December 01, 2003

 

 

Hog Report May Ease US' Concerns Over Rise in Hog Imports From Canada

 

Canadian hog producers has been hoping the hog report released November 20 will help address American unease over the rise of hog exports to the United States this year.

 

Canadian producers were afraid the increased exports, particularly of finished hogs, might prompt American trade action to quell the flow of pigs.

 

American producers were questioning whether market forces alone were driving more Canadian hogs south, or whether there were other factors at play, such as farm support programs in Canada.

 

The report issued from the George Morris Centre in Guelph, Ontario, Canada, attributes the increase in hog exports to the fallout from the BSE crisis in the Canadian cattle industry, the rapid rise of the Canadian dollar and a temporary decline in Canadian hog processing. Prepared by senior market analyst Kevin Grier, the report suggests exports of finished hogs are poised to decline and should continue to do so in the coming year.

 

The report should demonstrate to the Americans that the increase in finished hog exports to the U.S. is not a long-term trend, said Martin Rice, executive director of the Canadian Pork Council. An ongoing goal of the Canadian hog industry has been to expand domestic slaughter, rather than send greater numbers of finished hogs into the U.S., he said.

 

"As time wears on, there are adjustments taking place."

 

The George Morris Centre report was prepared for the Canadian Pork Council to explain the economic reasons behind the increase in hog and pork exports to the U.S. during the third quarter of 2003.

 

The U.S. National Pork Producers Council had not received the report as of November 21, so was unable to comment.

 

In his report, Grier showed that until this year, slaughter hog exports to the U.S. had been decreasing since 1998, thanks to expansion of Canadian packer capacity, which had grown to almost 480,000 head per week last year. That is up from 350,000 head five years ago.

 

He described events including the rapid rise in the Canadian dollar and the BSE crisis in cattle as unusual events, whose effects are now starting to subside.

 

The BSE crisis prompted increased Canadian consumption of beef as a show of support for the country's cattle producers. However, that weakened domestic pork demand and affected the prices that Canadian packers were willing to pay for hogs.

 

The report calculates that BSE likely cost Canadian packers about $7 per hog in lost revenue.

Packers also had to contend with the rapid rise in the Canadian dollar. The difference in the exchange rate between early in the year and summer cost Canadian packers $9 per 100 pounds or more than $20 per head, Grier reported.

 

That hurt packer profits and their ability to competitively bid against American packers for Canadian hogs.

 

Some Canadian packers closed or slowed operations during the summer.

 

The result of all this was more finished hogs going to the U.S.

 

Grier said the BSE crisis is fading now that the U.S. is again importing some beef from Canada, which helps to reduce pressure on domestic pork markets and prices.

 

"Packer margins have begun to seasonally improve this fall, which will result in increased kill rates and less slaughter exports," Grier said in his report. "Finally, the rapid culling of the Canadian herd will likely result in a reduction in exports later in 2004."

 

Feeder-weaner hogs continue to account for the largest percentage of hog exports to the U.S. In his analysis, Grier concluded that Canada has a comparative advantage in weaner production, while the U.S. has an advantage in finishing hogs. There's keen demand among U.S. hog finishers in Iowa and the American corn belt for Canadian weaners, he said.