July 16, 2010

 

Canadian hog numbers continue to decline

 

 

The number of hogs in Canada has been on a steady decline over the past five years, and there does not seem to be an end in sight to the ongoing contraction, according to industry officials.

 

Canadian Pork Council executive director Martin Rice said given the current status of the hog industry in Canada, there does not appear to be an expansion on the horizon that would see an increase in hog output, noting that there may be a small drop in the level of annual decline. The contraction has been related to the continuing lack of profitability and tight credit.

 

Rice said Canada was still undergoing a negative year-to-year change in terms of Canada's hog breeding population with the quarter to quarter decline also intact.

 

He said that as of October 1, 2008, the council was looking at Canada's breeding herd declining by over 7-8% on an annual basis, but the quarter to quarter decline began to back off.

 

Canada's year-to-year decline had begun to back off right up until the first of this year, when the year to year change dropped below 5%. Rice said as of April 1, 2010, the decline jumped again and was closer to 6%.

 

He said the hog industry is currently dealing with a lot of individuals who are managing four to five years of accumulated losses and who are still in the process of downsizing, if not getting out of the business altogether.

 

"There are a few hog operations in Canada that have begun to solidify their finances but there are also operations who are still dealing with a very low flow of equity," Rice said.

 

He also said Canada's financial institutions also appear unwilling to fund expansion of the hog industry at this time, adding that not many hog operations have over 50% of their financial returns coming back as capital rather than in debt.

 

If there is to be a turnaround in Canada's hog breeding herd there will need to be some kind of period of profitability that will reduce operating credit and ensure that long-term credit can be serviced, he said.

 

Rice estimated the downtrend in Canada's hog breeding herd will likely continue over the next two to three years.

 

He also pointed out that the increased potential for more feed grains being available in Canada does not automatically suggest hog operations will be able to expand.

 

Canada's hog breeding herd peaked in January 2005 at 1.63 million head. As of April 1, 2010, it was down to 1.3 million, almost over 20%. In terms of hog production, the decline was even faster, although at a six-month lag, Rice said. The country's peak inventory of hogs hit a peak of 15.2 million head as of July 1, 2005. Those numbers were down to 11.7 million as of April 1, 2010.

 

The rate of decline, however, has started to lessen, with Rice indicating the rate of decline, which was in the 7% range, is now in the 2% area.

 

Rice said the only way the contraction in Canada's hog breeding herd is going to change is if the profitability of raising a pig climbs significantly.