October 29, 2010

Canada hog herd falls to smallest in 13 years

Canadian farmers cut back their hog herds to the smallest size in 13 years as of October 1, as high feed costs and an unfavourably strong Canadian dollar puts many producers out of business.

The hog inventory on Canadian farms slipped 0.8% to 11.9 million head in the third quarter from a year earlier, Statistics Canada said Thursday (Oct 28).

Several years of low hog prices, high feed costs and a volatile Canadian dollar led the Canadian government last year to offer incentives to farmers who stop producing hogs.

While hog prices have recovered from a year ago, so too have corn and wheat prices. The Canadian dollar is also historically strong against the US dollar, making Canadian hogs more expensive in international trade.

Many hog farms have gone bankrupt in recent years, said Jim Long, chief executive of Genesus Genetics, a Canadian breeding and exporting company.

"To stay in the hog business, you need two things, capital and courage. A significant amount of people ran out of capital and a significant number of producers lost faith in the Canadian hog industry," he said.

Chicago lean hog futures <LHc1> are about one-fifth higher than they were a year ago at around US$0.67 per lb, as North American farmers cut back their herds due to high feed costs and recession-dampened demand for meat.

Canada's sow inventory-a key indicator of the future trend in hog production-fell nearly 4% to 1.3 million head, Statscan said.

Canadian hog exports fell nearly 12% to 1.3 million hogs from a year earlier. Hog exports have been hit hard by the country-of-origin meat labeling law in the US that raises US packer costs of processing foreign hogs.