The news isn’t getting any better for the hog industry following an announcement that Puratone Corp., the third largest hog producer in Manitoba, has filed for bankruptcy protection.
“We are facing some of the worst times in the industry since 1998,” said Andrew Dickson, general manager of the Manitoba Pork Council.
In 1998, the closure of several hog production plants in the United States and the subsequent inability of existing plants to ramp up production quickly to meet demand caused a back log of hogs that drove prices down and some producers out of the industry. Now, a drought in the United States’ Midwest has pushed feed grains to the point where hog producers are expected to lose between $20 and $50 per head. And again, hog producers in the province are closing their doors.
A stong harvest in Western Canada means there is a healthy supply of wheat and barley, which is used to feed the hogs. But the grains also act as a substitute for corn, a crop that was decimated by record-setting high temperatures in the U.S., driving food costs up and forcing many producers to make a tough decision.
“People will feed and look after their animals regardless of the cost, but the real question is how long will they do it for?” Dickson said. “Will they be better off finishing this crop of hogs out and then break up the operation or close it down for a while.”
In some cases, the process of closing down barns across the province has already begun. It’s another contributing factor to keeping the price of pork from rebounding.
“The issue has become self reinforcing,” Dickson said. “Producers are going to take their hogs to market and sell them at a lower weight to get them out of the barn which in turn keeps supply up and prices down.”
“They’ve essentially mothballed their barns and they’ll wait for things to turn around and the future looks a little brighter and then they’ll crank it up again,” Dickson added.
Puratone, who operates out of Niverville and has about 300 employees, owes about $92 million and according to court documents has lost about $36 million over the past four years.
“This is an important company to rural Manitoba and they employ a significant amount of people,” Dickson said.
Puratone’s filing comes the same week that Big Sky, Saskatchewan’s largest hog producer, entered into receivership and less than three weeks after the province was forced to euthanize 1,300 piglets on a farm near Austin due to “severe distress.”
Dickson believes there needs to be government intervention in the short term in order to ensure the industry’s success in the long term.
“We need the banks and government to work with industry during these times,” Dickson said. “We’re asking them to re-finance these losses and push them over a longer period of time,” Dickson said.
Puratone is holding a company meeting on Monday and one employee, who wished to remain anonymous, pointed to rumblings that the company could be purchased by Maple Leaf Foods.
“We’ll see what happens, but just hoping Maple Leaf will buy us,” he said.
Maple Leaf Foods, which employs about 2,350 at its plant in Brandon, are concerned about the possibility of producers leaving the hog industry and isn’t surprised by the troubles Puratone is facing.
“We’re witnessing hog producers exit the business, however, productivity improvements have helped offset the producers leaving the industry completely,” said Dave Bauer, a spokesman for Maple Leaf Foods. “We expect supply to be marginally less in 2013.”
Bauer said the next six months will be an important and trying time for the hog industry, but added their is a silver lining.
“The good news is Canada remains one of the lowest cost locations in the world for pork production and that is a very good competitive advantage,” he said.
Republished from the Brandon Sun print edition September 15, 2012