Manitoba pork producers and hog sector partners participated in the online fall producer meeting for producers west of the Red River and both Hutterite Brethren Districts on Nov 18. The last session with Darcy Fitzgerald and Andrew Dixon, respective general managers for Alberta and Manitoba Pork, discussed price mechanisms in Western Canada.
George Matheson, chair of Manitoba Pork, said in a nutshell, it is about making pork production more profitable for the independent producers on the prairies.
“Alberta Pork initiated this discussion because it’s always easy to let things go after a while when prices rebound and they rebounded,” said Matheson in his introductory remarks. In h@ms Marketing Services producer meeting, GM Bill Alford said, “It’s anti-cyclical this year. The strong prices should be in the summer, the weak ones in the fall.”
The Manitoba pork chair said the prices were weak in summer and rebounded to profitable levels in the fall. Nonetheless, historically, the price mechanisms in Western Canada have not helped independent producers.Darcy Fitzgerald reported on their meetings with three of the five packers in Western Canada. The goal to discuss the situation and highlight where producers are in Western Canada and to lay out the facts and build a relationship and work together in the future.
The most important point to show the packers how the pig business in Canada sits stagnated with no growth in quite some time and shrunk a bit in Canada for the total number of pigs produced. Farms have decreased over the past 20 years, 75 per cent decrease with less than 20 per cent of the farms eligible to ship pigs to one of those federal plants.
He pointed out by using the 201 from the USDA the independent producers in 2001; producers had 17 per cent of the pigs going through the system negotiated, today its less than two per cent and shrinking. He pointed out how the current pricing mechanism based on the USDA price isn’t working. Even with running an efficient 600 sow farrow-to-finish operation yield 28 pigs per sow using the last four formulations within that five-year timeframe, seeing losses of about $11 a pig. “Over five years, we’re looking at a 3.27 loss annually on net return of investment,” he said.
Other points focused on the benefits of change, for instance, less price volatility and swings, where the packer pays higher prices at the peaks and the producer absorbs the losses in the valleys.Fitzgerald said it’s difficult to ask a banker for more money to do maintenance, growth, operating loans, and build new things when faced with a negative return every year for the last five. Having a negotiated price made in Canada would be less reliant on the government business risk management programs. “With COVID, our governments are not happy to speak to us about business risk management and changing things and allotting more money.”
With a better and more consistent price, pork producers would increase investments into maintenance, growth and new barns and find that entry supply opportunity for packers. There’d be less competition in supply.
“When you have a strong relationship between the packer and the producer, it’s a great opportunity not to have to go off and look for somebody to give you a better deal, but rather you can work together,” he said.
Also, dealing with the collaborative side even further supports key initiatives that go to trade, government and public issues, dealing with a multitude of problems there.
“We spend in Western Canada, way too much time on pricing. There are so many other issues that we have to tackle and be in front of, and this is taking up way too much time,”said the Alberta Pork GM.This fundamental issue needs fixing to help build the brand together.
“What better than to be proud of what you’ve had, build a solid relationship between producer and packer, and to be part of the brand in the marketplace and be part of it.” •
— By Harry Siemens
