Leaders in Western Canada’s hog industry have thrown down the gauntlet in their search for a pricing system that will give producers the ability to earn a living.
Last year, the total earnings to Canadian packers was up $400 million from the previous year. So far this year, they have already made $440 million more than what they made in the first five months of 2019, says Darcy Fitzgerald, executive director of Alberta Pork.
A pricing model set up by Alberta Pork shows a dramatically different picture for the producers who supply that pork.
Based on an average 600-sow farm, farrow to finish and with costs of production at $1.85 per kilogram, independent producers in Alberta have lost between $900,000 and $1 million each in the last five years. The model projects that those same producers will lose upwards of $450,000 over the next 10 months, says Fitzgerald.
As this edition of Prairie Hog Country was being set for print, details from the paper entitled “Western Canadian Pricing Shared Value for Shared Success” had been discussed with people from Donald’s Fine Foods and from Maple Leaf Foods. A date had not yet been made to sit down with Olymel, said Fitzgerald.
Both packers who have come to the table replied right away with a short-term solution: Donald’s offered $1.40 per kg for four weeks and Maple Leaf added $20 per head for 13 weeks, contingent on contracting for an additional year.
Although the boards have not talked with Olymel, the Quebec-based packer has offered the Olywest 2021 formula, which is similar to its deal with Quebec producers, whose price is tied to the cut-out.
Olywest 2021 needs a bit of tweak to be more palatable to western producers, said Fitzgerald.
So far, none of the three packers has offered a long-term solution, he said.
“They’re all losing, though, and so we’re hoping that within the coming weeks someone will look at this and go, hey, wait a minute, this is not sustainable.”
Although there is no information available on how much income Canadian retailers are realizing from pork products, Fitzgerald said data from the United States Department of Agriculture provide a fairly accurate rendition of the Canadian scene.
Retailers are now seeing a 500-per cent increase from where they were 50 years ago, said Fitzgerald. In 1970, the lion’s share of the end value went to producers and everybody else got a piece. Now, it appears that the retailers are raking in considerable profit on the shoulders of packers and producers.
The bottom line for the industry is that producers are losing viability and leaving the industry, which has already caused a loss of supply to the packing plants.

“We can’t keep going on like this. You’re losing your supply and there are no new barns being built. No one can build a new barn; no bank will look at you if you have negative returns.”
(Through) the loss of an independent producer working on his own to becoming a contractor, we’re down about 50 per cent over the last eight years, using the last bits of their barns to work for an integrator.
“It’s a systemic problem in pricing in Canada. We haven’t come to grips on sharing the value in the value in the value chain. The packers and producers should be working together to talk to the retailers. The consumer shouldn’t have to pay more.”
Fitzgerald said the push is on to bring packers and producers together to create a pricing system that gives everyone a fair shake and that will allow producers to see positive margins over the long haul. What’s different now is that there is a document in front of everyone that gives a detailed and accurate picture of the industry in Western Canada, including charts showing the losses producers are facing from each of the three big plants.
“We want the industry to be successful, we want the packers to be successful, to stay in business, and we want to grow. There is a capacity problem within the packing plants. They just don’t have enough pigs, so we need to see that growth, and you need to have so many barns turn over and become new barns and we’re just not seeing that,” said Fitzgerald.
“Our pricing is sending a signal the wrong way. It says, hey, quit producing pigs because they’re not worth anything, and it’s exactly the opposite in Canada – they are worth a lot, and we have a shortage of supply.”
The report includes a calculator that has also been posted on Alberta Pork’s web page. The calculator shows the impact of the different contracts and how much income a producer can expect from those contracts and bonus structures.
The discussion paper and calculator are available at albertapork.com and have also been sent to producers throughout the four Western provinces. •
— By Brenda Kossowan