It’s no secret to those in Canada’s hog-production industry that the pricing system is and has been damaged for quite some time. Since 2015, the degradation in pricing for hog producers has gotten worse every year.
“The way things are being priced (in the packing industry) doesn’t work and hasn’t since 2015,” said Brent Bushell, general manager at Western Hog Exchange (WHE). “In the last five years, the average number is a loss of $11.74 per head on every hog. Some producers may be breaking even, some may be losing $20 per head.”
If the issues plaguing the pricing system were to be addressed “sooner (rather) than later,” the industry might just be able to be rebuilt and stabilized, he said. In the last three years WHE has seen between 12-15 farmers leave, or plan to leave the industry.
“It’s not magic, it’s just business 101. Processors are going to have to understand that they have a chance right now, if they share in the value with producers, to stabilize the industry,” Bushell explained. “If we sit tight with broken pricing until too many producers leave and there aren’t enough hogs, you will see packing plants go out of business and we are very close to that right now.”
Bushell estimates if practices continue this way, the side-effects of not being a “healthy industry” will culminate in one to two years.
“I’m an Albertan. A Canadian. However, I would have much rather raised pigs in Western Canada,” says retired producer, Brent Moen. “I could manage my risk and do substantially better by moving my production there.”
The irony is, the packers are causing the producers to get out of the industry, Moen said. Until pricing is competitive and producers start seeing a positive return on their investments, hogs and producers will continue to exit the market.
Source : Farms.com