Cam Dahl, the general manager of Manitoba Pork said the combined effects of African Swine Fever and COVID, last year’s drought and the invasion of Ukraine had created an almost perfect economic storm for pork producers.
Dahl said there are large swings in what farmers get for their product and input costs. First the impact of COVID. While Canadian producers and processors have weathered COVID well, that isn’t the case worldwide. Farmers are facing a lot of disruptions in the market right now, generating a lot of volatility and uncertainty. Uncertainty and volatility always come with a price.
“We see markets disrupted in China, for example, significant shortages in containers and flow disruption. It means processors, shippers, and exporters need to have more inventory in case of further disruptions so that comes with a cost.”
Without a doubt, African Swine Fever has caused major disruptions in the world market hitting Europe and devastated Chinese pork production. While supporting prices in Canada but not sure how long that will last or how far ASF will spread, causing significant uncertainty.
Then, of course, the third factor is the invasion of Ukraine by Russia. The Black Sea has become a significant supplier of cereal grains and feed grains with 16 percent of world corn exports and almost 15 percent of world wheat exports from Ukraine last year. Combine that with high prices caused by the drought in North America, those high prices are only going higher because of the impact on the supply of the Ukrainian invasion, so really almost a perfect storm.
“Who would’ve thought three years ago if you said that feed and wheat would be over $10 a bushel, I think many people would’ve laughed at you. But we’re not sure when those prices will come back down, squeezing the profit and loss margins.”
There is volatility in the prices that people receive for their pork making risk management more important.
“Risk management, forward contracting, focusing on the margin, not necessarily just the price of feed, but trying to lock in that margin.”
Discussions with governments on the business risk management programs to ask if the structure of those programs will meet the uncertainty and volatility facing the hog industry and adjust things like AgriStability so that it’s meeting the modern pressure that farmers are facing.
While the producer side is one thing, what about the processors and consumers and the price they pay for good quality pork?
The Black Sea region was a major food supplier, especially grains and oilseeds. So, we can expect upward pressure on prices and the disruption in the supply chains. That always comes with a cost.
“I have heard it said that we used to have a just-in-time international trading system that was efficient and low cost. Now, we’ve moved to a just-in-case, where everybody along the chain has to hold more inventory and prepare for disruptions. All of that comes with a cost.”
This causes the prices for foods the consumer buys to inflate. Because of all these disruptions, whether drought or the war in Ukraine, the impact of COVID, or African Swine Fever, those impacts will probably result in increased pressure on consumer prices.
On the positive side, Canadian agricultural value chains have proven resilient throughout the pandemic. Production and processing capacity has bent but not broken.
“We continue to deliver on our promise of safe, high-quality food for Canadians and consumers worldwide. This is a competitive advantage.”
At this year’s annual Manitoba Pork meeting, Dahl said that with all the uncertainty facing producers, one might have expected pessimism to be the predominant emotion at the event, but that was not the case.
“Farmers are optimistic that our pork will continue to see rising demand in global markets. As a result, most are looking for ways to grow the sector here in Manitoba, both in production and processing.” •
— By Harry Siemens
