December 21, 2006

 

Canadian hog industry to be hard-hit by high feed prices

 

 

High feed prices will likely cut into the profits of the North American hog sector in 2007 due to the continued rise of the Canadian dollar, according to sources.

 

Feed prices will go up a great deal, said livestock analyst Ron Plain of the University of Missouri-Columbia adding that hog prices would be down by US$2 to US$3 per hundredweight in 2007 compared to 2006.

 

Hog producers could run serious losses before the end of 2007, due mainly to higher feed costs and slightly lower hog prices," said Plain.

 

The hog cycle tends to last about four years, although there can be some variation in length, according to Plain. The US hog industry had "a good year" in 2006 but would start losing money in 2007 and return to profitability by 2009.

 

However, Plain said Canadian producers were already starting to hurt as the strength of the Canadian dollar means that US hog prices do not work out to the same as they did a few years ago when the Canadian dollar was weak and the country's hog sector was growing.

 

Patti Negrave, a red meat analyst with Agriculture and Agri-Food Canada, agreed that the strong Canadian dollar was cutting into the profitability of the Canadian hog sector, especially from the point of view of the packers.

 

However, she also thought that feed prices would play a larger role in the Canadian hog sector in 2007 and agrees it would cut into profits.

 

The international pork market would still see some growth, but would likely be slower than in recent years.

 

Although hog prices in Canada would be higher on the year, costs would see a larger increase, Negrave said.

 

The other main issues is plant closings. Maple Leaf has announced plans to shut down a plant in Saskatchewan and Olymel has announced plans to shut down two plants in Quebec. Olymel also recently backed out of pork plant to be built in Manitoba.

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