Farm & Country, December 7, 1998

Americans turn up the heat

By Robert Irwin

American packers are a major outlet for Canadian hogs. But faced with estimated losses of US$100 million a week, and a shortage of so-called shackle space, angry American pork producers are again ready to block Canadian pigs.

A major irritant is the Canadian government's failure to implement promised new hog import regulations, which would allow American hogs from states classified stage four or five for pseudorabies into Canada.

Canadian Pork Council vice chairman and Ontario Pork director Carl Moore returned from meetings with National Pork Producers Council (NPPC) officials in Washington recently with a tough message: "The Americans said they can't hold the people back much longer."

Ominously, a few days after Moore's return, NPPC issued a five point initiative aimed at improving U.S. pork prices. Citing Canadian government data showing an excess killing capacity of 50,000 hogs per week, it includes a call for a reduction of Canadian hogs.

Could Canada's failure to approve the import regulations be used to prevent our hogs from going south?

"I guess I don't have an answer for that, but I'm sure it's part of the equation", says John McNutt, NPPC president elect. He says the first step is to encourage U.S. packers to stop buying Canadian pigs.

In the past year Canada shipped about four million hogs to the U.S. On a couple of occasions in recent weeks Ontario Pork even re-routed contracted Ontario animals to the U.S. from Quebec packer Olymel, where angry Quebec producers prevented pig slaughter. (See Will Quebec be friend or foe?)

NPPC international trade counsel Nick Giordano suggests Canadian politics is stalling the new regulations. "All we're being told is the cheque's in the mail," he relates.

Giordano says U.S. producers' tolerance for Canadian hogs earned them the name "patsies for Canada" during a recent House of Representatives agriculture committee meeting.

"You have a lot of Canadian hogs coming south not only because of the exchange rate but because the Canadian packing industry is viewed...as not being willing to bid as high as the U.S. packing industry for the hogs," Giordano says. He also cites a George Morris Centre study that calls the Canadian packing industry "fairly inefficient."

Federal Agriculture Minister Lyle Vanclief's office wasn't able to explain the current status of the regulations. In the past various farm groups and provincial governments, concerned about pseudorabies, opposed American hog imports.

"It's been an explosive issue," says Brian Peart, chief regulatory officer for the Canadian Food Inspection Agency. He says the National Farmers Union has yet to give its blessing.

However, in recent months two other holdouts, Canadian Swine Breeders Association and the Quebec government, have accepted the idea, albeit reluctantly. Peart confirms the regulations have been drafted since 1993.

Ontario Pork chairman Will Nap concedes the logic of American concerns over imports, but questions the timing of the latest salvo. "In three weeks they've done a complete about-face," he notes, referring to Americans' earlier support of Canadian producers at the House of Representatives agriculture committee meeting.

Giordano concedes that implementing the Canadian regulation won't mean much economically. "Nobody on this side of the border is deluding themselves into thinking that all of a sudden there will be a lot of hogs going to Canada," he says.

"What will happen," he concludes, "is that producers in border states will have the option of marketing their hogs for slaughter in Canada, and that's important to them."

McNutt insists a blockade of Canadian hogs could actually benefit Canada because anything that boosts U.S. hog prices raises the price in Canada.

© copyright 1998 Agricultural Publishing Company Limited.



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Farm & Country, December 7, 1998

Will Quebec be friend or foe?

Earlier this fall Quebec pork producers angered by low prices and long abattoir lineups succeeded in turning away Ontario pigs that were part of a contract, due to expire in 2000, between Ontario Pork and Quebec packer Olymel.

It could happen again, says Federation des Producteurs de Porcs du Quebec market adviser Gilbert Lavoie.

Since 1992 when an industry round table was formed, all sectors of the Quebec pork industry have worked closely with each other, says Lavoie: "We were able to get the best price that way."

With a relatively small land base, Lavoie says the Quebec industry depends on a public perception that pork production is good for the province. Therefore it's politically unacceptable for Ontario pigs to displace Quebec's when killing capacity is exceeded as it was in October.

"It'll be the packer who reimburses us for any shortfalls in revenues we would experience," says Ian Muir, Ontario Pork's director sales and marketing. He says the animals, which were diverted to Indiana Packers and IBP, could cost Olymel as much as $10 each for the 7,000 head a week contracted.

Quebec hog runs normally peak in fall. This October's weekly kill jumped to 135,000 from summer months which averaged less than 110,000.

The pressure is off at the moment, says Muir. Olymel is "taking its full 7,000 head allotment" and other Quebec packers are actually calling Ontario for more pigs. In November Quebec weekly runs dropped to a little over 125,000.

Olymel recently increased its kill capacity by 5,000 hogs per week. Brochu, another packer in the province, boosted its capacity by 7,000 pigs.

This year Quebec production was up almost nine per cent. Projections are for another six per cent increase next year.

Official figures are unavailable but some analysts say Quebec dominates Ontario retail pork sales. Some estimates peg Quebec's market share of fresh pork in Ontario as high as 85 per cent.

Lavoie says Quebec was happy to help out by taking 12,000 Ontario hogs a week when Maple Leaf's Burlington plant was on strike. He notes Quebec may need the favour returned. -Robert Irwin

© copyright 1998 Agricultural Publishing Company Limited.



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Farm & Country, December 7, 1998

Quality labour talks continue

Despite sometimes overwhelming obstacles, Ontario Pork has found a market for pigs during the province's recent record hog runs. But does the worst still lie ahead as major disruptions loom?

Toronto-based Quality Meat Packers Limited, one of two major buyers in the province, has curtailed overtime to smooth labour negotiations.

Employees at the downtown Toronto abattoir have been working without a contract for months and could strike at any time.

Quality's manager of fresh meat operations, Don Collis, declined to provide details, saying his company wants to avoid negotiating in the press.

He predicts the situation will become clearer this month. "There are some very difficult bullets to chew on from an employee and an employer perspective," Collis says. - Robert Irwin

© copyright 1998 Agricultural Publishing Company Limited.



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Farm & Country, December 7, 1998

Will integrators provide relief?

In earlier years low hog prices disappeared when enough producers quit raising hogs. But quitting is the furthest thing from Illinois pork producer Ken Mills' mind.

While his neighbours combat stress and financial losses triggered by the worst pork returns in history, Mills is as relaxed today as he was over a year ago when he cast his fate with Murphy Farms as a contract finisher.

Whether his barn is empty or full, he collects US$35 per pig space per year while his neighbours lose about US$40 per head.

"I'm glad I chose to go this route," says Mills, who late November had just cashed a quarterly cheque from Murphy right on schedule.

Mills' labour averages less than two hours per day, which is exactly what he and Murphy production staff projected it would be when he began building his 3,300-pig complex. The only thing that hasn't worked out precisely as planned is his electricity bill. It's been about 15 per cent lower than projected. His local utility had to cut rates to compete in a newly deregulated market.

Mills, who grew tired of coping with market swings after 27 years as an independent pork producer, says he's aware of rumours that current 15 US cent hogs could put even Murphy, which owns more than 337,000 sows, out of business. But he stresses there is no sign of this in his dealings with the company.

Murphy economized by laying off construction staff involved in expansion and by closing its Illinois office recently, leaving the manager and three staff to work from home. New barn construction already in progress is continuing but no new projects are being started.

The question on many people's minds is will Murphy become part of the solution to low pork prices by leaving barns empty? "Right now it's a little early to speculate on that," says Murphy public affairs director Darra Johnson.

"Prices were really good last year. But we're no different than any other hog producer," says Johnson. - Robert Irwin

© copyright 1998 Agricultural Publishing Company Limited.



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