The 2026 FCC Food and Beverage Report states sales among food and beverage manufacturers are predicted to rise by 0.8 per cent while volumes fall by 0.7 per cent, the fourth straight year of decline. It notes sales growth will likely be driven by higher prices, not higher consumption.

WHY IT MATTERS: With trade tensions still disrupting global supply, prices could fluctuate this year, affecting consumers’ choices.

FCC chief economist Craig Johnston said this disparity speaks to the issue of consumer purchasing power.

“Higher food prices over the past several years are really weighing on households’ budgets,” he said in an interview. “They’re making more cost-conscious decisions.”

“This is actually a headwind for consumption and a headwind for volumes.”

He said any upstream changes will no doubt filter down to Canadian producers. Some challenges are shared across sectors.

“When we think about common elements, you can think about the tariffs, the elevated input costs, generally,” he said.

Margins are tight across the sector, including for farmers.

“We’re not seeing massive improvements on margins within the food and beverage manufacturing sector to pre-COVID levels, and we’re not necessarily seeing that filter through to a broad-based increase in margins for primary ag.”

“The industry in general is still going through this adjustment period” he said, “and we do expect that to continue to 2026.”

Trade tensions still a factor

Canada will continue to grapple with trade uncertainty this year, including the recent instability caused by the conflict in the Middle East.

Forecasts for costs of goods in the Food and Beverage Report were made before the crisis, “meaning that if the commodity price surge persists beyond just a few months, there would be upside risks to those estimates.”

FCC had expected pressures on some inputs, such as cattle and hogs, to ease from 2025 highs, but surging energy prices due to the conflict make that less likely.

Costs of production up

Production costs for food and beverage manufacturers increased by two per cent in 2025, driven mostly by raw material costs.

“The increase in raw material costs was driven by disruptions that constrained availability and raised prices,” the report states.

“Some examples from 2025 include avian influenza impacts on poultry … tariffs that increased the cost of imported aluminum packaging and historically low cattle herd sizes across North America.”

Costs across sectors

The report also breaks down costs associated with sub-sectors of food and beverage processing.

In grain and oilseed milling, sales were uneven in 2025 but improved by the fourth quarter. 2026 shows signs of a rebound in sales and volumes.

Large carryover of canola stocks is expected to keep prices under pressure in 2026. Canola prices are expected to fall by 3.1 per cent in 2026.

The report suggested demand for Canadian maple syrup and honey has continued to increase in the global market.

In the dairy sector, 2026 will likely see a 3.6 per cent increase of product manufacturing sales over 2025. Processors are also expected to pass along costs from the producer price increase for unprocessed milk to consumers.

In the meat manufacturing sector, FCC forecasts sales up 1.6 per cent and volumes down by 5.6 per cent.

Tight supplies of live animals, due largely to disease outbreaks, drove prices up in 2025. According to the report, “2026 will likely see another year where price, not volume, drives sales upward.”

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“No one will be spared the change in market pressures,” wrote Pam Lewison, director for the Washington Policy Center Initiative on Agriculture in a November policy brief.

“What those market pressures do to the overall higher cost of pork, however, won’t be known until the next marketing cycle after implementation,” she added.

Proposition 12, or “Prop 12,” was a California ballot initiative, passed in 2018. It said that meat and eggs could not be sold in California unless they came from animals raised in compliance with the state’s welfare regulations.

This includes foods imported into the state.

While egg and veal producers quickly fell in line, the policy brief said, pork producers—of which 99 per cent live outside California—challenged the law. This included taking the battle to the U.S. Supreme Court, which ultimately upheld Prop 12.

Pork distributors have until the New Year to submit third-party certification of compliance.

According to the brief, the hog industry estimates that the cost of retrofitting penning to comply with Prop 12 will be about USD $3,500 per sow. Proposition 12 specifies that each breeding sow much have at least 24 square feet of space, and have enough space to turn around, extend limbs, etc.

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

This with a projected average net cash hog farm income of $330,000 in 2023—down 28 per cent from 2022.

Pork producers have struggled this year with high costs in the midst of lowering demand and hog prices.

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

Canadian concerns

The Canadian hog sector has been eyeing Prop 12 with concern. Canadian producers exported nearly 6.7 million hogs to the U.S. in 2022, including millions of weanlings.

The fear is that if Canada’s national swine housing standards don’t meet California’s regulations, American producers and processors may not want to purchase Canadian animals. However, there has been little clarity as to what the actual effects of Prop 12 will be for Canadians producers.

Also of concern is other states that have similar animal welfare laws in the works.

“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 Manitoba Pork Council general manager Cam Dahl in a June interview with the Manitoba Co-operator.

The Canadian Pork Council has said its 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 the Manitoba Co-operator it was analyzing the situation and, “considering the U.S.’ obligations under the World Trade Organization (WTO) and Canada-U.S.-Mexico Agreement (CUSMA).”

—Geralyn Wichers is associate digital editor of AGCanada.com. She writes from southeastern Manitoba.

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However, prices in 2022 (which averaged $2.27 a kilogram for the year) were nearly 29 per cent higher than the five-year average, she noted. But high feed prices have cut into margins and the provincial hog herd fell by 2.5 per cent last year to 1.53 million head, according to StatCan.

Demand for pork is expected to remain strong this year and while households are being hit by rising food bills, “prices and availability of other proteins may lend support to pork demand,” said Boyda.

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Nearly a year later, the industry is in the middle of a speedy recovery.

At the Chicago Mercantile Exchange (CME) on Thursday, lean hog futures were either approaching or have surpassed the US$100/cwt mark, levels which haven’t been seen since October 2014.

Brad Marceniuk, a Saskatoon-based livestock economist for the government of Saskatchewan, said there are major drivers right now behind the rise in hog prices.

“Domestic markets typically get stronger into spring and summer with barbecue season increasing demand. We have also had reduced U.S. hog slaughter numbers overall the last few weeks which has reduced pork supply,” he said via email.

“Last spring, the pandemic forced many U.S. hog slaughter plants to slow down, some temporarily closing, which reduced weekly pork supplies for many weeks, reducing U.S. pork in cold storage. Previous pork in cold storage levels have not regained to pre-pandemic levels.”

One of the major drivers is China, as it continues to rebuild its hog herd decimated by African swine fever. Last winter, there were reports China was steadily growing its herd and reducing its overseas hog purchases. Now, they are starting back up again.

“Over the last few weeks there have been reports that China is again struggling to deal with African swine fever and have been forced to kill millions of pigs. This news has likely helped the lean hogs futures contracts to move higher in anticipation of higher pork exports,” Marceniuk said.

Canadian and U.S. hog markets are thriving and, despite rising feed prices taking a bite out of profits, slaughter-weight hog prices are now 60 per cent higher than the low levels seen last July, according to Marceniuk.

“I expect hog prices over the next few months to continue to be strong. We’re at the time of year where seasonal demand is stronger…If (China’s) demand picks up again, we could see a bump up in prices higher,” he added.

— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.

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However, strong global demand has propped up hog prices in recent weeks, with cash prices increasing by over 25 per cent.

Fewer hogs coming to market, coupled with strong export demand, were the main reasons behind the strength in prices, according to Brad Marceniuk, Saskatchewan’s provincial livestock economist in Saskatoon.

“Typically we see more hogs come to market, but this year we’re seeing fewer,” he said.

Recent data from the U.S. Department of Agriculture (USDA) indicated inventories of pigs between 120 and 179 lbs. has increased by over six per cent year over year, and pigs 180 lbs. and heavier have increased by nearly 10 per cent.

“Prices depend if hogs come to market,” Marceniuk said, noting the USDA Hogs and Pigs Report published in September also showed recent slaughter numbers have been down by nearly four per cent.

As of early September, hog slaughter prices had rallied by over 25 per cent compared to earlier in the year. U.S. cash hog prices as of Sept. 25 averaged US$64.70 per hundredweight, up by over US$3/cwt or 6.1 per cent from the prior week’s prices.

In Canada, hog prices were around $175.58 per hundred kg on Sept. 25, up by over $13/ckg on the week.

The COVID-19 pandemic has caused many meat processing plants to shutter due to outbreaks and lack of physical distancing, causing backlogs in the meat supply chain.

“With hogs marketed every week on a regular basis, lower slaughter capacity would result in hogs getting backed up on farms,” he said.

Increased global export demand has also been supportive of North American hog prices. African swine fever (ASF) decimated China’s hog population in 2019, reducing it by about 40 per cent. Germany, previously one of the top exporters of pork to China, has also been hit by ASF, causing China to look elsewhere for its pork products.

Marceniuk expected short-term prices to pull back slightly, then move higher in early 2021, barring significant outbreaks of COVID-19 in meatpacking facilities.

“Expect prices moving higher in early 2021, as long as demand stays strong, and COVID-19 doesn’t affect slaughter capacity at plants again,” he said.

“Any outbreaks causing new plant closures would reduce hog slaughter capacity and be negative for hog prices.”

— Marlo Glass reports for MarketsFarm from Winnipeg.

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An Alberta producer recently delivered 200 pigs to a packing plant and got paid $4,000 less than it cost to raise those animals. And then he had to disinfect his truck at a cost of $500.

“So he walks home minus $4,500,” said Darcy Fitzgerald, executive director of Alberta Pork. “How does he do that consistently?”

But if that same load of pigs had been delivered to one Manitoba hog buyer, the farmer would have at least broken even on the animals (although he would have been down the $500 cleaning bill).

And if the pigs were sold in Quebec, the farmer would have had a profit of $5,500.

The pork business is very profitable right now but the system used to price most hogs in Western Canada means producers here are suffering “devastating” losses, say industry officials.

“When your industry is shrinking but yet the product you produce is growing in demand, there’s a problem,” said Fitzgerald. “Supply and demand says if there’s a high demand, the supply price should go up, and that hasn’t happened.

“This is a serious problem that needs to be addressed.”

Last month, Alberta Pork and its sister organizations in B.C., Saskatchewan and Alberta sent a letter to Canada’s biggest pork packers (Maple Leaf Foods, Olymel and Donald’s Fine Foods) saying their broken pricing system needs to be replaced or there’ll be an exodus of producers.

“We’ve said we want to meet and talk about how we can fix this system so that it works for both the packers and the producers,” said Fitzgerald. “The packer wants to make a profit, and that’s good, but so does the producer. The packer wants to have a return of 10 to 15 per cent? Well, the producer would like that, too.”

Currently, prices are determined by a U.S. model that is so thinly traded “they can’t even post the number because it may identify the individual selling the pigs or the plant buying the pigs,” he said, adding there are times when there are simply no pigs on that marketplace, forcing producers to rely on the last available price.

“It’s so bad that the Chicago Mercantile Exchange (CME) that we all use has said for the last number of years that we need a better system,” said Fitzgerald. “This is not going to last. It’s going to collapse.”

And because of COVID, the futures market has also “gone out of whack,” he added.

“We’re seeing prices that we’ve never seen before,” said Fitzgerald. “Right now, producers are losing money. They’re probably making $1.35 a kilogram, and the five-year average is more like $1.85 a kilogram. We’re 50 cents out, and that’s significant.”

Increasingly, American pigs are priced based on a cut-out model that looks at the value of the pork. Depending on the market, that puts a premium of $20 to $50 a head on the value of the live pig.

That’s the model they shifted to in Quebec last year, said Fitzgerald, meaning producers there get at least 90 per cent of the cut-out value (using USDA figures).

That’s closer to the model that western Canadian pork producers would like to see.

“We’d like to use a system based on the cut-out value, where the producer is at least guaranteed he’ll get a certain percentage of that value. Then at least he has something he can bank on,” said Fitzgerald.

“This way, if the packer is making money, the producer is making money. If the packer’s not making money, neither will the producer.

They’re working together instead of being in opposition.”

‘It’s got worse and worse’

While the packers have not yet responded to the request from the farm groups for a meeting, their ask isn’t unprecedented. Aside from the shift to cut-out pricing in Quebec, HyLife — a packer based in Manitoba — has begun moving toward this model.

“They recognize that needs to happen for those farmers to stay in business,” said Fitzgerald. “Times have changed. The packer has to look at this and see that he would not be in business if he had a negative return on his investment, so how could he expect the producer to do that?

“Everybody needs to make out OK. That’s really the bottom line.” Packers are making a profit — almost $300 million above last year for the first quarter of the year — while producers can’t even meet their cost of production, he said. “In this system over the past number of years, it’s got worse and worse for the producer,” he said. “He’s now seeing on average more days that he’s losing money than he actually makes money. And in some years, it’s significant. There won’t be very many months where he actually makes any money.”

In mid-June, the base price at the Western Hog Exchange was $1.571 per kilogram dressed, while HyLife’s price was $1.7312 per kilogram dressed. The price in Quebec was even higher, at $1.976.

“If you look at the Western Hog Exchange price versus the HyLife price, with premiums you’re looking at almost $20 a head difference. If you look at Quebec, we’re looking at probably $50 a head difference,” said Brent Moen, vice-chair of Western Hog Exchange and chair of Alberta Pork.

“If you consider that break-even is about $1.65 per kilogram, western Canadian producers who are not priced on the cut-out are losing money.”

It’s even more significant when you look at the seasonal cycles of the pork business, Moen added.

Hog producers tend to lose money from October to April, at which point they start to move out of the red and into the black. In summer, they typically make $40 to $50 per pig, which brings their average annual return to between $10 and $15.

But this summer, it’s expected producers will lose an average of $30 a pig.

“Unfortunately because of COVID, we’re in a situation today where this week’s price for Western Hog Exchange is going to be $1.35. Next week’s price is probably going to break below $1.20,” Moen said in mid-June.

“If you look at it compared to cost of production, we’re going to have a$35 to $40 loss per head—but if you look at it relative to normal seasonality, we’re at about $80 a head out of cash flow that we would normally have. It’s devastating. It’s absolutely huge.”

And Western Canada’s pork industry will only continue to shrink if the pricing model isn’t fixed.

“It’s at a point where it really could potentially devastate the industry,” said Moen. “Realistically, if producers were thinking about getting out of the business or shutting their barns down for major renovations, they should probably be doing it now. These losses are devastating.”

The effect could be permanent, Fitzgerald added.

“Now we have an industry that’s not growing anymore — it’s shrinking,” he said. “When there are no new barns being built and people are leaving the industry, that’s a bad sign. That’s a sign that there’s a problem here and we need to fix it.”

And that starts with changing the relationship between processors and producers.

“Historically, packers and producers have had an adversarial relationship,” said Moen. “That really has to change. We’re hopeful that the packers will sit down with us, but if we can’t, that will send a pretty clear message to producers that we need to change the business model we have.”

That could mean some producers will move toward owning their own packing plants, as they have in the States, he predicted. But others may just quit the business.

“In both cases, the net benefit to the existing packing plants is a negative,” said Moen. “Ultimately, they’ll lose producers and their pigs.”

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“We expect pork values to move higher, due to the shortness of production in China,” said Brad Marceniuk, a Saskatchewan provincial livestock economist in Saskatoon.

An outbreak of African swine fever earlier in the summer reduced China’s pork production by over 35 per cent, and lowered the global pork production rate by about 15 per cent.

North American hog prices have been low due to seasonally high slaughter numbers. Typically, when the hog supply to slaughter markets is high, prices are driven lower as pork must be stored rather than shipped.

However, due to the boost in foreign export demand, pork cutout prices have provided pork manufacturers with “a large packer margin.”

For the week ending Saturday, pork cutout values averaged US$81.58/cwt. That’s a 13.6 per cent increase per hundredweight. when compared to the same week in 2018.

“Everyone takes their share of profit during certain times of the year, and this is the time where packers are taking their share of the profit,” Marceniuk said.

The U.S. exported 181,534 tonnes of pork in October, nearly a 12 per cent increase from the previous month. Marceniuk believed North American trade relations with China, which have been invariably rocky for most of 2019, will benefit from the substantial hit to China’s pork production.

“China is the largest producer and consumer of pork in the world,” he said.

“African swine fever is forcing them to import more pork from everywhere, as well as more beef and more chicken.”

— Marlo Glass reports for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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“In terms of the current prices, there’s nothing spectacular,” said Ron Gietz, an extension specialist with Alberta Agriculture and Forestry.

Still, that’s an improvement on the spectacularly bad period last summer when hog prices plunged by more than 40 per cent in just six weeks, and producers were losing more than $50 for every animal sent to market. A rally in early fall briefly pushed prices above the break-even point, but they’ve steadily dwindled since then with producers now experiencing losses of about 30 cents a kilogram.

“Producers are currently losing money,” said Gietz, but the futures market is suggesting higher prices are on the way.

“It hasn’t been a total wreck, but it hasn’t been very good either,” he said.

African swine fever is sweeping through China, and has had some impact on the futures, but “the market is in a ‘let’s wait and see mode’ to see if we’ll be exporting a little more pork to China,” said Gietz.

Here in Alberta, the discovery of the province’s first case of porcine epidemic diarrhea shouldn’t affect the market, he said.

“If we keep it confined to one farm or a few farms, then it’s just something that affects the productions on a few farms. It doesn’t affect how the price is calculated and it doesn’t affect our markets at all.”

Washington’s trade battle with Beijing has reduced its American pork exports to China, but that hasn’t boosted prices for Canadian hogs because prices here are based off the U.S. price. The hope is China’s anger with Ottawa over the detention of Huawei executive Meng Wanzhou (who is subject to a U.S. extradition request) won’t affect exports to China.

“We’ll see how that plays out with China and how it impacts trade going forward,” said Gietz. “Like swine fever, it’s something to be watched, but not something that will necessarily play out in terms of trade.

“On the upside, if the Americans make a deal with China, markets will react to the upside as well. So far, we’ve only seen the negative side of it.”

However, markets “are losing faith” there will be a quick resolution to that situation and so have been drifting lower, he added.

“Markets are still unsettled. On paper and with futures, it doesn’t look like too bad a year coming up. But there are so many variables and so on, we’ll just have to see.”

All of this uncertainty is taking a toll.

While fears of a major exodus of producers in Alberta haven’t materialized, the number of hog producers continues to drop.

“There’s an ongoing leaving as producers reach the age where they don’t want to do it anymore,” said Gietz.

There will be problems with succession, he said, as young people who have watched their parents struggle to make money from hogs won’t be keen to take over operations. As well, he noted, most barns in Alberta were built in the late 1990s or early 2000s. Moving to loose sow housing (which will be required by 2024) will require a significant capital investment that many may find hard to justify.

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“It feels like we’re in a bit of a transition time,” said Tyler Fulton, director of risk management with Hams Marketing Services in Winnipeg. He noted that prices saw a sharp drop in August, before recovering in September and then holding steady through October. He described that activity as a “reversal of the normal seasonal trend,” due in part to broader market uncertainty that stems from the trade war between the U.S. and China.

The U.S. hog slaughter has been climbing recently, taking pork production in the country to record high levels. Those heavy supplies are weighing on prices, according to Fulton.

For local producers, “we’re probably right on the cusp of where some guys are profitable and some guys are not profitable,” said Fulton. He said feed costs were also cutting into profits in some cases. While soybean prices have hit their lowest levels in years; that weakness has not yet transferred to softer soymeal prices.

“There too, we may be on the cusp of a change in the trend,” said Fulton.

The fourth quarter is often a struggle to stay in the black, “but longer term, the prospects look very good,” said Fulton, pointing to the premium in the deferred futures over the current cash market.

The U.S. futures are pointing to strong hog prices for 2019, with concerns that African swine fever in China will cut into their pork production, according to Fulton. A reduction in China would swing more demand to North American pork, and underpin prices.

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Cattle futures were only slightly lower on the Chicago Mercantile Exchange, staying within the narrow range that has defined the trade for weeks.

CME December hogs, the most active contract, declined 0.975 cents to settle at 56.575 cents/lb., declining for the second straight session (all figures US$).

Thinly traded October hogs were 0.3 cent higher, to 68.75 cents/lb. The front-month contract finished just below its roughly seven-month high notched on Monday.

Strong cash hog prices and an increased U.S. hog slaughter have bolstered hog futures in the near-term even as an outlook for increased supplies pressured deferred contracts. The October-December hog spread at an October premium of 12.175 cents was the widest in four years, Refinitiv Eikon data showed.

“It’s evident watching from October to December that traders do not expect this relative tightness in the slaughter hogs is going to last,” said independent futures trader Dan Norcini.

Hogs in the top Iowa and Minnesota cash market were up 33 cents to $65.25/cwt, U.S. Department of Agriculture data showed, reflecting good demand from pork packers.

USDA late in September showed the total U.S. hog herd about three per cent larger than a year ago.

“We should not be running into any shortage of hogs,” Norcini added.

Most-active CME December live cattle eased 0.825 cent to 113.35 cents/lb., declining from an earlier seven-month high of 114.475 cents.

The contract has been trading in a roughly two-cent range since Sept. 27, with traders reconciling satisfactory cattle supplies with robust demand for beef.

USDA data on Tuesday showed U.S. beef exports in August sharply higher than a year ago.

CME November feeder cattle were down 0.925 cents to 157.5 cents/lb. Feeder steers and heifers fetched prices $3-$5/cwt lower than a week ago at a closely watched cash auction in Oklahoma City, USDA said.

— Michael Hirtzer reports on commodity markets for Reuters from Chicago.

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