Production

 Industry Partners


Prairie Swine Centre is an affiliate of the University of Saskatchewan


Prairie Swine Centre is grateful for the assistance of the George Morris Centre in developing the economics portion of Pork Insight.

Financial support for the Enterprise Model Project and Pork Insight has been provided by:



Author(s): Claude Bilodeau
Publication Date: January 1, 2004
Reference: Banff Pork Seminar 2004
Country: Canada

Summary:

The pork industry is of great importance to Quebec’s agricultural economy. Since 1981, Canada’s pork production has increased by 82%, with Quebec increasing 56%. Quebec’s contribution to overall Canadian production is shrinking. Considering the environmental difficulties faced in Quebec and the costs associated with it, there is a prediction of very weak growth in Quebec’s pork production. Despite the difficult situation in the hog markets since 2001 and the deterioration of the financial situation of certain producers, it is believed that most operations will survive the current crisis. Financing using debt is still the most often used method of financing. Using equity is interesting because it does not require short-term repayment of the debt but the return is over 15%. Very few agricultural operations can achieve that return. Quebec does not have any venture capital for agriculture, so banking support remains essential. Banks finance agriculture even though it is considered moderate risk. The industry faces a number of challenges, and the quality of pork from Quebec and the rest of Canada are no longer sufficient to ensure a place in the export markets. A better network and the creation of new synergies in the industry are essential to overcoming these challenges. These primary risks include market risk, management risk, production risk, environmental risks, and financial risks. In a period of good profitability it is important to build good working capital and not to overload the enterprise with non-productive investments. In periods of low prices it can be strategically worthwhile to take advantage of certain opportunities that the market offers: the acquisition of an enterprise at a low cost, and expansion projects. Production cost reducing investments and changes to improve performance in the herd should be realized in a depressed market in order to be at full production when prices improve.

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