There's more change in store for the Ontario pork board. Before autumn is out, look for a grading system that truly reflects today's lean-type hogs, board chairman Carl Moore told convention delegates.Earlier, Wellington farmer Carl Israel contended that index 114 carcasses, supposedly the perfection point of pork production, was not liked by some meat packers. Conversely, producers see the ultra-lean animal as their best profit maker.
Revamped grading, based on 1991 and 1992 cutout data, will set a course for production goals. Previous data used as a guideline for revised grading grids lacked sufficient kill-line sampling, Moore said. With changes in place, the pork industry will move into several sales options: a high-low price range, pricing based on meat components, and open and identified auctions.
Pricing could be a blending of alternatives but always producers make their own choice. He stressed that prices will be published 14 days before a "marketing alternative" goes into effect, giving time for farmers to choose their outlet.
Many options are made possible by the board's new computer whiz, Ze'ev Ionis. He now is perfecting software programs that make producers and packers world leaders in the market place. It's not a question of a high-tech obsession but of the industry selecting specific animals for niche markets.
These may include special weight categories, pigs fed special diets or selling on a special cuts market. Whatever shape the emerging structure takes, the auction principle stays, a basic principle Moore calls "the face of the system," with prices based on a "mutually acceptable price...paid for a hog of undoubted quality."
Moore added that only an unhampered North American market can set a true price. He hopes is that countervailing duties will soon fade away. Already it has been removed from sows, boars and weaners, with market hogs getting similar treatment by year's end.
American flexibility was triggered by the U.S. National Pork Producer' Council, he said. Relations between it and the Canadian Pork Council have warmed in recent months, although he warns that it sees Canada's anti-pseudorabies health regulations as a veiled form of tariff barrier - JP
Pressure grows to open U.S. border
It's no longer a case of if U.S market hogs enter Canada but when. This was clear when Oxford county headed a move to open the border, but Ottawa has to ensure that protective health measures are in place.Tavistock breeder Warren Stein urged pork board delegates to accept what he implied was "inevitable". Rather than fight a losing battle, it would be far better for the pork board to use its clout to prevent the spread of pseudorabies entering contaminated trucks.
Stein insisted basic steps should include a workable checking system, "because we can expect some states to cheat." Protection from the disease could come in the form of continuing sampling done at packing plants. Perhaps veterinarians could draw five random blood samples per incoming truck load, Stein said.
There would also be heavy penalties imposed on truckers delivering pseudorabies-infected animals. Stein predicted that at first U.S. hogs would come from five and four areas, zones declared free of pseudorabies, and then extended to area three or even a specially created three-and-a-half zone where pseudorabies is under control.
Pork board chairman Carl Moore said Ontario could not live with the status quo much longer. The U.S. National Pork Producers Association seeks open borders and is in the mood to exchange cross-border trading for ending countervailing duty on incoming Canadian hogs.
Pork board economist Mary Lou McLeod told Farm & Country that while this duty now amounts to 1.34 cents a pound, it still adds up to $3 a hog. "And that's what it costs our pork producers whatever else may be argued." Two or three years ago the duty hit 9.32 cents a pound "and that really hurt us badly."
Moore revealed that Ottawa last month officially drafted its protocol governing importation of live U.S. animals. It will be publicly released shortly. This, he suggested, was done to head off American allegations that Canada's health rules cloak trade barriers. He added that the protocol protects herds from the threats of pseudorabies.
Durham region purebred breeder Henry DeWolde was not convinced farmers were protected from the disease entering Ontario. One outbreak would mean closing off an area in a "radius 100 miles of any outbreak." He was assured farmers would get compensation under Ottawa's dangerous diseases regulations. But pork producers may keep smiling for the rest of 1996, assuming McLeod's price assumptions prove right. From now to the end of May, she sees prices ranging between $175 to $188 per 100 kg, with a summer decline to the $171 to $178 range. There could be a further slackening to $160 to $164 for the balance of the year.
Nothing is certain, she warned. Feed prices play a major role in any price formula, and they could continue to occupy the high end. Add to this the unfolding U.S. scenario. With corn in the $4 to $5-a-bushel range, many Corn Belt farmers could decide to plant hedge-to-hedge corn interspersed with equally profitable soybeans. Returns, at the moment, seem good and planting corn would be an easier way of making money than seven days a week spent in the farrowing area.
McLeod sees an expanding hog market ahead. There's been a nine-per-cent expansion in Ontario and Quebec since 1994, although growth slowed last year. This trend may continue, although the board's optimistic chief executive officer, Julien Den Tandt, looks at a 50-per-cent jump to around 120,000 to 130,000 over the next three years.
This major jump is not out of the question. Despite high feed prices at $5 a bushel and more, the current $173 price offers a half-reasonable profit. Another important trend, pork board executive Irv Stinson noted, is that last year's sow marketings at 52,000 were down 25 per cent from the previous year. This could suggest that more females were retained for breeding.
Stinson said there is a strong export demand for both Canadian and American hogs. Last year Canada sent 347.3 million kilograms of live slaughter hogs and cuts out of the country. This was 36 per cent of total production, with the U.S. taking 36 per cent of Canada's total output or 58 per cent of all exports. Japan took 14 per cent and 40 other countries took the remaining 28 per cent - JP
Electronic auction restores faith in marketing board
Getting top market returns was a preoccupation for many delegates at the Ontario pork board annual convention. Producers were happy with the restoration of electronic auction selling earlier this month and resulting firmer prices, but their directors were told to press for U.S. price parity.Middlesex producer Lyle Hendrikx stressed that a free North American market called for an American price equivalent. Canadian packers, he added, should be told that unless their bid matched U.S. offers, "they won't be sold any of our hogs." For the first time in recent years the convention rumbled with concern over contracts with packing companies. Do they undermine the total price structure? There were even suggestions of phasing them out and auctioning all hogs, with no exceptions.
While this was soft peddled, there was overwhelming support for single-desk selling. Gone were former days when more than a few delegates sought alternative sales techniques. With the board's high market profile and effectiveness since last year's palace revolution, one lone criticism evoked an icy silence.
Lambton farmer Arend Korremaker noted that single desk selling was a "great strength...and has proved itself over the years." And a self-professed former board critic, Jody Durand of Huron county, urged fellow producers to stop the infighting that had weakened the organization. "There's been a great improvement in the board's approach to selling hogs. Let's pull together." Ray Howling, who runs a Waterloo farrow-to-finish enterprise, told producers "they had better think very carefully before changing their selling system." Today's sow market shows what happens when farmers have no control over the end product, he said: "Maybe a packer wants sows, but at his price, and maybe he doesn't want them. That's the way hog selling would go but for the single-desk offering."
Pork board sales manager Rick Scragg noted that new selling rules improved the system. Contracts no longer are pool-price based. Since early March there has been little difference between the firmer auction price and contracts. On some days the auction gave better returns. He felt the previous system effectively meant lower prices after allowance was made for contracts.
Those using the weekly pool "became second-class producers", Scragg said. Signing delivery contracts with packers is no longer an attractive proposition. The 14-day clause - prices are published openly two weeks before a contract goes into effect - has "given a high degree of openness," Scragg stressed. He added that contracts functioning before the March 1 change would run their course - JP
Residues will be costly
Ontario pork producers face Draconian measures should they abuse health regulations governing the administration of sulpha drugs. A tiny minority has not cleaned up its act and the risk of residues found in Japan-bound exports jeopardizes the entire market.Lazy or careless producers will suffer tough penalties, pork board chairman Carl Moore noted. A few cannot endanger the livelihood of the majority.
In future, producers will have a total shipment condemned and then have to pass stringent tests before further shipments are accepted. Further, a violator would pay $80 a hog to have each hog in his shipment tested. This sounds like rough justice but Japanese buyers now demand guarantees that imported animals are free of sulpha taint.
The Japanese are in a tight bind. Recent Tokyo laws impose a five-year jail term should Japanese buyers import and sell meats responding to sensitive sulpha testing. Essentially, consumers across the developed world are now calling the shots.
Moore stressed that the Ontario pork producer's future hinges on export markets, whether Japan or elsewhere. There are markets for up to 120,000 pigs a week if Maple Leaf, Quality Packers, Schneider's and close to another 120 smaller processors don't expand processing capacity.
More hogs will go into export markets. Apart from Japan and other Pacific Rim countries, American packers seek lean, high-quality Ontario animals. These include Thorn Apple Valley in Detroit, Quebec processors, Hatfield's in Pennsylvania, and IBP in Indiana. These markets cannot be threatened by careless drug treatment, Moore said.
He added that about 80,000 Ontario hogs now being produced are "but a token of potential demand." The pork board chairman added that it would be tragic if a few producers undermined an "unequalled potential...for lean, well-muscled animals that can be processed into premium-quality products." - JP
U.S. packers line up to bid on Ontario hogs
By JOHN PHILLIPS
Bidding for Ontario hogs could get even more intense as fast-expanding U.S. packers vie for high-lean pigs. Michigan's Thorn Apple Valley already buys up to 7,000 pigs a week, and may buy 10,000 once a group of southwest Ontario farmers - mostly members of the planned 3-P kill-and-chill co-op in London - sign a delivery contract with Thorn Apple.Restoration of the pork board's electronic auction also added steam to the market. Mid-March the price hit $182 but settled at a $173 weekly average, notes pork board sales manager Rick Scragg. Additional stability came to the market, following a series of meetings between pork board and packing company executives who were decidedly nervous when the Ontario government's farm marketing watchdog approved a return to auction selling late January.
Meanwhile, Thorn Apple seems set on becoming a fixture on the bidding scene. Soon it will be linked directly to the board's electronic sales system.
Other U.S. meat packers may also be seeking hogs. Iowa Beef Processors Inc. (IBP) executive Steve Ehman told Farm & Country his company "would like a chance to bid on your pigs." At a recent meeting involving Huron county pork producers in East Lansing, Michigan, he said premium quality was the main attraction.
He said "Canadian leanness is better than ours at the moment... but don't take it too far, like the Danes," explaining that Danish hogs have lost so much fat that "you have PSE and PSS problems." IBP opts for a pig with backfat in the 18 to 25mm range since pork needs fat to impart a desirable taste.
As procurement chief at IBP's Logansport plant in Indiana, Ehman said he buys on the basis of five company grades: Premium down to '5', with '3' as the average and "sorts" beyond this grouping. Other preferences include an accent on genetics giving a meat yield of 75 to 77 per cent with the head off and a live weight range of 230 to 270 pounds. There are price penalties for over-fat animals, and he implied a preference for the 250-pound animal.
IBP will need Ontario hogs once its new Logansport plant steps up production. There are reports labour disputes delayed speeding up the kill line. Former employees of a nearby Wilson plant, closed because of high overheads, want higher hourly rates than the US$7 to $12 an hour IBP officials say they can afford.
With IBP becoming a major contender in the Northeast meat packing complex, industry analysts predict an all-out donnybrook for hogs. Thorn Apple has signed a 10-year agreement with Michigan Livestock Exchange co-operative which undertakes to find two million pigs a year from its 40,000 members in Michigan, Indiana, Ohio and Kentucky.
Thorn Apple's strategy at the moment is to get as many local hogs before the IBP plant gets into high gear for a planned four-million-a-year output. But IBP is not without a procurement network with the acquisition of the Heinold Hog Markets Inc. buying stations. So for the next two years Thorn Apple and IBP will slug it out for market domination.
While both Northeast plants have equal capacity, Thorn Apple has the advantage of being local. In addition, the IBP grouping, about the same size as the Hatfield food conglomerate, owners of Smithfield - each handles 25 million pigs a year across the U.S. - has a bloody battle on its hands when it opens a promised plant in North Carolina.
Both corporations have diametrically opposed production strategies. Smithfield CEO Joseph W. Luter III says integration is the "cornerstone" of its business." He has formed contractual relations with large pig factories such as Carroll's Foods, Murphy Family Farms and Prestage Farms. IBP, however, opts for buying its needs from thousands of independent family farms.
Ehman said only eight to 10 per cent of the hogs are bought in advance by contract. The average producer last year shipped 38 hogs to the seven company plants, with animals delivered to a local buying station.
He said prices are settled on the meat value and over the coming few months measurements will be based on 18 carcass measurements taken ultrasonically. Computerized grade and yield information already is mailed to producers, along with dressing percentage and carcass yield. "We've already seen a good response to this, and genetics are really improving."
IBP is committed to this approach. "Our forte is processing hogs, while the producer's forte is raising hogs," Ehman said. "They're completely different functions. We think this is the most profitable approach for all of us. We don't want anything different." This may not be altruism on his part. With so many small producers raising hogs for the vast IBP network, the corporation does not have to invest in genetics, whether seedstock, breeding or multiplying herds.
Only time will tell whether the IBP or Hatfield approach is the right one. But one thing is sure: Ontario now seems committed irrevocably to North America's market forces. There are reports the proposed 3-P processing co-op in London may handle a large part of Thorn Apple's chilled pork cut exports to Japan and Pacific Rim countries. The official answer may come next month when an internal report sees the light of day.
As the 3-P and Thorn Valley partnership develops, industry watchers are looking to see how the powerful IBP fits into a future scenario.
Border standards lax
With all signs pointing to American- market hogs crossing the border, and countervailing duties dropping on Canadian animals entering the U.S., keeping pseudorabies at bay becomes the priority.A group of Huron county farmers recently took a hard look at how incoming live pigs could be handled should the barriers come down. Pig Improvement Company (PIC) official Chris Hills was astounded when federal veterinarian Dr. Susan Wray, who is at the Sarnia border crossing, said she lacks the staff to run a health checking system.
U.S. live hogs, either at Sarnia or Windsor, would be checked by American officials. "It's up to them," she said.
Hills then asked: "How effective is the floor scraping (of transport trucks)?" There was a shrug in response. "What about power washing?" Hills pressed. "Is there any done?" Wray conceded a soft "No."
Seven miles south of the Port Huron entry point, U.S. government veterinarian Dr. Tom Brown operates the privately-run inspection centre. Animal transports pull into the yard where he checks papers for the 15.9 million "critters" that head north each year. Papers are examined, but like Dr. Susan Wray he does not have the facilities to unload pigs. Parrots and macaws may be given closer attention. Should loads appear in order, he snaps a metal seal on the truck and animals - at the moment only cattle and lambs - and the driver heads directly to the Ontario packing plant where animals are checked. Should a seal break during the journey, the driver telephones Brown and he takes verbal responsibility for health standards.
Over the past year or so, Ontario pork producers have insisted thorough sanitation procedures be undertaken before U.S. market pigs can cross border points. Late last fall, federal agriculture official Bill McElheren reminded border crossing officials that all trucks that had carried hogs and poultry must be cleaned and disinfected before entering Canada. Until that reminder, Ontario, unlike Alberta and Manitoba, had not enforced the rules. Now, truckers must pay $50 to $100 to have their vehicles washed.
Rates of pseudorabies infection have dropped in states such as Michigan. Dr. Larry Granger, a veterinarian and marketing co-ordinator for the Michigan Livestock Exchange co-op, says while the disease has caused large income losses, an eradication program started in 1990 is bearing fruit.
Six years ago there were 308 infected farms. After recent use of vaccines that do not confuse testing techniques - earlier testing could not differentiate between infected and vaccinated hogs - there are now only four herds left, around 500 animals, now carrying the virus.
Granger predicts that final eradication may come much sooner than predicted. -JP