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Author(s): Western Hog Journal
Publication Date: July 12, 2011
Reference: Spring 2008


Surprise at January census data 

With anecdotal evidence of a significant number of producers quitting production, especially in Alberta and Saskatchewan, there was surprise at the December pig census data released by Statistics Canada in January, which showed only a 1.9% drop in breeding stock numbers.  Total pig numbers, down 6%, perhaps better reflected the liquidation that is taking place, although a significant proportion of this is likely due to the increased numbers of pigs being shipped to the USA for finishing or slaughter.

Alberta showed the biggest drop in number of breeding pigs, at 4.9%, while total pig numbers fell 10.6%. However, a survey carried out by Alberta Pork in late 2007 suggested that about 15% of producers intended to quit and that there were possibly another 15% that had already started the process of running down their operations and therefore did not respond to the survey. Saskatchewan had the next biggest drop in breeding pig numbers, at 3%, while numbers in Manitoba fell by only 0.6%. Ontario and Quebec also showed modest reductions of 1.6% and 1.3% respectively.

Table 1:  Percentage change in pig numbers – December 2006 to December 2007

                                             CAN                          AB                 SK                     MB

Total pigs                                  -6                         -10.6               -10.3                    -2.0

Breeding stock                       -1.9                           -4.9                 -3.0                    -0.6

Other pigs                              -6.5                           -5.0               -11.1                    -2.2

< 20kg                                      -1                         -11.3                 -5.1                 +13.4

20-60kg                              -11.4                         -11.3               -18.0                  -12.3

> 60kg                                   -7.3                         -10.7               -10.4                  -11.4

It seems likely that the unexpectedly low reduction in breeding pig numbers reflects the time taken to dispose of inventory and the difficulty in getting sows slaughtered at the end of 2007 and into 2008 was probably also a factor. Many producers seem to have taken their decision in the late fall and the reduced numbers will be shown more clearly in the April census data.

Numbers of pigs in the weight classes from weaning to slaughter were significantly down, indicative of the large increase in numbers being shipped to the USA. For Alberta, numbers in the <20kg, 20-60kg and >60g categories were all down about 11%, and similarly in Manitoba, where numbers fell by around 12%. In Saskatchewan, pigs in the 20-60kg category fell by a massive 18%, as the province’s two largest production companies continued to increase the number of pigs finished in the USA. 

While the January figures do not truly reflect the situation on the ground, they do show a trend towards a steady reduction in the national herd, which seems likely to continue for some time. With or without the federal Cull Breeding Swine Program, we are likely to see a further 10% reduction in sow numbers during 2008.

New government support includes cull sow program

Federal Minister of Agriculture and Agri-Food, Gerry Ritz, announced changes to the Agricultural Marketing Products Act (AMPA) at the end of February that will provide producers with better access to cash advances. He also announced a new sow cull program designed to assist producers who are either reducing their herds or exiting the industry altogether. Both the Canadian pork and beef sectors are now considered by the government to be facing “severe economic hardship” and therefore can qualify for emergency advances under the amended Act.

The requirement for livestock producers to use business risk management programs as security for cash advances has been removed and inventory values will be used instead.  This provision means that producers will not be limited by the value of their CAIS/Agri-Stability reference margin for the advance. Producers will also not have to use payments from these programs (such as interims, targeted advances or final CAIS/AgriStability payments) to repay the loans, unless they are in a default position.

The amendment has added “severe economic hardship” as a trigger for an emergency advance. When the “severe economic hardship” condition is declared, the requirement that the security for the advance be in first position is removed and the maximum amount of the advance raised to $400,000. The advance will be based on 50% of expected market price times the number of animals in inventory.

“Producers will have quicker and easier access to cash advances,” says Minister Ritz. “And, if all producers take advantage of the improved program, an estimated $3.3 billion in advance payments will be available.” 

“This is much needed help,” says Canadian Pork Council (CPC) president Clare Schlegel.

He notes, while this isn’t new money, the proposed changes to the APP will provide the breathing room livestock producers have been asking for. However he admits, “It doesn’t get us out of the woods by any stretch of the imagination but it is much needed help.”

In addition to these measures, a new $50 million Cull Breeding Program will provide support for hog producers taking steps to exit the industry or who permanently down size their operations. The objective is to reduce the national breeding herd by an additional ten percent over and above normal annual liquidations to more accurately reflect market conditions. Producers will be eligible for a per head payment for animals slaughtered and reimbursement for slaughter and disposal costs based on several conditions including that they depopulate at least one barn and not restock for three years.

 Sows and boars marketed from November 1, 2007 until the date when program applications become available will be eligible for a $225 payment per animal less the selling price received. The marketing of these animals is not subject to the restrictions for animals marketed after the applications become available, when slaughtered sows and boars must not enter the human food chain.  For the latest information, go to the CPC website,

Provinces announce more help for livestock producers

 Western provincial governments have responded positively to requests for assistance from livestock producer organizations as the high price of feed and low market prices continue. In February, producers in Alberta received an additional payment under the Alberta Farm Recovery Plan (AFRP), which was designed to compensate all farmers, not just those with livestock, for the high feed, fuel and fertilizer costs.  Re-appointed Agriculture Minister George Groeneveld delighted pork producers attending the Alberta Pork Congress in March when he hinted that the AFRP would likely be extended for another year. 

 Manitoba’s Agriculture, Food and Rural Initiatives Minister Rosann Wowchuk also announced support for cattle and hog producers.  The province, through the Manitoba Agricultural Services Corporation (MASC), is making $60 million in loan support available to hog producers at attractive interest rates, which will assist producers facing significant cash flow challenges. Producers will be able to borrow $35 per slaughter hog and $10 per weanling sold between October 1, 2007, and May 31, 2008. Loans will be termed over eight years with the maximum amount being $2.5 million.

Principal payments on these loans will be deferred for the first three years. The first year interest rate will be 2.25 per cent on borrowed amounts of up to $1.5 million with 4.5 per cent charged on any remaining loan amount. All loans will have an interest rate of 4.5 per cent for years two and three and six per cent for the last five years. An additional interest rate reduction of one per cent will be available for young farmers for the first three years.

 “The livestock industry in Manitoba and across Canada has been under significant pressure,” said Wowchuk. “Producers in Manitoba need assistance and our government is committed to ensuring our farmers in this important sector receive support to maintain their farm businesses today and position the sector for future profitability.”

Saskatchewan’s pig producers are being offered early access to their expected 2008 AgriStability payout under a Targeted Advance Payment (TAP) program.  The 2008 program announcement came two months after Saskatchewan pig farmers went public with notices received from the agriculture income stabilization (CAIS) office, saying the farmers’ TAPs from the 2007 AgriStability program were going to be much less than what the office had originally informed them they would receive or, in some cases, zero.


Little comfort from Hogs and Pigs Report

 The USDA Quarterly Hogs and Pigs Report, released on March 28, provided little hope for pork producers in the USA and Canada, suggesting that there is going to be a lot more pork on the market than expected. Virtually all the inventory numbers set new records for March. All hogs and pigs came in at 65.909 million head, which is 6.5% more than last year and nearly 3% above pre-report estimates.  The breeding herd inventory was slightly larger than last year and the market herd saw a jump of 7.2% from last year to 59.77 million head, a much bigger jump than estimates had predicted. USDA also revised its 2008 pork production forecast by adding 90 million pounds to the first-quarter estimate to reflect higher-than-expected hog slaughter in February.

 First-quarter pork production is expected to be 5.96 billion pounds, a massive 10.5 percent above the same period last year.  Total commercial pork production in 2008 is expected to be 23.1 billion pounds, 5.4 percent above 2007.  First-quarter liveweight prices for 51-52 percent lean hogs are predicted to range between $40 and $41 per hundredweight, 12 percent below the same period a year ago.  Worse still, stocks of frozen pork on January 31, 2008 were 563.6 million pounds, 16 percent above year-earlier levels.  Continued build-up of cold stocks may signal a slowdown in pork demand.

 The one bright spot is that January 2008 pork exports were more than 353 million pounds, almost 27 percent above January 2007. 

 Kevin Greer, Senior Analyst at the George Morris Centre, says in his Alberta Pork Hog Market Report that, based on US forecasts and a par dollar, producers are in for a very difficult year. He predicts 110-index prices of $1.15-$1.20 per kilo in the second quarter, “over $1.30” in the third and a drift down to $1.15 to $1.20 in the last quarter of the year.

Smithfield to reduce sow herd by five percent

 Smithfield Foods announced in February that it will cut its US sow herd by 4-5% or 40,000 to 50,000 sows – a move that will ultimately result in production of 800,000 to 1 million fewer market hogs annually.  The company raises 18 million market hogs annually at present and said that it was introducing the changes immediately, although the effects on the number of pigs marketed will not be seen until early 2009.

 Given the economics for raising hogs today, we cannot continue on the current path; something has to change,” said C. Larry Pope, president and chief executive officer. “Grain costs continue at record levels, with the potential of escalating, given the current US government policy favouring corn for ethanol. Today the economics are very challenging, and we believe that these increased costs will translate eventually into still higher food costs for the American consumer. In the meantime, Smithfield is taking immediate action to improve the efficiencies of our live production operations.”

 Murphy-Brown, Smithfield’s production division, announced last year that it was moving towards group sow housing, which for existing farms, will likely result in fewer sow places, especially in those locations where the opportunity to construct additional space is limited. Also, in North Carolina, changes to environmental regulations may lead to the need to reduce animal numbers. Therefore, although Smithfield cites economic conditions as the reason for the cutbacks, it seems likely that these factors played a major role in their decision.

 “Other hog producers will likely follow Smithfield’s lead and trim production,” believes Ron Plain, agricultural economist at the University of Missouri.  Also, he suggests, more cutbacks will be needed to push hog prices high enough to cover production costs. “This is not enough of a cutback to turn things around,” he said of Smithfield’s action.


European prices on the turn as pig numbers plummet

 The European average pig price increased by about 10% in the first quarter of 2008 and industry commentators expect further rises to continue as pig numbers throughout the region fall. There is hope that this signals a return to profitability for producers, whose costs have soared due to increases in feed prices. Census figures published so far this year show reductions of up to 10% in pig numbers. In Hungary, the Czech Republic and Poland the sow herd fell by 10-11%, between December 2006 and December 2007. Data from Northern Ireland show an 8% reduction in sow and gilt numbers, while reports from Europe’s largest pig producing nations – Spain, Germany and Denmark – also suggest significant herd reductions.

 Despite the promise of better times to come, half of Denmark’s pig producers are at risk of going out of business in the next two years, according to Henrik Jeppesen of the country’s Fionia Bank.  Producers are concerned that his view by could be an expression of no faith in the ability of producers to survive the current shakeout in the European pig industry.  They fear that, if the bank starts a credit squeeze, producers will not be able to invest in new housing and equipment and that could signal Danish production grinding to a standstill.  A Danish Bacon and Meat Council spokesman is quoted as saying that during second half of this year there will again be enough profit for Danish pig farmers to “cover their expenses”.

 Meanwhile British producer organization, the National Pig Association, continues its creative campaign to persuade the country’s retailers to pay producers more for their pigs, while increasing public awareness of the situation the industry is in. In February, a group of producers took to the recording studio to record the song “Stand by your ham”, which received massive publicity around the world. Then, in early March, this was followed up with a rally in London, when around 1000 producers and supporters lobbied MPs and received a high profile in the media (see Stuart Lumb’s article in The View from Europe in this issue)

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