Manitoba’s hog industry is on the downswing yet again as producers brace for market losses.
But as the industry faces what has been called the “worst crisis in the history of Canada’s pork industry” by Manitoba Pork Council chairman Karl Kynoch, it appears governments are increasingly being called upon to intervene on behalf of an industry that is becoming more turbulent.
Kynoch told the Winnipeg Free Press last month that hog producers are expecting to lose about $130 million over the next six months, due in large part to soaring commodity prices.
“It’s now costing us about $160 to $180 in feed to finish a hog and prices today are about $160 to $175 per hog,” Kynoch said.
Hog production in Manitoba has also decreased to about eight million hogs this year from more than nine million head a few years back.
But the troubles facing the hog industry were underscored last week when Puratone Corp., the third largest hog producer in Manitoba, filed for bankruptcy protection. As the Sun reported, Puratone, which employs about 300 people in this province, owes about $92 million and according to court documents, has lost about $36 million over the past four years.
Puratone’s filing came the same week that Big Sky Farms, Saskatchewan’s largest hog producer, entered into receivership, and less than three weeks after Manitoba was forced to euthanize 1,300 piglets on a farm near Austin due to “severe distress.”
Reuters reported earlier this month that Big Sky, which also owns barns in Boissevain and Melita, was struggling under the high costs of animal feed.
While some producers will attempt to hold on over the next several months, the process of closing down and mothballing barns has already begun across the province. And as they sell off their hog herds at lower weights to get them out of the barn, it boosts supply on the markets and in turn keeps prices low, just when higher retail pork prices could help boost the industry.
This is not the first time that Manitoba hog producers have found themselves in dire straits in recent years. Only four years ago similarly high commodity prices and low retail pork prices, coupled with stricter provincial waste treatment regulations, forced the industry to contract.
At that time, Manitoba’s NDP put up $60 million in loans for livestock producers affected by soaring feed costs. Hog producers were able to borrow $35 per slaughter hog and $10 per weanling sold between Oct. 1, 2007, and May 31, 2008.
Now Keystone Agricultural Producers is calling for a similar, though more expensive, solution — this time $130 million in government loan guarantees.
KAP president Doug Chorney says the situation is so bad that family farms will be lost and hundreds of people could lose their jobs in related industries unless Ottawa and the province intervene immediately.
The need for a government bailout has been made more pressing, reports Reuters, because banks have stopped lending money to large and small hog producers.
“We are on the verge of not just having a downturn here — this is an industry-killing experience that we’re going through,” Chorney said.
Federal Agriculture Minister Gerry Ritz said he would be meeting with farm lenders this week to address the situation and news reports suggest Manitoba Agriculture Minister Ron Kostyshyn will meet with the Manitoba Pork Council soon. But producers can’t count on government aid, even as the industry falls down around them.
In general, producers can guard against such market volatility by using the futures markets for feed grain and slaughter prices, as a way to lessen the bust and boom effect. But that’s only a partial answer.
Historically, high commodity prices usually meant difficult years for livestock producers and vice versa. However, the economic troughs that accompany lean years are becoming more difficult to manage as farms take on more debt to build modern facilities that meet stricter provincial standards.
Last month, the federal government set up a task force to look into the state of the country’s hog industry and to find ways to help producers weather this economic storm. We don’t expect federal and provincial governments to stop droughts in the U.S. from withering crops and driving up commodities, but the increasing need to bail out the hog industry in this country isn’t sustainable either, for government or for the producers.
Before the industry is damaged beyond repair, the task force better do some quick thinking.
Republished from the Brandon Sun print edition September 18, 2012