Bill Alford, general manager of Hams Marketing Services Co-op of Headingley, MB said changes in the geographic hog producing and marketing areas plus COVID-19 restrictions cause significant pig pricing discrepancies in Canada.
Alford said the hog industry has moved to a more national-based reference model or reference market, off the USDA instead of a negotiated market-driven price formula here in Western Canada, or Canada, for that matter. With fewer hogs bought on a negotiated basis, like singular markets like the Western Corn Belt, Iowa, or Southern Minnesota. They’re making up a smaller portion of the hogs bought.
“The industry is using the national constructed price or national reference report on all formulas in Western Canada and out east, too. Most of them, and there’s still some other ones in Iowa, Southern Minnesota based formulas, but not strictly negotiated,” he said.
That portion which is tight and negotiated, in regions with shut down packing plants, are getting no or very poorly competitive bids. Mainly due to constraint capacity, producing a very wide-spread in the pricing, but in Western Canada pricing off Maple Leaf, HyLife, or Olywest is different. They don’t use a singular market to construct the price, so there are cut-out components in that national and other purchase arrangements.
“It’s not a hundred percent cut-out-based unlike what Quebec introduced last year, where the cut-out skyrocketed from an all-time low five or six weeks ago an all-time high,” said Alford. Relating to these packing plants shut down, constraining the supply of meat on the market creates a very volatile hog market. In some areas in the US, it’s just a matter of finding a shackle; price is pretty much secondary.

“But fortunately in Western Canada, the plants remained open rallying into this with meat prices going up, so at least getting a bit of a recovery,” he said.
The Hams Marketing executive director said for a cut-out price; they also use USDA reference reports and markets. They put out a USDA cut-out report daily, virtually just the main primal cuts, hams, bellies, etc. of the hog carcass and traded for daily to comprise an overall cut-out price. With the COVID-19 lockdown, some panic buying in general, not just meat, cause a drawdown in supplies helping the cash hog prices in Canada and across the US and then came to the unknown. Now what? Then the demand backed off, but then the plants started having numerous infections and had to shut down due to worker safety and immediately boomeranged the supply of available fresh pork and beef into a shortage. It’s getting back up to the normal, whatever that might be, the new average level of capacity.
Alford said with the social distancing guidelines in place that they’ll be able to get to that previous capacity. Producers in the US are showing signs of liquidation to get that herd back into balance, which will help prices in the long run in general.
“But, and kind of knock on wood here, our pork processing plants got through this without any shutdown. Producers with higher prices recently and the cut-out being high, the packers are doing very well,” he said.
Bob Kleinsasser, hog boss at Suncrest Colony near Steinbach, MB said it is going very good, the price is up, got $225 last week.
“Isoweans, not sure what’s going on. Our guy who buys ours didn’t take them two weeks ago and had to crowd them into our barn, so not sure what’s going to happen in 3 weeks,” said Kleinsasser. “We could get by this time, but next round, not so.”
That is an indication of where it’s at, especially as it pertains to weanling producers.
Alford said those weanlings supply an oversupplied market. While not talked about much, weanling exporters can’t ship their pigs or at least at a price that would return anything. This weanling oversupply disrupts, and with that constrained capacity down there, it’s pushing right back onto the weanling guys.
He said HyLife at Neepawa is the first packer in Western Canada to phase in a cut-out based pricing formula.
“Again, timing’s everything. They were about to introduce these several weeks back, but that’s when you saw this acute meat shortage and the cut-out soar to record levels, which like anything that happens too quickly, you got to wait until it slows down to get back in line with what your cost structure is,” said Alford. “At Hams Marketing, we’re moving towards cut-out in the existing formulas. Now, this is the first Western Canadian packer to go a hundred percent. But again, they’re phasing it in, using an adjusted value based on current formulas.” •
— By Harry Siemens