What’s Going on in Canada?

The Canadian pork industry is making news a lot lately—and the news is not necessarily good. Reports last week following a Canadian Pork Council meeting talked about potential threats to the entire Canadian pork supply chain if too many producers were to exit the industry. I always want to know the “rest of the story,” beyond what the news releases are telling me. Today I sought some perspective from Karl Kynoch, Baldur, Manitoba, chairman of the Manitoba Pork Council.

 

The Canadian pork industry is making news a lot lately—and the news is not necessarily good.  Reports last week following a Canadian Pork Council meeting talked about potential threats to the entire Canadian pork supply chain if too many producers were to exit the industry. I always want to know the “rest of the story,” beyond what the news releases are telling me. Today I sought some perspective from Karl Kynoch, Baldur, Manitoba, chairman of the Manitoba Pork Council.  Now Karl is a pretty upbeat sort of fellow, but the grim reality still came through in our conversation.

Karl says that Canadian pork producers have been struggling for some time and are simply lacking the money necessary to keep their operations going. “I get calls every week from producers asking what to do. We have been getting around $10/pig less than producers in the United States. The challenges of the low prices have been putting producers further into debt and many have been using their existing savings to try to bridge the gap to survive until better times. Access to capital in the industry has become a big challenge. Banks are saying, ‘no more money,’ and producers are making the decision on whether or not to throw in the towel.”

Manitoba is the largest pig-producing and pig-exporting province in Canada, accounting for nearly 30% of Canada’s pig production. Kynoch says feed prices and drought are contributing to the problem. He notes that Manitoba has gone from 1,700 pork producers to 500 producers (and falling) in the span of seven  years.

The Canadian pork industry has been seeking government help to try to get cash flowing back into the pork industry. In response, Kynoch says the government has been pretty clear that no additional programs or assistance will be made available beyond programs that already exist. Kynoch says existing programs are not providing much help when producers have depleted their reserves. “Producers are falling through the cracks with programs because they don’t have profit margins to go on,” he explains. The Canadian government joined provincial governments in issuing joint announcements last week to encourage struggling pork producers to use existing assistance programs. But will it be enough to make a difference?

It was also announced this week that Canadian packer Maple Leaf Foods has entered into an agreement to acquire Puratone Corp., a hog production company in Manitoba, for $42 million.Earlier this fall, Puratone had filed for bankruptcy protection, citing feed prices, the strong dollar and global recession as factors leading to the company’s downfall. Puratone Corp. is the fourth-largest pork producer in Canada. Meanwhile Saskatchewan’s largest hog producer, Big Sky Farms, was placed in receivership around the same time.

When sorting through the details in following this story, I was a bit shaken up to hear the thoughts expressed during a recent radio interview on the Canadian Broadcast Network in which Gerry Ritz, Canadian minister of agriculture, said 43% of the country’s hog farms went out of production during a paid buyout in 2008, but production only went down 10%. During the same interview, a food distribution expert at the University of Guelph in Ontario noted that the Canadian pork industry was not facing a crisis, but instead needed to face up to a “chronic disease.” Ritz summed up the situation by saying that Canadian producers were just plain too good at their jobs and had created an oversupply of pigs. The two men indicated that the pork industry simply needed to rebuild itself for a different competitive advantage besides focusing on economies of scale. It all sounded a bit harsh to me. Kynoch says at least it made the situation clear, and producers now know that they cannot base decisions about their future on a hope for additional government assistance. He states, "Our government has stated it would not give assistance to producers that could become counter-available down the road."

Kynoch spends time in the United States each winter, manning a Manitoba Pork booth at both the Minnesota and Iowa Pork Congress trade shows. He also attends World Pork Expo in order to build relationships. “We have so many similarities on both sides of the border,” he notes. “Producers in both countries are dealing with animal welfare, sow stalls and PRRS, for example. When I talk to the U.S. producers, I usually find it’s like talking to a producer neighbor from right down the road; we have such similar issues to face.”  What do you think about the situation facing our Canadian neighbors?  Post your thoughts, questions, comments or encouraging words in the “Comment” section here, or email lora.berg@penton.com

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