March 6, 2006

Canada's pig industry takes stock of its problems

Canada's hog industry, beset with problems for the past few years, is likely to face more in the months ahead as factors like tax duties, bird flu and decreased productivity haunt the beleaguered industry.

The inventory of market hogs was up by 5000 hogs between the two countries compared to the previous year while the sow inventory was up only 38,000, according to a joint report by the USDA and the Canadian Agricultural Statistical Service

Canadian market hog numbers were down nearly 1 percent while sow numbers were down 4,000. The number of pigs per sow was down one percent compared to last year while the number of sows farrowed per sow in inventory was down 4 percent.  These factors together led to a 6 percent from last year's Canadian pig crop. 

The slide in Canadian productivity is the cumulative effect of the problems which have plagued the Canadian hog industry for the past several years.  Domestic prices have suffered under heavy competition from beef, as Canadian cattlemen have not been allowed to export beef for the past three years due to mad cow disease.

Furthermore, pig export prices have suffered under unfavorable exchange rates that made pork more expensive in the US.

Heat and disease have also taken their toll in key production regions.

To top it off, US corn for Canadian pigs is taxed at very high rates due to a lawsuit filed by Canadian corn producers. Since it would be cheaper to feed the pigs corn that is tax free, many had expected more feeder pigs to have been brought in from Canada to be fed in the US. However, imports of feeder pigs have remained the same as last year.

Although limited growth in hog inventories suggests positive news for hog prices,  bird flu outbreaks in the rest of the world are pushing down demand for poultry and could harm the Canadian pork industry as well. This is because the US, being a major poultry exporter, would have more poultry on its hands, meaning that chicken would pose a serious threat to pork demand in the battle for the consumer dollar as producers cut prices. 

Despite all the negativity, futures price for the April lean hog contract suggests the market is expecting demand for live hogs to be quite similar to last year.