs, Vanessen said he is making a small profit. These days, the pork industry is focussing more on foreign markets, he noted.
But it’s been a hard go.
“We’ve also watched a lot of our fellow producers leave the industry,” he said. “For the last 10 years there have been negative margins. A lot of family farms don’t see a future for the industry, so they encourage the next generation to do something else that’s more profitable and more rewarding.”
Construction costs are also thwarting the sector, said Vanessen. Some farmers leave the business because the cost of renovations and new barns is out of reach.
“Until the reinvestment costs go down, and it looks like there’s more profitability long term, there won’t be many new people entering the business,” he said.
“It seems to me that it’s still in decline. Farms are getting older, and guys are not willing to spend the money to rebuild them or remodel them, especially now.”
