Tyler Fulton, the Director of Risk Management with h@ms Marketing Services said so much of what is happening in the hog industry, especially the pricing, depends on what United States will do under President Donald J. Trump.

Yet he said considerable volatility in the hog market was fuelled by the prospects of larger pork supplies and questions related to demand.

Fulton said the market expects a three to four per cent increase in pork supplies over the next six to eight months and, while all indications over the past six weeks show domestic demand for pork is quite good, the export side of the equation is uncertain.

He said lean hog futures have dropped significantly, rooted largely in a cash market influence from the pork belly complex.

“Pork bellies are the primal cut that is the source for bacon and we were bumping up against near record high prices over the course of the past month or so and there really wasn’t a lot of support for it, keeping in mind that pork production numbers and weights have all been significantly up from year-ago levels,” he said. “So the flow of pork was still flowing quite heavy but there was some speculation in the market that there was a tight supply and quite simply the market couldn’t sustain the levels that the pork bellies were trading at.”

Fulton said the pig prices were trading at approximately $180 to $185 per hundredweight, then on last Wednesday’s trade alone, they dropped $25 per hundredweight which accounts for about a 12 to 13 per cent drop, which is very significant for any one primal cut to make a move in one day.

“That really shook the whole hog market and resulted in some significant selling and weakness in both the cash and futures markets.”

He said domestic demand for pork is quite good but the question is whether that demand is sustainable.

“On the export side the uncertainty comes from the possibility of new trade and tax policy that could result in a de facto trade war with, for example, Mexico which would be negative for livestock markets, particularly the lean hog market,” he said.

More specifically in Manitoba where the two largest processors, Maple Leaf Foods in Brandon and Winnipeg, and HyLife Foods in Neepawa keep looking for more pigs, Andrew Dickson, General Manager of Manitoba Pork says the province’s pork industry is seeing the first signs of a rebound in the number of hogs available for processing.

Over the last decade huge losses, poor pig prices and a hog expansion moratorium implemented in 2011 saw a decline in the number of hogs produced in Manitoba resulting in challenges for the province’s pork processing plants in accessing the numbers of slaughter hogs necessary to operate at capacity.

Dickson said the numbers of pigs on farms have crept up a little bit taking the industry back to hog numbers in 2006 in terms of numbers of animals on farms. Productivity continues to improve and producers are now actually thinking of expanding their operations.

That is why it is so crucial as to where president Trump takes the whole trade policy because as the industry has indicated, for them to expand, the price needs to stabilize or rise to give them the confidence to invest in new infrastructure and expansion.

“We’ve have a number of operators looking at whether they should expand their existing operations,” he said. “We’ve got some looking at building new facilities and we’ve got some service companies that provide, for example, genetics, they’re looking at building new facilities here in Manitoba. It is early days in terms of large numbers but it’s a start.”

Dickson said it is better than what the industry did four or five years ago. With the credit agencies coming to the table prepared to lend on new construction costs it is a big help.

“One of the processing plants is offering financial incentives to encourage people to build finishing barns so I think we’re starting to see some real opportunities coming up in the next year,” he said. “The Canadian dollar is in the 74 to 76 cent range compared to the U.S. dollar so, when you translate the American hog price back into our price, there are margins in there if you’re careful in terms of input costs and you lock in some of the higher prices offered going forward into 2017.” •

— By Harry Siemens