Government program won’t help most pork producers
for Smoky River Express
Pork producers have been hit hard in the past few years. Most recently a rising dollar and a U.S. country of origin labelling program have hurt exports, a major problem since Canada exports half of its pork.
Now the public’s false perception that the H1N1 virus or swine flu has something to do with eating pork has dealt a devastating blow to an industry already in crisis.
Producer groups have been lobbying the government for $800 million to assist the industry. On Aug. 15, the federal government announced a new $75 million restructuring plan aimed at helping struggling operations get out of the industry and get government-backed credit to viable operations trying to weather the perfect economic storm.
The plan also includes $17 million for an International Pork Marketing Fund to find new customers for Canadian pork products.
“We know Canadian hog producers can become profitable again, but we have to face tough realities to make our pork industry lean and competitive,” said Agriculture Minister Gerry Ritz. “Some operations simply aren’t viable any more and we are going to help them transition out of the industry and reduce production. Some operations need access to credit to weather the current economic storm and we are providing government-backed loans to help them restructure. Farmers want to make their living in the marketplace and we’re investing in marketing to find new customers for Canadian pork and make our pork industry successful for the long term.”
“Our government continues to put farmers first and continues to show strong support for the hog sector in these difficult economic times,” said Chris Warkentin, Member of Parliament for Peace River, in a press release. “Our government is working with the pork industry to help hog farmers recover or exit the industry, and to help the industry take advantage of new market opportunities.”
Peace Pork’s Rocky Morrill agrees that the industry is in a deep crisis.
“You’ll hear two years or three years, but it’s been almost four years that the price has been below break even,” he says.
Most people in the industry are in their 50’s and 60’s and are not being replaced by a younger generation. Raising pigs doesn’t have the cowboy mystique attached to it the way raising cattle does, and it’s also a difficult and time-consuming business.
“The pork industry is at a critical point. It will lose people who will never come back to it,” Morrill says. “We’ll have no domestic production.”
But Morrill doesn’t believe the new government measures will help most people in the industry.
“Generally, as is typical with any government program, they get so focussed on making sure no one abuses it that ultimately it will help very few,” Morrill says. “By far, this is not a broad spectrum solution.”
Morrill says there is nothing in the plan that presents a good option for local business.
“None of these programs will help Smoky Pork.”
The government-backed loans may also not entice banks to lend to most producers in deep debt.
“If a producer is in very bad shape then these things will probably help the banks more than the producer,” Morrill says. “There’s a good chance the money will be going to the lending institution. The bank will own everything.”
Morrill is also sceptical about the transition program meant to help people get out of the industry while retaining some equity and without losing their home.
“It’s not going to be, well ma and pa get to retire. Some may, but again, only a very small sliver of people will qualify for these programs.”
For larger farms, Morrill says the better option would be closing down certain barns that aren’t doing well rather than the entire business.
“Some larger companies have multiple assets, with multiple barns,” Morrill points out. “Maybe Sunterra has a 2,500 sow barn and they decide to say, let’s stop the bleeding and shut it down. By the regulations of this program, they’re not going to be able to do it. They would need to say they weren’t in business anymore and shut down everything.”
In Alberta, reducing production is not a good option in general.
“In Alberta we need to retain our pig production because our main packing plant in Red Deer is getting down to critical numbers,” Morrill says.
Morrill also doubts reducing production nationally will raise pork prices to a profitable level again.
“It’s also not going to change the price of pork overall because the North American price is the North American price,” Morrill says. “All of our prices in Canada are based on the U.S.”
Meanwhile, U.S. producers have so far preferred to wait out the crisis in the industry, and haven’t reduced their own production.
“[The U.S.] has country-of-origin labelling, which is tariffs against us. Yet you run down to Costco and it’s all U.S. pork.”
Morrill says the Canadian commitment to free trade has hampered the ability to sell Canadian pork.
“We’ve designed our Canadian red meat production around feeding the world. We’re going to be the meat locker of the world, as one Minister put it,” Morrill points out. “The world holds us at ransom. We’ve increased our production, partly because of government initiatives, and you end up giving meat away.”
Most pork industries in other countries such as Russia and China are getting a good price for pork.
“They’re making money because their domestic market is strong. But because Canada exports 50 per cent of our pork, we don’t get a good price, and our domestic market gets softened,” Morrill says.
“In Canada, that’s the main lesson to be learned from a multitude of things that have happened.”