May 24, 2004

Canadian Hog Exports Would Continue Despite US Duties

The shipment of Canadian live hogs to the U.S. would continue but at a slower pace if the U.S. government were to implement countervail and anti-dumping duties, according to industry sources.
 
The U.S. Commerce Department said Friday that it has postponed until August 16 the date it will make a preliminary determination on what duties should be applied to Canadian live hogs.
 
"I think the weanling sector would be impacted the greatest," said Brad Marceniuk, a hog analyst with Saskatchewan Agriculture and Rural Revitalization.
 
He acknowledged that there has been a huge jump in the amount of weanling pigs going to the U.S. from Canada, with Ontario and Manitoba accounting for the majority of those shipments.
 
"It will really come down to what kind of contract these Canadian producers have with their U.S. client base," Marceniuk said. "Is the Canadian producer still going to be forced to send these weanlings to the U.S. despite the tariffs based on the terms of the contract or will the U.S. importer be forced to cover some of these extra costs?"
 
Marceniuk said only the contract holders would be able to answer that question. "If nothing else, new contracts may be put on hold," he added.
 
Martin Rice, executive director of the Canadian Pork Council, agreed the duties would negatively impact the market but more so for weanling and feeder pigs.
 
"We've lived with duties in the past on the live hog sector," Rice said.
 
"Some years, we had a very low countervail duty rate on Canadian live hogs when shipments were actually quite high," Rice said. "Then there were years in which the countervail was high when shipments were lower ... it varied quite widely."
 
The impact on the Canadian producer will vary based on the details of each contract, he said, acknowledging that depending on the contract, some of the cost may have to be picked up by the U.S. client.
 
The impact on Canadian weanling producers would be more noticeable as those animals were produced on the premise of being shipped out rather than being finished, Rice said.
 
Marceniuk said there was still a pretty good chance that the U.S. Commerce Department investigation will find that there was no injury to U.S. hog producers.
 
"There is no doubt that hog producers on both sides of the border experienced a very difficult year during 2003," said Neil Ketilson, general manager of Saskatchewan Pork. "Now whether or not this is significant in terms of anything that can be classified as countervailable or not, or anything that can be levied against Canada as dumping, is anyone's guess."
 
Marceniuk said a solution to sending some of the hogs into the U.S. could be partially resolved by adding processing capacity in western Canada.
 
"Right now, it makes more sense for Canadian producers to sell the weanlings to the U.S. rather than finish them at home," Marceniuk said. "However, if there was more processing capacity in western Canada, then the need to ship them south would also diminish."
 
Canadian weanling and feeder hog shipments under 50 kilograms to the U.S. during calendar year 2003 totaled 4.971 million live pigs, Marceniuk said, quoting Agriculture and Agri-Food Canada figures. During 2002, Canada shipped 3.727 million weanling and feeder pigs under 50 kilograms to the U.S.
 
Slaughter-weight, meaning over 50 kilograms, live hogs from Canada to the U.S. totaled 2.458 million head in 2003 compared with 1.966 million in 2002.
 
No figures were available for calendar year 2004.
 
The U.S. International Trade Council in early May found reasonable evidence that the U.S. industry was materially injured by reason of imports of live swine from Canada that are allegedly subsidized and sold in the U.S. at less than fair value.