Alberta Pork’s chairman is calling on producers to help redesign the pork value chain to put more money in their own pockets and divert thousands of pigs now being shipped south for finishing and slaughter.

During regional meetings with Alberta Producers in mid-March, Frank Novak reiterated his contention that the pricing model is broken and needs to be fixed if Alberta’s industry – including farms and processors – is to remain viable.

Novak pointed to various factors that have affected the cash markets in the United States, which is typically used as a basis for pricing Canadian hogs. That system is no longer relevant, he said, because so few hogs are sold on the cash market. Vertical integration in the US, both upward and downward, means processors are now slaughtering hogs raised on their own farms and producers are investing in their own processing plants.

In response to these new realities, Alberta Pork and the Western Hog Exchange formed a pricing committee last fall to examine the industry and come up with some options for Alberta producers. The committee included four people from each organization’s board.

“We wanted to make sure that producers were fully informed about what these different contracts do and how we stack up, so we know what we’re talking about and understand what’s going on in the world. We needed to figure out exactly what that value chain looks like long term and figure out who’s going to work on it with us,” said Novak.

“Hopefully, it would be with the processors we have now, but if they’re not willing to do anything different, then it’s our job, in order to protect our own businesses, to find somebody who will,” he said.

Producers were asked in December to provide information about their contracts to help the committee with its task. As of the Red Deer regional meeting on March 15, Alberta Pork had received only four responses, which Novak said leaves the committee lacking the information it needs to move forward.

“If you want something to happen, if you want to be part of it, you have to actually do something,” said Novak.

“This is not really hard to do. It’s relevant whether your contract is up this year or next year or five years from now. We just need to know.”

The bottom line in Alberta is that local producers cannot continue to sell at a major discount and expect to survive for another 10 or 20 years, he said, explaining that Alberta producers are at least $10 per head behind their American counterparts in pricing – a huge amount of money when added up over time.

“Right now, our American friends have been putting that $10 in their pocket and they’re doing stuff that we would love to talk about doing because they’re in a position to actually cut cheques.”

Novak went on to address the 70,000 weaners being shipped south every week while shackles remain empty at major plants in Western Canada.

Prairie producers and processors need to find a pricing system that will encourage producers to grow and finish their pigs here, which would ultimately fill the unused capacity at processing plants in Western Canada. Novak pointed out that the shortfall in capacity at the major plants adds up to about the same number of hogs as those being shipped live to the US.

While the pricing committee is working on finding ways to ratchet up the value of Canadian pigs, leaders are also working on a long-term plan to revise the value chain, said Novak.

“The rest of the world is changing. The Americans are telling us . . . that they think integration is the future. Those new packing plants that are being built in the United States today are all producer owned. That’s an important thing for us to know, because that tells us how they think they need to formulate and get together and learn to compete long term.”

Novak said he would much rather work with the processors that are already here and talk about developing a vertically-integrated value chain than try to build new plants, which require a great deal of planning and capital.

“At the same time, I will not wait for them to come. We will continue to talk to people and look at stuff in the background and on the sidelines and try to find some way to find some leverage or find something that we can do with somebody to make our lives better.”

The alternative, said Novak, is that Canada becomes a supplier of weaners for American finishers and processors.

“It’s crazy, but it could happen. You only have to watch and see what’s happened. Year after year more and more pigs leave and more and more barns disappear and more and more people pull the pin.

“I see the plants being built in the US, I see who owns those plants, I see what their business model is, I know what I’m going to have to be competing against, I know my supply is disappearing, I don’t know what they’re waiting for.”

In his earlier presentation, during which he described changes in Canada’s pork exports over the past 10 years, Novak put up a chart showing a dramatic reduction in the proportion of Canadian pork being shipped to the US along with dramatic growth in other markets, especially China. Not even a glimmer on the 2010 chart, China represented 25 per cent of all Canadian pork exports in Canada in 2016, while the US had dropped from 55 per cent to 33 per cent.

Novak said Alberta producers cannot sit on their hands and wait for someone to do something, but must work together to make the changes they need to become more profitable.

“We helped create the world that we’re in today. We’ve got to figure out what combination of models are going to work as well as they can possibly work.” •

— By Brenda Kossowan