October 18, 2004

 

 

Tariff May Boost US Hog Prices

 

Hog prices could move higher because US producers won a victory Friday in their arguments that Canada dumped hogs into the US market and improperly suppressed prices.

 

The US Commerce Department ruled that Canadian hog producers shipped hogs into the United States below the market rate. The department imposed a trade duty of 15 percent on Canadian hog exports to the United States, currently $389 million a year.

 

Importers must pay the extra tariff to bring hogs into the country. The ruling could also boost prices for US producers, who are already seeing some of the most profitable months in recent years.

 

Producers lost money from November 2001 to January 2004, said John Lawrence, agricultural economics professor at Iowa State University.

 

Over the past few months producers have been making between $6 and $10 profit per hog. Profits are being driven by higher purchase prices by packers, lower-costing grain for feed and increased pork demand because of exports and high-protein diets.

 

"All of the right things have happened to line up at once," said Al Prosch, coordinator of the Pork Central office at the University of Nebraska-Lincoln. "Nobody would have suggested a year ago that demand was going to bail us out and we would have a real good year."

 

More than 100 US producers, companies and lobby groups, including the Nebraska Pork Producers Association, petitioned the federal government to investigate Canadian hogs. The hogs have come into the country at a higher volume since May 2003, when the United States closed its borders to Canadian cattle following a case of mad cow disease in that country.

 

Nick Giordano, an attorney for the National Pork Producers Council, said the Canadian government has given large subsidies to its pork producers. That encouraged them to send more hogs south to the United States.

 

"This whole thing is being driven by the direct payments to producers in Canada," Giordano said. "We're not trying to close the border. We're just reacting to unfair practices in Canada."

 

Canada exported nearly 6.6 million hogs to the United States in the first nine months of 2004, up more than 20 percent from the same time a year ago. While packers import about 40,000 hogs a week, about two-thirds of all hogs sent to the United States are weaned pigs sold to farmers.

 

Slaughter numbers show the United States is producing just about the same amount of pork as a year ago, about 4.8 million pounds a week. Packers are paying nearly 35 percent more for the same carcasses, and pork meat cuts are selling for about 20 percent higher.

 

Former US Agriculture Secretary John Block, who represents a group of hog farmers opposing the trade complaint, called the Commerce Department decision "misguided" and said it would hurt small Midwest hog producers who rely on a steady supply of affordable Canadian pigs.

 

"The rates are unfair and will hurt hundreds of American farmers who buy Canadian pigs and raise them to market in the US," Block said.

 

Giordano disagreed, saying the same farmers will benefit from higher prices for finished hogs. The ruling likely will increase the volume of hogs that stay in Canada, so Canadian farmers will receive less for their pigs.

 

"The majority of adjustments are going to be north of the border," he said.

 

Representatives from the Canadian Pork Council said the added duties are an additional expense for moving hogs into the United States and erode free and fair trade that has made the North American hog and pork industry successful.

 

Nebraska is often a destination for Canadian slaughter hogs and feeder pigs. At the same time, the state has experienced a loss of producers, particularly since the late 1990s when prices were suppressed and Canada increased its exports.