Prop 12, which became law Jan. 1, stipulates that sows supplying the state’s consumers must be grouped in housing that provides a minimum of 24 square feet per sow.

For Darcy Fitzgerald, executive director of Alberta Pork, there’s another issue at play: the potential weakening of the Canada-United States-Mexico trade agreement by making California a regulatory focal point.

“(Right now) we’re dealing country to country,” he said. “If we have to start doing state and province to state and province, suddenly it’s not really going to be a free trade agreement, because there could now be all these barriers to entering a country.

“We don’t know; we may have to negotiate with 50 states.”

Prop 12 is a California ballot initiative passed in 2018, under which meat and eggs cannot be sold in California unless they come from animals raised in compliance with the state’s welfare regulations.

For pork, the law forbids the sale of whole pork for human food in the state if it’s the product of a breeding pig or immediate offspring that was confined during the production cycle.

That means each breeding sow requires at least 24 square feet and enough space to turn around and extend limbs. The law extends to pork imported into the state.

According to a policy brief released in November by Pam Lewison, director for the Washington Policy Center Initiative on Agriculture, egg and veal producers quickly fell in line with Prop 12.

However, pork producers, 99 per cent of whom live outside California, challenged it. They took the battle to the U.S. Supreme Court, which ultimately upheld Prop 12.

According to Lewison, the cost of retrofitting penning to comply with Prop 12 will be about US$3,500 per sow.

“For an average hog farm of 1,000 pigs, that represents a cost of $3.5 million,” Lewison wrote.

Between weaners and market pigs, Alberta producers export about 450,000 animals to the U.S. every year, said Fitzgerald. Canadian producers exported nearly 6.7 million hogs to the U.S. in 2022, including millions of weanlings.

Prop 12 will affect Canadian hog producers who sell their product either directly into California or to other links in the supply chain that have earmarked hogs or pork for that state.

As more U.S. processors and hog facilities comply with Prop 12, more pressure will be exerted on Canadian producers to abide by the state’s law, said Fitzgerald.

“If you’re a producer, you’re selling to a processor, and that processor may then sell into retail in California. Everybody’s going to double-check to make sure everybody’s doing the right thing.”

And then there’s the question of fines and other penalties, which Fitzgerald said are still unclear — at least in terms of how they apply to Canadian producers.

According to the Prop 12 text, “Depending on the specific violation of these requirements, a person could be found guilty of a misdemeanor or felony, either of which is punishable by a fine, imprisonment or both.”

Fitzgerald also worries that other states will adopt California’s restrictions or create similar or more restrictive policies.

The space requirements seem arbitrary, he added.

“Where does it stop? Yeah, it’s 24 square feet. Was that scientifically proven that that’s what you need? Is the next amendment going to be 26 (square feet) and then somebody else makes it 30 or 40?

“That’s a big undertaking to change your barn again. The worrying issue is that every state could have something different,” he said.

Retrofits are expensive.

“I’m sure it’ll be more expensive in Manitoba and Saskatchewan and then it’ll be immensely more expensive in Alberta just because everything costs more here to make those changes and retrofit things,” said Fitzgerald.

He also takes issue with a measure passed by a majority of people with no connection to agriculture.

“When you throw in something like Prop 12, it’s just a voter decision without (voters) really understanding what’s going on. It just throws a real wrench into agriculture, which has enough hurdles already.”

The law comes at a challenging time for the pork industry, in which hog farms had a projected average net cash income of $330,000 in 2023, down 28 per cent from 2022.

According to the Lewison’s policy brief, it may force producers out of the industry, increase consolidation and raise costs for pork at the meat counter.

“Given the downturn in net income, the stark choice facing many small- to medium-sized farm owners may be to sell to larger farms,” wrote Lewison.

“Consolidation in the meat production industry has long been a source of concern for producers, consumers, and even lawmakers. Certainly, pork will become more expensive as both supply constricts and the actual cost of compliance is revealed.”

In a June 2023 interview, Manitoba Pork Council general manager Cam Dahl expressed many of the same points as Fitzgerald, including frustration over lack of clarity on how Prop 12 will affect Canadian producers.

“We don’t negotiate separate trade agreements with 50 states. We need to be able to have a North American market that’s integrated, allows for the free flow of product and isn’t different in every different state,” said Dahl.

In a more recent discussion with Glacier FarmMedia, he noted the effect had been working its way through the business for months.

Those regulations were initially slated to come into effect on July 1, 2023, but in June 2023, a California judge extended the enforcement date to Jan. 1, 2024, for meat that was already in the supply chain.

“The impact isn’t just starting today; we have seen that impact for some time,” said Dahl.

When pressed for specifics, he pointed to signals such as price trends for piglets, a major market for Manitoba. The province exports millions of piglets to the U.S. every year.

“I don’t have empirical evidence to back this up, but in looking at things like the prices for isoweans going into the U.S., it is my perception that yes, it is already having an impact,” Dahl said.

He is also concerned that Prop 12 will fragment the North American marketplace.

“That’s something that’s going to hurt farmers and consumers alike. Farmers are going to see a lower return, and consumers are going to see higher prices.

“So, that’s a lose-lose situation. We have signed a trade agreement with the United States of America; it isn’t with individual states. To have different sanitary and phytosanitary conditions across different states is just something that’s not in the interests of anybody on either side of the border.”

The Canadian Pork Council said it sees Prop 12 and similar laws as akin to non-tariff trade barriers and has pressed the Canadian government to take up the issue with the U.S.

In late September, the Canadian government told Glacier FarmMedia it was analyzing the situation and “considering the U.S. obligations under the World Trade Organization (WTO) and Canada-U.S.-Mexico Agreement (CUSMA).”

– With files from Geralyn Wichers and Don Norman.

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“China’s need to fill the grain market void left by Ukraine is expected to push prices higher,” the organization said in a briefing note posted on its website on Feb. 24.

It also cited a report from an analyst with Global AgriTrends who said interruptions in shipping through the Black Sea could see global grain prices rise by 20 to 40 per cent.

“This, compounded by the dry conditions hampering South American crops, could sound alarm bells for feed markets,” the Alberta Pork article concluded.

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“The past year has presented quite a few disruptions at every stage of the value chain,” Bijon Brown, the organization’s production economist, said in a release.

The sharp rise in feed costs have been the biggest blow, but transportation disruptions, labour shortages, and “supply chain challenges,” have all pushed up production costs, the release said. The latest increase has been for some pharmaceuticals.

“When we placed our last order to fill a certain prescription, the bill was nearly 50 per cent higher than when we ordered it just a while back, amounting to a few hundred dollars extra,” said Lethbridge-area producer Steven Waldner. “We have also noticed other products doubling in price by weight.”

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“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.”

Government support

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.”

The post Hopes were raised but hog producers facing yet another crisis appeared first on Alberta Farmer Express.

They join four other board members: vice-chair Stan Vanessen, Martin Waldner, Hendrik Fourie and Marcel Rupert.

Alberta pork producers have had a tumultuous year with hog prices being under — and often well under — the cost of production as well as the recent temporary closure of Olymel’s Red Deer plant. Alberta Pork has been in prolonged, but so far unsuccessful, talks to negotiate a new pricing formula.

Moen, who represents Red Willow Farms on the board, has also been chair of the Western Hog Exchange for a decade.

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Olymel, an arm of Sollio Co-operative, said late Wednesday it had recalled “employees that are needed to ensure that the gradual restarting of operations goes smoothly” at its Red Deer, Alta. hog plant. Slaughter is to resume Thursday and cutting room operations Friday, the company said.

The company said Wednesday it was also recalling employee groups “to take part in training sessions covering all implemented health measures, adjustments and additions made to some of them, and the action plan developed for reopening.”

United Food and Commercial Workers (UFCW) Local 401, which represents workers at the Red Deer plant, said Wednesday on Facebook it was “glad to see Olymel reacting to the pressure we’ve been placing on them by cancelling a planned slaughter shift and instead providing the training we called for in our response to the proposed plant reopening.”

Olymel on Feb. 15 declared an indefinite suspension of work at the plant as COVID cases rose among employees, and said conditions were “no longer assembled to continue normal operations in a safe and efficient manner.”

Quoting provincial and union officials, local media on Wednesday reported over 500 cases of COVID-19 are linked to the Olymel plant outbreak, including four deaths. The plant employs about 1,800 people.

Olymel, in its release late Wednesday, said management “is pleased to confirm that most of the employees who have had COVID-19 since the outbreak began have recovered” and offered condolences to families, friends and coworkers of three employees whose deaths were linked to the outbreak.

The company said it “took advantage of the plant closure to update and reinforce the many health and safety measures that were already in place at the plant,” working with a provincial task force that was set up “to support the company in planning a safe gradual reopening.”

Following “full plant inspections by expert teams” from Alberta Health Services (AHS), Occupational Health and Safety (OHS) and Environmental Public Health (EPH) on Monday and Wednesday, AHS “made several recommendations aimed at adjusting and reinforcing certain measures that were already in place and gave the green light to gradually resume operations,” Olymel said.

AHS experts “will be on site when operations resume and will offer rapid testing to anyone who has not tested positive and wishes to be tested,” the company said, noting 1,370 Red Deer employees have been tested since Jan. 1.

However, in a letter Monday to plant management, UFCW 401 president Thomas Hesse said “well over 70 per cent of Olymel employees feel so uncertain about the safety of the plant, that they are prepared to exercise their right to refuse unsafe work.”

That number, he wrote, “is a startling statistic from workers who have been laid off without pay through no fault of their own for going on two weeks.”

Hesse’s letter included a list of “action items” for Olymel to address, including compensation for workers laid off during the shutdown, as well as $4/hour in “pandemic pay premiums” for all employees going forward as long as the pandemic lasts.

The union also called for measures to reduce employee crowding in certain areas, improve ventilation and air quality and stagger start times and break times to help maintain social distancing.

“Please know that unless you can guarantee no one else will become ill and no one else will die, the rushed reopening of Olymel’s Red Deer plant and the resulting consequences will be on your conscience — and yours alone,” Hesse wrote.

‘Precarious position’

The plant’s supply teams, meanwhile, are “in contact with Alberta hog farmers to plan the gradual resumption of deliveries,” Olymel said Wednesday.

Olymel had said in mid-February it expected a backlog of 80,000 to 90,000 hogs from closing the Red Deer plant and planned to ship its company-owned farms’ hogs to U.S. packers to help clear that backlog.

It said Wednesday it “had made the necessary decisions to manage the flow of pigs from its own farms in order to facilitate a return to normal when operations resumed.”

The Red Deer plant has capacity to process about 45,000 hogs per week, out of the company’s total Canadian capacity of about 185,000.

Officials with Alberta Pork had said Feb. 23 that many of its producer members ship hogs to the Olymel plant weekly — and the closure of any processing plant, “even for a short period of time, places producers in a precarious position.”

“Barns are starting to get crowded,” Alberta Pork chair Brent Moen told Alberta Farmer on Monday. “Collectively, we would have marketed probably 100,000 to 110,000 head that are now backed up.”

Affected hog farmers were “adjusting feed levels” to slow their hogs’ growth, while also seeking slaughter space at other plants in both Western Canada and the U.S. for market-ready hogs, Alberta Pork said Feb. 23.

Some producers, the organization said, “are opting to move younger pigs to empty barns in the U.S. to free up space for larger pigs at home.”

Alberta Pork at that time asked producers who normally ship to Olymel to “voluntarily submit any settlement statements and transportation bills” as supporting data for a federal/provincial set-aside program, similar to those set up following COVID-induced cattle and hog slaughter plant shutdowns elsewhere in Canada.

Moen said Monday a program to help offset the costs of keeping market-ready hogs was “under discussion” with provincial officials, “and I believe they are working on a program, but it’s too early to speculate as to what exactly that might be.” — Glacier FarmMedia Network

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The unusual request is the latest instalment in an ongoing effort to staunch the flow of red ink in the province’s hog sector. But leading an effort to cut production in a bid to win higher prices from processors isn’t on the table, Alberta Pork said.

Officials from the organization recently met with six commercial hog farmers who apparently want to use lower production as a lever to force pork processors to share some of their profits.

“The group met virtually with Alberta Pork board directors and staff to advocate for reducing hog production, in response to pricing problems that producers continue to face,” the organization said in a news release.

“Alberta Pork agrees that this pricing issue needs to be resolved immediately.”

But while the farm group can advocate, it lost the power to act as a marketing agency 25 years ago and would need provincial approval to do so again. (Although at its last AGM in November, two-thirds of its members voted in favour of a resolution calling on Alberta Pork to explore that possibility.)

Since last summer, a “pricing committee” (made up of reps from the four pork boards in Western Canada) has been meeting periodically with Olymel, Maple Leaf Foods and Donald’s Fine Foods. It has urged all three to change their pricing formulas so the cut-out value (that is, the value of the pork) is reflected in the prices paid to producers. While some have offered temporary price rises and the market has improved somewhat, Alberta producers are still losing money on every hog they sell and have been for years, industry players say.

The situation is different in Quebec, where producers and processors use a pricing formula that reflects cut-out value. Producers have directed Alberta Pork to look at other hog-marketing options, including a system like Quebec’s.

“This exploration process is underway, and meetings have begun taking place with representatives from the provincial government,” the Alberta Pork release stated.

While the release did not say how many pigs the six producers raise or what size of production cuts they were contemplating, some sort of action is needed, the organization said.

“Alberta Pork will support producers wishing to make production reductions by bringing awareness of the initiative to others, including other producers, packers, and the media,” the release said. “However, it is necessary to acknowledge this approach only works for some farms. Not all farms are able to adopt such a strategy, as doing so could cost them their business.”

There are just over 300 commercial hog operators in the province who collectively have a herd of about 125,000 sows. Hutterite colonies and “producer groups” dominate with independents accounting for 17 per cent of production. In the last three years, 13 colonies and 19 independents have left the hog business.

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Two-thirds of Alberta Pork producers voted in favour of investigating a single-desk marketing system similar to Quebec at their virtual annual general meeting held November 23. Thirty per cent voted against, and the rest abstained.

It is a sign of how bad things are — and have been for quite a while — for hog producers in the province, said Darcy Fitzgerald, executive director of Alberta Pork.

“Even Hutterite colonies are leaving (the sector), which we’ve never seen before,” he said. “Money is not going into the industry like it should — for maintenance, repairs, and building.

“The packers need to come to terms with the fact that they’re not going to have a supply if they don’t change.”

Alberta Pork used single-desk marketing up until 1996.

“Everyone put their bid on for pigs and they all sent in their bids into one organization, Alberta Pork — based on pricing, you’d get pigs,” said Fitzgerald.

The Quebec model is somewhat different.

Producers, acting as a group, first meet with packers to work out a pricing formula for a three-year period. The formula involves things such as the U.S. cut-out price (that is, the value of the meat), a premium for hogs that are ractopamine free, quality factors, and discounts for other factors. If the groups do not agree, the matter goes to an arbitrator.

“The arbitrator then makes its decision and says that’s what the pricing system will look like,” said Fitzgerald. “And that’s what they have to work with for the three years.”

It’s estimated Quebec producers receive about $35 more per pig than their counterparts in Western Canada.

But returning to the single-desk model isn’t necessarily the first choice of Alberta hog producers. The motion approved at the AGM only calls on Alberta Pork to “pursue a single-desk selling system, similar to Quebec.” Even the mover of the motion wasn’t calling for a return to the type of single desk that his organization used to operate, said Fitzgerald.

“The mover spoke to everybody and said, ‘I myself don’t think going back to 30 years ago is the right thing,” he said.

Rather, the vote in favour is more of a shout-out from producers who want a fix for a broken system, which is currently based on U.S. hog prices but not the value of pork.

“If we look at the last five years, no one has made any real money in the industry and that’s because the packers are taking it all,” said Fitzgerald.

Pork producers are suffering major losses even as demand for Canadian pork continues to skyrocket, he said. In 2019, packers in Canada sold $400 million more pork than they did the previous year (in terms of exports).

“This year in the first eight months, they sold $550 million more than they did in 2019,” he said. “They are seeing a lot of transactions coming through their door.”

Alberta Pork has been working with producers to obtain their actual expenses and revenues — data that shows producers have been losing about three to five per cent every year on a return on investment.

They’ve also shown the numbers to packers in an effort to show that things need to change.

Alberta Pork’s board will be meeting (virtually) to discuss the resolution and consider next steps. The organization has been in talks with marketing associations and pork groups from other provinces, trying to find a solution to the problem. Something along the lines of the Quebec model would require provincial government regulations.

“You can get things going in each province, but it’s just a matter of how much work it will be, especially if it is legislated,” said Fitzgerald. “The producers are pretty desperate, so even if it needs to be legislated, let’s look at that.”

A simpler option would be to strike a deal with the big three packers: Olymel, Donald’s Fine Foods and Maple Leaf Foods. The latter two did increase payments temporarily when prices were very low in the spring while Olymel recently announced an increase in its floor price.

“There are a whole host of other options that you can look at and convince the other parties to come to the table and come up with an agreement of some sort,” said Fitzgerald.

The post Beleaguered pork producers consider move to single desk appeared first on Alberta Farmer Express.

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).

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The conference presentation on humane transport by CFIA meat hygiene inspector Nancy Simmons prompted questions that “highlighted the great demand producers have for this information,” said Annemarie Pedersen, AFAC’s executive director.

The webinars are a chance to “work with the industry directly and reach the producers and others involved in livestock transportation,” said Simmons.

The webinars will be industry specific and include a CFIA presentation on the updated regulations followed by a question-and-answer period.

“We want to hear from the people who have to deliver on these changes and have a real discussion,” said Pedersen.

Two sessions have been scheduled so far — Sept. 9 with Alberta Pork and Sept. 22 in partnership with Alberta Beef Producers — with more to follow.

For more information, visit afac.ab.ca.

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