YOU SAID IT

Should health barriers be lifted to allow live U.S. pigs into Ontario?

"I have no comment about this being a health issue, about whether we should be opening the border for health reasons. If this is an economic barrier, if this is a trade barrier, I don't see it as being one that should be there. I don't like the idea of using it as a trade barrier. The industry we are in, we are exporting pigs. We probably need to import pigs."
Arnold Frey
Farrow-to-weanling,
Elora

"It's coming. We should wait until everything is under control. Ontario pork is better pork than American pork. Why do packers want to buy American pigs? It's poor quality - maybe you get it cheaper, but the quality will fall down. I think it will come eventually, but we have to be ready for it. They can sneak up on you."
Matt Marui
Farrow-to-Finish
Mitchell

"I think our government has to implement rules, laws, to ensure everything possible to prevent this from happening, because it would be devastating to the Canadian pork producer. [If some states are pseudorabies-free] I suppose you could allow them in as long as it's not going to threaten the livelihood of our own producers because of oversupply and drive the price right into the ground. I wouldn't be in favour of that. But if there's a need for more domestic supply over and above what we can supply, [we could] take in disease-free states' pigs into Canada until we can meet that supply."
Jim Ryan,
SEW nursery,
Seaforth

back

Maple Leaf beefs up Burlington

What a difference a year makes. At the beginning of 1997, Ontario packers were running at 60-per cent capacity, and the Ontario hog run languished in the 75,000-a-week range. Today, Ontario's largest packer Maple Leaf Pork has put new contracts on hold, and is running overtime to cope with a record provincial hog run that flirted with 105,000 last month.

If it weren't for record low prices, the timing would have been ideal for Maple Leaf Pork president Patrick Jones to announce an $11.8-million upgrade to his Burlington plant to boost the weekly run from 35,000 to 43,500. Completion is expected in seven months.

Despite poor prices, Ontario Pork chairman Wil Nap welcomed the news of the plant expansion - though he couldn't resist tossing out the barb that "We've got 6,000 producers looking for a part-time job who would be happy to come and help build it."

Calling the announcement "tremendous news," Nap said "we've been waiting for Maple Leaf to do this since the strike was settled. We can't wait to get on with the project."

Jones says the expansion is part of a $34-million project at the Burlington plant that will culminate in two shifts, 87,000 hogs per week, complete byproduct recovery, blast chilling, and additional coolers to handle the second shift.

While the current hog glut has prompted a moratorium on new hog contracts, Jones says Maple Leaf's Signature Pork program has been an "enormous success," accounting for 35,000 hogs, or one shift. The plant expansion will help stem the current overflow of Ontario hogs to Quebec and the U.S., he says, and bring Burlington close to par with the company's Brandon, Manitoba, plant, due to open up next year.

"We didn't want a poor cousin here in Burlington," he says. Between the Burlington expansion and the new Brandon plant, capacity at two shifts will be 177,000 hogs a week, giving Canadian producers "the processing capacity right here at home to handle their hogs," says Jones.

The Burlington and Brandon moves solidify Maple Leaf's position as Canada's No. 1 pork packer. Maple Leaf also processes 5,500 hogs at Lethbridge, Alberta, for the Japanese market, and 4,000 at Charlottetown, PEI, for a total capacity of 186,500 head a week, or 9.7 million a year. According to Statistics Canada, the annual Canadian actual slaughter is around 16 million head. Maple Leaf currently processes 42 per cent of the Ontario hog kill.

Jones says construction of the 11.5-acre Brandon facility is well underway, with the processing floor, coolers and quick chill up andclosed in. The company recently received a permit from the Manitoba government for waste handling and discharging. Local opponents of the plant failed in their bid to get the government to launch a public hearing. Jones says the company continues to respond to community concerns through "townhall meetings."

While pork prices may be in the doldrums, Jones' longer-term outlook is bullish: "There's still a lot of demand out there. We think the future is very bright for exporting pork from Canada, and we think there will be good returns from growers resulting from that."

Nor are packers reaping extra profits from the downcycle, he says: "It's still a margins game....There's a lot of pork, high inventories and record kills in the U.S. and Canada." Maple Leaf's quarterly fiscal report is due shortly.

Also reassuring to producers is news that, despite some "carryover of bad feeling" from last winter's strike at Maple Leaf plants, plant morale in Burlington is generally good, according to Jones. "Employees have responded well" to recent overtime demands, he says, and the first expansion should add 69 new jobs at Burlington, bringing the total to 862.

© copyright 1998 Agricultural Publishing Company Limited.



back

Green light for U.S. giant

One cloud on Maple Leaf's horizon is a continued standoff with Kitchener-based Schneider Corp. At presstime, Maple Leaf was still holding out hope to add another plant to the fold: the modern 40,000-pig-a-week facility Schneider is gearing up in Winnipeg.

Mid-October, Maple Leaf's bid for Schneider was set back when the Ontario Court of Appeal cleared the way for the Schneider family to sell the company to Smithfield Foods of Virginia, according to the Financial Post.

At presstime, the deal was still in some doubt, however, as Smithfield shares have plunged, souring the share swap by $10 a share since last December. Smithfield, the world's largest pork packer, lost US$5.3 million in its first fiscal quarter for 1999, Feedstuffs reports.

Maple Leaf's higher bids of up to $29 a share were rebuffed by the Schneider family, prompting Maple Leaf and minority shareholders to take Schneider to court.

© copyright 1998 Agricultural Publishing Company Limited.



back

Staying afloat

BY ROBERT IRWIN

The good news is the recently increased hog numbers affirm, as industry leaders had been hoping, Ontario producers have renewed faith in the Ontario pork industry. The bad news is the timing couldn't be worse as abattoirs across North America scramble to handle increased production, plunging the Ontario pool price to its lowest level since January 1992.

At press time, production exceeded processor capacity, the run for the third week in October hit an all-time record 104,943, and pigs were backed up on Ontario farms. "All of a sudden it's just jumped to a new tier," says Ontario Pork forward contract specialist Stuart DeVries.

"It would have been 109,000 if we could have handled them all," DeVries says of the week's run which after the previous short week created by Thanksgiving amounted to a whopping 21,601 increase over week earlier. Along with government and other analysts, DeVries had been anticipating hog runs to remain below 100,000 this year; but now he concedes numbers could reach 115,000 by Christmas.

American states and Western Canada have been the focus of expansion talk during the past two years. Now Ontario has shocked almost everyone by unexpectedly posting what may be the greatest percentage increase anywhere.

One thing everyone agrees on is Quebec producers with their provincial stabilization program recently sweetened by a $9.50-per-hog pre-election government handout are more comfortable than their counterparts in other pro-vinces. Still, there's grumbling among producers there over shipments of contracted Ontario hogs to plants in La Belle Province already straining to handle home-grown pigs.

At press time Quebec handled 12,000 Ontario pigs while stateside IBP and Indiana Packers swallowed 11,577. Total U.S. marketings have exceeded two million pigs per week for the past six weeks.

Despite official assurances from National Pork Producers Council leadership that free trade is here to stay, and despite the windup of the recent border blockades in Western Canada, Canadian officials are privately worried by anti-Canadian sentiment said to be building among some NPPC and state officials. One other question mark hanging over Ontario's industry at press time is the labour situation at Quality Meats, where workers are into their second month working without a contract.

Given current North American marketings and limited shackle space in every direction, any disruption at Quality would likely hurt producers far more than the infamous strike at Maple Leaf's Burlington plant.

In light of the current glut, have pork board officials who worked hard to stimulate expansion for the past few years been caught by the old axiom about being careful what you wish for because it might come true?

"No, I don't think so," responds Ontario Pork chairman Will Nap who notes Ontario numbers have little to do with low pork prices world-wide. "We've always encouraged expansion as long as it's based on sound financial principles," he stresses.

Nap, who observes "some producers are really hurting," finds some have avoided the "horrendously low" prices by forward marketing using the board's Window contracts. He says Ontario Pork is opposed to any government bailouts or subsidies that would provoke a U.S. countervail response, but is solidly behind a Canadian Pork Council proposal to launch a federal-provincial "disaster relief program."

The plan undergoing intense discussions between government, farm organizations and commodity groups in recent days would probably guarantee producers between 50 and 80 per cent of margins over the previous three years. It won't likely be in place before summer 1999.

Any payout might only come in the following year's income tax refunds.

Pork board director Carl Moore, who stepped down as Ontario Pork chairman last March, insists "the Asian market is still good. Sales to Japan are going up month by month on a North American basis."

A one-time banker, Moore says he's been warning producers "since last fall that it's very foolish to try to cash flow barns at $180-$200 [per ckg], which a lot were doing, when our long-term average is $150 $160."

Moore says all Ontario producers are "hurting right now" but he sees feeder producers and farrow-to-finish operations hit hardest. In recent weeks he's been stocking his feeder barn with bargain-priced 28 kg feeder pigs from Quality Swine.

"They're beautiful pigs and for somebody to sell them to me for $27 or $28, that's pathetic; that person lost $20 to $30. Maybe I'll lose some more on them too but I don't think the industry can be that bad."

Doug Maus, with M & F Livestock in London, which moves large volumes of feeder pigs from Canada to the U.S., says "there's still good demand, just with no good price attached." He speculates there has been no significant liquidation yet because "I don't think a lot of these guys know what to do.

"My guess is that we got rid of a lot of the weaker players in '94-95 and we're going to have to get rid of a couple of warriors this time and nobody wants to be it."

Pork board director Andy Ernewein worries the price downturn may be different from others which have hit the industry every few years. He and fellow director Liz Samis represented the board at a recent U.S. lenders conference where a study on the changing structure of the industry showed farms producing more than 50,000 pigs annually are now responsible for 37 per cent of total U.S. production. In 1988, those farms accounted for just seven per cent.

Ernewein, who runs a 40-sow farrow-to-finish operation near Walkerton, notes U.S. producers putting out fewer than 1,000 pigs were responsible for 32 per cent of the hogs in 1988.

"Today, that category of small producers who used to create the cushion (respond to prices by entering or leaving the industry) only produce five per cent of the hogs. They're not there anymore to create the cushion," Ernewein warns.

"I don't think the glory days we've seen in the past with extremely large profits will be there," confirms John D. Lawrence, associate professor of economics, Iowa State University and author of the study cited by Ernewein. He predicts prices will return to break-even levels of more than 40 U.S. cents per pound liveweight by mid-summer.

"The following year, when if history had repeated itself we would have been into the $60s and upper $50s and very very profitable conditions in the year 2000. I don't think that part of the cycle will return," Lawrence forecasts.

© copyright 1998 Agricultural Publishing Company Limited.



back

Smoother sailing ahead?

There are hopeful signs on the horizon as Ontario pork producers struggle to stay afloat in a sea of red ink

* Weekly provincial hog run could hit 115,000 by Christmas, indicating underlying confidence in the future

* Some producers have avoided the horrendously low prices by forward marketing using Ontario Pork's Window contracts

* The Asian market is still good, with North American sales to Japan increasing month by month

* U.S. demand for feeder pigs remains strong

* Prices are forecast to return to break-even levels of more than 40 U.S. cents per pound liveweight by mid-summer

© copyright 1998 Agricultural Publishing Company Limited.



back

Help is as close as the telephone

Saskatchewan Pork Inter-national (SPI) Marketing Group chairman John Germs was recently quoted in media reports as calling for that province's NDP government to provide at least $20 million in emergency aid to keep hog producers in business over the next six months. For the past few years the province has aggressively promoted hog expansion.

Marilyn Jonas, production systems specialist with Pork Central, the provincial government agency established in January 1997 to help increase production from one million hogs to three million by 2004, says those with highest production costs "will be in deep trouble right now. Others with lower costs are on the edge where a certain amount of belt tightening will help them weather the prices at least for a while."

Jonas' remedies must be tailored to individual situations but she offers what she terms "gross management solutions" for Saskatchewan producers that suit some Ontario operations.

High-cost producers
* Shutdowns with or without bankruptcy
* Shutdowns where they look at contract situation with another production group (they pay their bills off with the depopulation and set up a contract situation to help pay for their facility and labour)
* Bring more capital in through investors
* Work with banks to recapitalize operating and long-term loans
* Extend lines of credit with suppliers

Mid- and lower-cost producers
* Increase sow throughput to help decrease fixed costs
* Decrease personal withdrawals and live off other parts of the farm or off-farm income
* Increase personal hours of work and of other staff rather than replacing people if someone has left; or let casual or part-time staff go and fill the gap with own labour
* Utilize feed grain supplies on the farm

Regardless of which category a producer is in, Jonas urges anyone who "feels they may be in difficulty" to "look for outside assistance." Help could come from a herd health veterinarian, business consultant, or provincial government extension specialist.

"The important thing," she stresses, "is to share the burden with others and to not be afraid to seek assistance to get you through the crunch." - Robert Irwin

© copyright 1998 Agricultural Publishing Company Limited.



back

Strategies for low hog prices

With feed costs hovering around 70 per cent of the cost of raising a pig on today's market, Ontario pork producers will surely be reviewing feeding strategies this fall and looking for areas to reduce costs.

Be careful, though: Don't panic and run out and grab the chainsaw and start cutting costs. Gather the pertinent information, study it, and then react in a manner that will benefit you.

Remember: Good feed suppliers who rely on your business to make a living realize that your success is their success and that your business is important to them. They will help you analyze your farm's feed usage records, tour your facility with you to review pig flow and density, and review with your veterinarian any health strategies currently used at the farm.

Here are some key feeding areas that can be adjusted quickly with a minimum of mechanical or physical changes.

Feed additives, growth promoters
Are we adding something to the ration to improve feed efficiency? Is it still necessary at today's feed prices? Let's look at an example of a growth promoter added to a finishing diet from 75 kg to 110 kg (market). Let's assume we received a two-per cent improvement in feed efficiency by adding this product and the cost of adding it was $5 per tonne of finished feed. Low Cost Strategies: Growth Promoters shows the economics.

Based on this example, using today's high lean average feed costs, even an improvement of two per cent in feed efficiency resulted in a loss of 13 cents per pig. If the product added happened to be an antibiotic, not only is money lost, but we may be feeding drugs unnecessarily to animals. Consumers can quickly lose confidence in an industry.

Therapeutic antibiotic use
Health problems do occur in livestock. The proper use of the proper antibiotic at the right time can reduce mortality, improve the pigs' quality of life, and improve the economics of pig production. Manufacturers of antibiotics for livestock want pork producers to work closely with veterinarians to use the drugs correctly and safely. On the other side, drugs used incorrectly, with little or no response to the livestock, can cost swine producers big bucks.

To bring this into an economic perspective, Low Cost Strategies: Medication shows approximate Ontario costs per tonne of complete feed for some commonly used therapeutic and growth promoting levels of antibiotics cleared for use in Ontario swine feeds. For specific claims, cautions, warnings, and feeding directions, consult the manufacturer, veterinarian, or feed company.

To help bring Low Cost Strategies: Medication into perspective, consider this scenario. You are adding a vitamin-mineral premix to your ration at 30 kg/tonne of complete feed and you are able to save $100/tonne of premix. The result would be a cost reduction of $3/tonne of complete feed. Any savings per pig produced would only be realized if performance was not reduced.

Cost of commodities
It is also time to consider the commodity costs of corn and soybean meal. OMAFRA provides an excellent review of your past and current commodity costs in the Pork News & Views newsletter. Low Cost Strategies: Commodities (above, facing page) shows a five-year history with current year to date until the end of September 1998. Yearly averages of market prices of hogs from Ontario Pork dressed weight charts are also shown.

Another way of evaluating costs is to look at the total return per bushel of corn received (not including labour costs) over the past five years, plus year to date until the end of September, '98. Low Cost Strategies: Economics shows this data using high lean diets and carcass weights of 84 kg adjusted to 107 index.

Many other factors can influence feed costs, but these may involve management or equipment changes. The following are some areas of concern, which may be evaluated fairly easily.

* Feed grind. Particle size or grind of the grain portion of a diet is preferred to be 700-800 microns. Smaller, and feed intake and stomach ulcers are a concern. Bigger, and feed efficiency is reduced. Take immediate action by rotating the hammers in the mill or by changing screens.

* Feed wastage. New-style feeders have helped but let's not let down our defenses yet. Check feeders daily to ensure that 30 per cent of the bottom of the feeder can be seen. More, and limit feeding the pigs can occur. Less, and wastage can occur. Replace worn out feeders.

* Shipping weights. Certain genetic lines can go to heavier weights without putting on extra fat. Check index (if measured) and weigh pigs during the last two weeks before market to evaluate growth and feed intake. Heavier hogs will also be in the barn longer, so extra barn space is required. OMAFRA estimates that it costs 17.5 cents per head per day in the finishing barn.

* Target feeding. Feeding a set amount of feed per pig can save dollars, especially in the nursery on the first two or three diets. Reducing the energy and protein (amino acids) levels in rations of top-end finishing pigs two to three weeks before market can also yield good returns in certain genetic lines. Separate feed lines will be needed in many cases.

* Split sex feeding, housing. This practice can result in better barn flow, especially if high lean diets are utilized on gilts and standard lean diets on barrows. Extra feed lines may be required to phase feed separate diets properly.
Ken Palen is livestock specialist with Kenpal Farm Products, Centralia

© copyright 1998 Agricultural Publishing Company Limited.



back