Canada's hog herd shrinks amid higher prices

 

 

Hog farmers in Canada continued a four-year herd downsizing trend in the first quarter, but the pace slowed as higher hog prices and lower feed costs boosted profits.

 

Farmers reduced the national pig herd 2.1% from a year earlier to 11.635 million heads as of April 1, the lowest in at least eight years, Statistics Canada said Wednesday (April 28). That's a fraction, however, of the nearly 12% reduction in late 2008.

 

Many of Canada's hog farmers have suffered from years of unprofitability due to a series of factors, including a stronger Canadian dollar and trade restrictions on Canadian pork tied to AH1N1 flu.

 

Lately, however, improving hog prices and weaker feed costs have allowed more farmers to earn profits.

 

Chicago lean hog futures have nearly doubled in value to about 88 cents per lb since mid-August amid tight supplies and strong demand for pork. Chicago corn futures have risen over the same period but are down 15% in 2010.

 

"What people who supply the industry tell me is that the (farmers) who are there now are the ones that have staying power," said Kevin Grier, senior market analyst at the George Morris Center. Mixed farmers, who grow feed crops for their hogs, have weathered the industry's problems better than some, he said.

 

Canada's sow inventory dropped 5.7% to 1.3 million heads as of April 1, Statscan said. The number of sows expected to farrow in the second and third quarters has dropped 2.1% and 3.6%, respectively, from one year prior, as farmers have committed to remove 131,000 sows from production in exchange for government funds.

 

Those incentives to exit the industry may also be visible in the number of farms reporting inventories to Statscan, which shrunk 11% to 7,150 farms from a year earlier.

 

Canadian hog exports, which have been hit hard by a meat labeling law in the US that raises US packer costs of processing foreign hogs, fell 20.5% to 1.4 million hogs from a year earlier.

 

Hog slaughter has been stable at 5.5 million heads for each of the past three quarters due to long-term contracting by packers and reduced flow of hogs to the US, anaslysts said.

 

But packers such as Olymel LP in Alberta and others in Ontario, such as Maple Leaf Foods (MFI.TO), are starting to feel supply pressure, analysts said.