Increases in the number of packer-owned sows is raising new issues with independent producers concerned about their future in the industry. 
Maple Leaf foods announced in June that it has acquired two sow herds and two nursery barns from Polar Pork, adding 140,000 pigs per year to its production capacity in Saskatchewan. That is not a large number of pigs overall but will ramp up the number of packer-raised pigs that has already shown increases in recent years. In its annual Pork Powerhouses report, the American agriculture magazine, Successful Farming, stated that Canada’s packer-owned sow herd had grown to by 73,000 sows in 2020, from 346,000 to 419,000 animals. That does not include the Maple Leaf acquisition. 
Successful Farming lists sow numbers for five Canadian packers in its report for 2020, which of course does not include figures for this year. Olymel (including the acquisition of F. Menard in Quebec) grew last year from 106,000 to 134,00; HyLife grew from 88,000 to 132,000, Maple Leaf in Manitoba remained static at 75,000, The Progressive Group in Manitoba had a modest increase from 45,000 to 46,000 and Alberta-based Sunterra also remained static at 32,000. 
Prairie Hog Country has been contracted by independent producers who wonder what the impact of vertical integration will be on their efforts to negotiate a better pricing package from the packers that buy their hogs. 
Brent Bushell, executive director for Western Hog Exchange, circulated the following message to its shareholders on June 25: 
“(With) only two simple choices, the effects will be one of great opportunity or one of more pain and suffering for hog producers. 
One option would be to step back and realize that hog producers produce the most cost effective, safest, and consistent hogs in Western Canada. By sharing in the value of the pork with producers and working hand in hand, Canadian packers and producers could find efficiencies, new markets, and branding programs to export, promote and sell the best pork in the world. This model would help communities thrive with profitable hog producers, attract new entrants, and keep all our valued supply companies that supply producers with everything that they require, in business. 
The second option is a little darker. 
This is where packers either start to build their own barns or buy producer’s barns out to firm up the hog supply for their slaughter plants. This will eliminate competition for producer hogs, diminish the chances of hog producer supply businesses from staying and take our industry down a road where all animals are produced and slaughtered from a large corporate business perspective. 
This is a road where the independent producer is no longer required in the industry.” 
Citing a report by economist Kevin Grier, he said Maple Leaf is adding further capacity by building its new barns in Saskatchewan and Manitoba, further reducing its reliance on independent producers. 
Bushell emailed a message to Prairie Hog Country, predicting profound changes in the next five years. 
“I can see a reduction of a third of the producers and barns as they are old, producers are old (and) bank accounts are light overall,” he writes. 
“Either packers buy up these old farms and rebuild new small 600-sow farrow-to-finish barns (too small) of their own on these operations or we lose 35 per cent of the independent producers. I am not sure that new permits for large-scale finishing barns will be accepted by counties and municipalities to move forward by packers. 
“If that happens, we will then also lose 35 per cent of the packing capacity as you can’t slaughter hogs for pork if there are no hogs to slaughter. 

“I would guess that out of our five federal packers, the big three . . .  will be pushed out of the export market.” 
That will hurt all involved in our industry including trucking companies, genetics, feed companies, vets and others as once you lock in with a packer to finish hogs, they choose all those options for you. You will only get paid for labour and barn. 
Bushell gets no argument from Alberta Pork Chair Brent Moen, who sees vertical integration as a double-edge sword. Moen is general manager of Verus Swine, acquired by Olymel in 2017 with the purchase of Alberta-based Pinnacle Farms, and sits on the board at WHE. 
He said packers are purchasing their own barns to ensure that their hog supplies are adequate to keep their shackles moving. There is no market for swine producers if the packing plants cannot remain viable, Moen said in an interview with Prairie Hog Country. 
At the same time, producers in the western provinces do not have the high level of marketing power that is legislated in Quebec, he said. And while a fair pricing formula is the goal, the industry needs to take a hard look at retail’s share of the cutout and whether that group needs to be investing more money in ensuring a future for independent hog producers. 
About 30 per cent of Canadian pork is consumed in Canada, while the balance goes to export, said Moen. 
Unlike the United States, where mandatory discovery means retailers must report their profits, Canadian retailers do not have to publicize their markup and profit margins. 
It is difficult therefore to estimate the level of profit retailers see from the sale of pork products, but it appears significant, he said. 
The one thing that hasn’t changed is that, despite a current spike, producers are not being paid enough to sustain current levels, never mind support the expansion and growth that would ensure long-term viability for the packing plants. 
Producers benefited from a spike in 2014 related to an outbreak of porcine epidemic diarrhea that destroyed millions of pigs, said Moen. But that money was farmed off in subsequent years and those same barns are now five years older, he said. 
Alberta Pork figures shows profitability of $60 to $70 per hog at the end of July, said production economist Bijon Brown. The current spike is based on disease-related production cutbacks in the United States and increased demand in China, said Brown. 
But there is no question that the current bubble will burst, said Moen, leaving producers back in the same position as they were in after 2014 and with barns that are seven years older. 
“I wouldn’t say that (independent producers) are being run out of business by vertical integration. I would say they’re being run out of business by lack of profitability in the independent sector,” said Moen. 
Until producers can be assured of a fair and stable funding formula that will put cash in their pockets over the long term, the industry will continue to gravitate toward packer-owned barns, despite the higher costs involved, he said. 

Packer barns can never be as efficient and profitable as a properly paid independent, said Moen. 
“In any business, if you own it, you’ll do a better job running it and you’ll do what it takes to make it efficient and make it profitable, versus somebody that’s getting paid by the hour. 
“I firmly believe that independent producers can produce a pig cheaper than an integrated model.” 
Olymel and HyLife have made significant changes to their pricing programs over the last few years, which has been useful for producers. But other major packers are currently paying an average of $15 per pig less and recent moves from Maple Leaf show that they are ramping up their involvement in raising pigs. 
Alberta producers who want to make some comparisons have been introduced to an online tool developed by Alberta Pork. The pricing calculator uses a number of key factors to create an algorithm comparing various shipping options. Brown said the tool is under-subscribed so far but anticipates that more producers will take advantage of the tool as contracts draw to a close. 
Andy Waldner, one of six producers spearheading a production reduction program to try forcing packers to the table, said there has not been much action on that front in the past couple of months, but anticipates more interest with recent developments. 
“What are the packers’ plans for our hog industry and where will those plans leave the independent and small family farms?” Waldner asks in recent email. 
“We saw what vertical integration did to the small farms in the States. Do we really want that to happen here, or will we push back while they still need our hogs? 
“Once they own enough of their own hogs, we will have zero negotiating power left.” 
In an industry overview circulated late in July, Canadian Pork Coucil said production in through the second quarter of 2021 was up from the same period last year. However, it cites economist Rob Murphy of JS Ferraro & Company, who has stated that production in the third quarter could drop to three per cent less than last year, which means strong pricing will continue into fall with some correction going into winter. 
“This is important for buyers because as pork production falls well below last year, well below normal levels, I think we can expect pretty strong pricing as we go into the fall. Our estimate for Q3 pork production is down about three per cent from last year’s admittedly elevated levels,” Murphy says in the CPC report. He expects fourth-quarter pork production to be more closely aligned with what the pork industry has seen in previous years, going up or down one per cent and forecasts that supplies will be relatively close. Murphy notes labour shortages as a risk going into the fourth quarter, saying affected packers have three or four months to get the labor situation straightened out so they can push larger numbers of hogs through in November and December. •
— By Brenda Kossowan