BOTH SIDES SEEK END TO HOG PRICE DISPUTE

The hog marketing imbroglio had lostmuch of its
earlier turbulence mid-November as the board and
three major processors continued private meetings.
Both pork board chairman Carl Moore and Maple Leaf
Foods CEO Archie McLean told Farm & Country that
they seek a resolution of their pricing dispute
before the month's end.
Earlier, the government's marketing watchdog, the
Farm Products Marketing Commission, ordered the
pork board to pull back from its move to drop
formula pricing and offer market animals to the
highest bidder by electronic auction. Moore's board
believed it was the only way improve market hog
prices.
Late September a U.S. Agrimetrics Associates Inc.
study, co-sponsored by the industry, suggested that
Ontario's packers under-price pigs. Within hours
Ontario's three major packers, Maple Leaf Meats,
Quality Packers and Schneider, contested the
findings. They maintain researchers confused hot
dressed yields at the plant, 81.47 per cent, and a
marketing yard yield of 80 per cent. This
translates into a $3.92 differential.
From that point it was a field day for the bean
counters. Moore, a successful Oxford county pork
producer and former bank executive, notes there's
no squabbling across the border. American packers
have hundreds of wayside collection points where
settlements usually are based on plant yields.
"What's the real problem?" he asks. Packers and
producers come up with the same cry: "it's price".
Canadian Meat Council (CMC) hog section members
contend they already pay the equivalent U.S. price,
while producers, through their board, assert that
U.S. packers offer more than their Ontario
counterparts.
No argument here, although Quality Meat Packers
president David Schwartz says that the Thorn
Apples, Hatfields and IPCs indulge in cherry
picking: they take Ontario's best animals, using
them to "top-up" their killing lines. What happens
when Ontario's packers go out of business when
starved of hogs? he asks.
Moore counters with undisputed facts: with prices
allegedly matching U.S. averages, why are 15,000 to
20,000 Ontario weaners a week trucked to the U.S.
for finishing? Finishers and packers pay a plumper
price than makes economic sense in Ontario.
By mid-October the two groups went public. Moore's
message was simple: it's the board's mission to get
the highest possible price for its members. The big
processors called a press conference at Toronto's
plush Sutton Place hotel, and created a precedent
when all three CEOs participated in a
near-dignified cross-examination without the
customary flacks and spin doctors feeding them the
latest computerized printouts.
Maple Leaf Meats chief Michael McCain explained
that in the last year margins came under increasing
pressure, not only in Canada but in the U.S. This
assertion was borne out by Chicago's Chuck Levitt
of Alaron Trading Corporation. During 1994's last
quarter, when the price to producers hit the skids,
American packers averaged US$20 a hog after
slaughter and shipping costs.
Since then it's been the slippery slope, Levitt
noted. When producer prices recovered, profits
plummeted to US$9.50. By July it was down to US$2
to US$3, one-third of what it was during the same
1994 period. 
The packers were cross-questioned about their
profitability and while McCain stressed that his
operations could meet "most U.S. competition head
on," he could pinpoint "some inefficiency
problems... as you can anywhere else. And we're
aiming to be good at everything."
Schneider CEO John Lauer conceded his own company
lacked the line speed to meet competition, adding
that his curing and processing operations,
described as "synergies", helped modify the
imbalance.
"We've got to change," he confessed. Does this mean
a new plant other than the $40-million Winnipeg
expansion? "Our vision for Ontario is not clear,"
he responded. "The environment question is a very
important issue."
Before the conference closed, Quality's Schwartz
said he wanted producers and packers working
together. "We need more efficiency... and strong
vertical alliances (with producers) to offset U.S.
vertical integration." He proposed that packers and
producers  work together, sharing their business
objectives.
As the Farm Products Marketing Board Nov. 27
deadline for a solution approached, both pork board
directors and processors voiced hope, albeit
hesitantly. Moore told Farm & Country that his
producers sought "an equal price for equal
quality... and I want our customers treated
fairly."
To Moore, sales contracts are the ideal. Maple Leaf
Foods CEO Archie McLean leans heavily in this
direction, with the futures market as a new
built-in component. Any structure could include
meat packers, perhaps both groups hedging on the
futures market, although he adds that this calls
for "crossing bridges and dotting the i's and
crossing the t's."
Echoing Schwartz's plea, McLean said the
confrontation must end. "It's not good for us and
it's not good for producers." Meanwhile, the pork
board's Moore asserts that losing the electronic
auction will cost producers $2 million a month. -
JP 
   

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