Alberta Pork is urging hog farmers in the province to band together to force packers to pay a fair price for their animals.
And that includes thinking about returning to a single-desk model or forming marketing co-operatives to “shift the balance of power back to producers.”
In an analysis of the sector covering the past half century, Alberta Pork says “the power has swung from an equitable place for both producers and packers, to favouring packers and retailers.”
Alberta Pork acted as the single-desk seller for hogs from 1969 to 1996 and the analysis asks if ending the single desk was a wise move.
“Hindsight is 20/20, but most will likely agree that a united front for producers is now more important than ever before to address the hog pricing situation,” the article states.
It argues hog producers have been driven to the brink because there are few packers today and “very little government oversight” of their pricing practices.
“With so few packers in the province, they can dictate the price in the contracts offered,” Alberta Pork states in the article.
It says producers don’t even know what prices hogs are fetching because of confidentiality clauses in contracts, but that the effect of losing a single-desk seller is plain to see.
“Expenses in 2019 were more than twice what they were in 1996, while on the revenue side, the hog price in 2019 was lower than what it was in 1996,” the article states.
Alberta Pork then argues that the best solution would be for producers, packers and retailers to work co-operatively — but it also makes the case for collective action.
“Negotiating power stems from producers’ ability to come together. The more producers are divided, the more power producers give to packers and the less control they have over prices.”
Bringing back the single desk would be the “most effective option,” but such a move would require government approval and “government support for this concept may be long gone.” However, an alternative would be for producers to form marketing groups, the article states.
“For example, Hutterite colonies in Alberta currently make up more than 40 per cent of the industry’s core producers and own nearly half of all sows on-farm. If colonies were to form a marketing cooperative, then this could increase their bargaining power. Consolidated producer marketing means that a few packers would now be forced to compete on price for a larger volume from one source.”
The article says this type of co-operative action has worked in Quebec, and is an alternative to the current “broken” pricing model, which is based on U.S. hog prices.
“Producers need to ask: What steps do I need to take to shift the power back to an equitable place for both producers and packers?” it concludes.
The full article (‘Price negotiating power balance hurts producers’) can be found on the home page of Alberta Pork’s website (www.albertapork.com).