Alberta producers desperate to stop the bleeding are looking at strategic cuts in production to reduce cost and leverage processors – not necessarily in that order.
Discussion of a broken pricing model and the need to put more money into producers’ pockets has netted some concessions from major packers during the past year. But even at the recent spike to $1.93 per kilogram, producers in Western Canada still struggle to remain viable while their counterparts in Quebec are seeing $25 to $30 more per hog, says Brent Bushell, executive director of Western Hog Exchange.
Late last year, Bushell offered a set of options for producers seeking to fix a pricing system that has generated a net loss over the last 10 years:
1. Lobby the province for a single desk marketing system, similar to Quebec,
2. Producers buy or build their own slaughter plant,
3. Producers convert their barn to iso-wean and ship the pigs south for
finishing and processing,
4. Production reduction, meaning breeding is curtailed so there will
be fewer hogs ready for market during times of the year when prices
are at their lowest,
5. Shut down until things change or close permanently,
6. Status quo.
A few weeks ago, six producers presented Alberta Pork with a document seeking its position on pricing and asking for support on a move to cut back production.
While the other five options are still on the table, the group committing to Option 4 had grown to 12 farms by late March, Bushell said in an interview with Prairie Hog Country.
“In a perfect world, if you wanted to make money in hogs, you would raise hogs from April until September,” said Bushell.
“You can’t always, and that doesn’t help the packers. Packers can’t run six months of the year.”
Producers invested in the plan will cut breeding back by 25 per cent 10 months ahead of the winter season, when prices typically drop off because of higher supply worldwide. It will certain mean less income, but with hogs selling at negative margins, production reduction means less money lost, said Bushell. Certainly, farmers will have to feed open sows, but that is a loss they are prepared to bear, he said.
Focus on Option 4 does not mean producers are not interested in the other options, only that some feel that’s the one that will force processers to come up with better prices, said Bushell.
The message to processers is, if you want hogs, you have to pay a fair price, he said.
“When we see a large packer . . . coming out and reporting record earnings once again, it grates on guys. Production reduction is probably the easiest (option) because there are no new buildings or conversions.”
Darcy Fitzgerald, Executive Director for Alberta Pork, acknowledged the document at press time, but was unable to offer a position on its contents.
“It was the producers themselves – there was a number of ways of getting the packers’ attention from the producers’ perspective. Those options were conveyed from the WHE a number of times to producers, and I think this group of producers took up the one about production reduction. “They’ve taken it on their own and they’ve just asked if there are other producers who have considered this that they do a similar type of thing.”
Alberta Pork has been pushing for a pricing system that puts more money into producers’ hands, including investigation the potential for single-desk marketing similar to the Quebec system.
Bushell anticipates further developments in the ensuing weeks as Alberta producers look at ways to salvage their farms and their industry.
“The idea of purchasing their own facility is still out there – there are still producers that want to ratchet themselves up the food value chain,” he said. •
— By Brenda Kossowan
