Canada recently introduced a program to assist its hog industry. Based on a recommendation
\nfrom the Canadian Pork Council, the program has two components that can provide direct
\neconomic benefits to hog producers. One component will pay producers to exit the industry. The
\nsecond component provides partial loan guarantees under commercial terms to potentially viable
\nproducers who elect to remain in production and restructure their operations.
\nThe US National Pork Producers Council (NPPC) opposes the program and cites a study from
\nIowa State University that estimates a 7.5% reduction in North American hog prices as a result
\nof the program.
\nThe study is not publically available, so it is not possible to analyze it. However, the claim is
\nastounding. The aim of the first part of the Canadian program is to reduce the Canadian breeding
\nherd by 5%, which would eventually reduce the number of market hogs from Canada
\naccordingly. Assuming price flexibility for pork between -1.0 and -2.0, the loan guarantee
\nprogram would need to result in 6.75 million to 13.5 million more hogs from Canada than would
\nhave been the case. This is based on 2008 production levels. If the first component results in a
\n5% reduction, the loan component would need to result in a 27.5 – 52% increase in Canadian
\nproduction in order to suppress prices by 7.5%.
\nIt\u2019s extremely hard to imagine how a program that reduces sow inventories, provides marginal
\nloan benefits to a relatively small portion of Canada\u2019s industry, and that, at best, guarantees loans
\nat levels equal to about half of variable costs could ever have any negative impact on North
\nAmerican prices, let alone one as large as is claimed. Several potential issues that must be
\naddressed in a proper analysis of the supply response to this program have been identified in this
\npaper.
\nNevertheless, an official of the NPPC, quoted today (August 26), says that the program will put
\nthe onus on poor American producers to adjust and relieve the responsibility from Canadian
\nproducers. No one should have any sympathy for this type of woeful spin. The fact is that
\nCanada has already reduced its herd by 14.5% from its peak in 2004, and total inventories of
\nhogs in Canada the second quarter of this year were down 19.4% since mid-2004. During the
\nsame period, US mid-year inventories of hogs grew every year until 2008 before dropping
\nslightly by 1.4% this year. Meanwhile, US producers have added to this summer\u2019s poor prices
\nby loading another 4-5 lbs of weight on each hog they ship to market. The market expects that
\nAugust 2009 pork production in the US will set a record.
\nI don\u2019t know whether this Canadian program is good policy or not from a Canadian perspective.
\nI do know it is responsible from an international trade perspective. It appears inevitable that
\nthere will be threats and the potential reality of yet another trade action by the NPPC. One can
\nonly hope that, when it occurs, the US industry will be held responsible for its failure to adjust to
\nan ugly market situation, and that proper economic analysis is used in the argument.
\nOne of the major reasons for the current situation in the hog industry is domestic and
\ninternational reaction to the outbreak earlier this year of the new H1N1 virus, which is daily
\nmisnamed swine flu in North American media. It has scared domestic consumers and
\ninternational customers away from pork and has reduced demand. The NPPC might better use
\nits resources and influence to fight that real battle than to blame its trading partner for nonexistent
\nnegative effects of a benevolent program.<\/p>\n","protected":false},"excerpt":{"rendered":"
Canada recently introduced a program to assist its hog industry. Based on a recommendation from the Canadian Pork Council, the program has two components that can provide direct economic benefits to hog producers. One component will pay producers to exit the industry. The second component provides partial loan guarantees under commercial terms to potentially viable […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[6699,19102,8882,13816,2349,2344,18311,7730,2817,189,6784,190,583,19644,7646,23694,4663,12670,286,7731,7732,20007,14804,34,3878,20792,5381,2476,10858,10859,7733,7734,3465,16262,1324,17152,4732,4257,17743,27282,104,4644,35,20911,18011,1301],"class_list":["post-5745","post","type-post","status-publish","format-standard","hentry","category-economics","tag-6699","tag-address","tag-al","tag-ass","tag-breed","tag-breeding","tag-canadian-pork","tag-canadian-pork-council","tag-cla","tag-consumer","tag-cos","tag-cost","tag-costs","tag-dd","tag-debt","tag-dir","tag-don","tag-down","tag-dust","tag-economic-programs","tag-exit-the-industry","tag-gh","tag-hal","tag-hog","tag-hog-production","tag-influence","tag-light","tag-loading","tag-mark","tag-nat","tag-news-and-events","tag-payouts","tag-pea","tag-pl","tag-pork","tag-pork-producers","tag-pork-production","tag-prices","tag-prod","tag-production","tag-sow","tag-summer","tag-swine","tag-t","tag-tot","tag-weight"],"_links":{"self":[{"href":"http:\/\/prairieswine.com\/rsc\/wp-json\/wp\/v2\/posts\/5745","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/prairieswine.com\/rsc\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/prairieswine.com\/rsc\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/prairieswine.com\/rsc\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/prairieswine.com\/rsc\/wp-json\/wp\/v2\/comments?post=5745"}],"version-history":[{"count":0,"href":"http:\/\/prairieswine.com\/rsc\/wp-json\/wp\/v2\/posts\/5745\/revisions"}],"wp:attachment":[{"href":"http:\/\/prairieswine.com\/rsc\/wp-json\/wp\/v2\/media?parent=5745"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/prairieswine.com\/rsc\/wp-json\/wp\/v2\/categories?post=5745"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/prairieswine.com\/rsc\/wp-json\/wp\/v2\/tags?post=5745"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}