Time is running out on Western Canada’s hog industry, with one factor at the bottom line: Producers absolutely must earn a higher share of the carcass value if they are to continue raising hogs. Industry leaders say Alberta is closing in on the critical point where there will not be enough hogs available to supply the plants.  
“Our industry really hasn’t been profitable, on an annual basis, for the last five or six years,” Alberta Pork Chair Brent Moen said in a recent interview with Prairie Hog Country. Moen had been asked to comment on his presentation to the organization’s annual general meeting, held in November.  
“There are not too many businesses that can sustain a negative return for five years,” he said of an Alberta Pork study that examined producer profitability, based on a 600-sow farrow-to-finish operation. While there have been periods of profitability, the average margin among Alberta producers over the last five years has been a loss of $5 per head, said Moen.  
That compares badly with producers in Quebec, whose single-desk marketing system returns a higher value for their hogs and assures that producers remain profitable.  
Alberta Pork has looked at various means available for improving margins for its members, but the bottom line is that the people breeding and raising pigs need a bigger share of the income from their hogs if they are going to stay in business, said Moen.  
“The challenge with a hog operation is, either you are producing pigs or you’re closed. If you’re going to cut your production back by 20 per cent, you know, get rid of the most inefficient sows that you’ve got, it will save you a little bit of money. But over all, you’re still going to lose money because you’ve got less pigs to cover all of your fixed costs.”  
Five years of negative margins have had a distinct impact within Alberta, he said.  
“We have probably lost seven or eight (out of 200) producers in the last year to a year and a half, who have gone out of production or are in the throws of getting out of production.”  

Using data produced by the United States Department of Agriculture, Moen showed an exponential increase in the retailers’ share of the carcass value, compared to a modest increase in the packers’ share and a decline in the share to producer from August of 1970 through to August of 2020.  
While the Canadian situation is different that the US because of the higher proportion being exported, the chart shows steady increases in the value of a hog carcass, with retail taking a bigger bite every year.  
It’s not just about being paid for meeting quality standards or reducing costs of production or improving farrowing rates or any of the other measures taken to market better hogs. It’s about earning enough income from the hogs to continue producing and to achieve a viable business with reasonable expectations of being able to grow that business.  

While producers are unable to influence retailers, they do need a stronger partnership and a more positive response from the packers who buy their hogs, says Brent Bushell, General Manager of Western Hog Exchange. Concessions made through negotiations with Olymel, Britco and Maple Leaf have simply not been sufficient to produce the needed results.  
He concurs with Moen’s position, presented at the AP AGM, that a single-desk system – which existed in Alberta until 1996 – would offer fair pricing and stability that could ensure the long-term viability of the industry for producers and packers alike.  
However, he is not optimistic about the potential success of such an attempt.  
“We’re playing a game where the odds are stacked against us,” Bushell said in an interview with Prairie Hog Country.  
“The game has evolved – or devolved – to where an individual producer no longer has the power, the strength or the negotiating ability to get back to that price. WHE is the largest supplier and the largest customer of hogs in Alberta, and I still can’t do it. So that is the challenge that is going to be out there for producers.”  

Any gains packers are making within the current price regime is going to come at a very dear cost in the not-so-distant future, said Bushell.  
He commented that while processing companies like Olymel can raise their own hogs, their costs of production are considerably higher than those of an independent producer. So, why not pay that money to those producers instead, offering profit margins to stimulate more production and ensure a long-term supply of high-quality hogs in number sufficient to keep plants running at capacity?  
WHE has offered to assist any producer group willing to enter the packing business, either by purchasing an existing plant or building a new one. While there has been some discussion, no one had come forward with a proposal by the end of January, said Bushell.  
He and Moen both said that people outside the industry, including consumers and government, are largely unaware of the impending threat to their supply of high-quality Canadian pork and the impact a crash would have on local economies.  

Alberta Pork has commissioned an economic impact study that will determine the contribution pork production makes to the province’s economy, but results have not yet been tabulated.  
Bushell remarked that a collapse among hog producers would have a ripple effect throughout the value chain, including plant staff, veterinarians, truckers, pharmacists and others who supply products and services to the barns and the plants.  
Moen said retail prices are historically high for all meats, including beef, pork and poultry and that packers’ margins have been good, yet producers continue to lose money.  
“It’s not a sustainable business. Frankly, if you talk to executives of the larger packing plants and the larger grocery retailers in Canada, if you ask them, ‘How would you like to run your business with these types of margins?’ they would tell you that they wouldn’t.” Moen’s report to the AGM is available online: 
https://www.albertapork.com/2020/12/01/producers-vote-to-explore-new-hog-selling-options •
— By Brenda Kossowan