News and Views – Shock at Manitoba regional moratoriums

Posted in: Economics by admin on July 14, 2011 | No Comments

The announcement March 3^rd by Manitoba Conservation that it was implementing indefinite moratoriums on the construction of new or expanded hog operations in three regions of the province led to reactions of shock and outrage from industry representatives. Conservation Minister Stan Struthers said that the restrictions applied to southeastern Manitoba, the Red River Valley and the Interlake, while the moratorium for the rest of the province was lifted. However, the report of the Clean Environment Committee also made 48 recommendations aimed at making the hog industry more environmentally sustainable. These include a requirement for new manure storage facilities to have synthetic covers and a complete ban on winter manure spreading from 2013.

Manitoba Pork Council chairman Karl Kynoch says imposing a permanent moratorium will hurt the value of existing farms in the affected area, especially small family farms, and may end any opportunity to attract a new processing plant to the province. “We were expecting, after the public consultations, that there weren’t too many huge issues and that it would be a fairly neutral report,” he explains. “We have some concerns with the CEC report but what just blew us out of the water was the fact that the government went outside of the report and implemented a permanent moratorium on the eastern side of the province.”

Kynoch believes that the moratorium will affect at least two thirds of the production because most of the production is in those regions. He says that his big concern is the potential devaluation of buildings and the effect on the viability of family farms that are unable to expand or develop their facilities. “There’s going to be a lot of hard decisions made, especially on some of the small family farms whether to continue on or whether to shut the operation down.”

Kynoch says that singling out the hog industry, which accounts for only about 1.5 percent of the phosphorus runoff ending up in Lake Winnipeg, is the wrong way to go, especially when farmers will still be allowed to use chemical fertilizer. He also notes that swine manure contains a wider range of nutrients needed by crops and the moratorium will limit access to that source of crop nutrients at a time when farmers are looking for every opportunity to reduce input costs.

In response to the government’s decision, Manitoba Pork Council, Keystone Agricultural Producers and the Manitoba Chambers of Commerce announced they had formed an alliance that will work to have the decision overturned. A working group will be formed to examine the CEC report and its recommendations and identify the best way to implement those recommendations, engage in lobby efforts to convince the government to reverse the decision and conduct public education to build awareness of the issue.

Karl Kynoch says targeting one industry is unjustified.  “What’s really concerning is the fact that the government spent $750,000 doing a Clean Environment Commission review of our industry and has now gone outside of those recommendations. The CEC did not recommend putting a moratorium on the hog industry and we feel that the government has announced this moratorium, at the same time the report has come out, just trying to blame it on the commission. It’s very disappointing for us to see them do that kind of an investigation on our industry and then go outside the recommendations and put this moratorium on.”

Keystone Agricultural Producers president Ian Wishart observes that only the hog industry is being targeted which makes you wonder about the science behind all of this. “You can generally explain that approach to farmers and get good cooperation but, if it isn’t based on science, it’s pretty hard to get farmers to act,” he says.

Manitoba Chambers of Commerce policy and communications director Dan Overall agrees the government has not dealt with the hog industry in an evenhanded manner. “It’s bad not only for that specific industry but for our reputation as a province. Government needs to deal with industry in an even-handed manner and it needs to know that it can’t get away with not doing that,” he says.

News and Views – Expedited LMO process will speed up foreign worker recruitment

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Alberta Pork, in conjunction with Alberta Agriculture and Food and Service Canada, has established an Expedited LMO Program that will drastically speed up the process of obtaining a Labour Market Opinion. Obtaining an LMO document is the first stage in the process of employing a worker from overseas. 

The Alberta Pork website is currently being updated in order to provide producers with all the information they need to understand the processes involved in recruiting and employing a foreign worker, including how to complete the LMO application form.

The process involves Alberta Pork receiving completed LMO applications from producers and checking them to ensure they are correct prior to forwarding them to Service Canada. In this way, it will provide a means of “quality control” so that all applications are of the required standard, allowing them to be processed quickly. Producers are, of course, free to make an application directly to Service Canada, who will deal with it in the normal manner, points out Alberta Pork.

In order to assist producers further, a database of foreign workers who have been interviewed in their country is being established in order to provide a pool of suitable candidates, initially from the Philippines, Mexico and Europe. Producers will be offered a shortlist of candidates depending on the job position and the skills and experience required.

Bernie Peet, of Pork Chain Consulting Ltd., has been contracted to assist with this project and will be carrying out the day-to-day work on behalf of Alberta Pork. Alberta Agriculture and Food has provided funding for the project. For further information, please contact Stuart McKie of Alberta Pork – Phone: (780) 491-3527  Cell: (780) 307-5853, or Bernie Peet, Pork Chain Consulting Ltd. – Phone: (403) 782-3776  Cell: (403) 392-3104

Natural pork provides niche market opportunity

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The economic pressures faced by small-scale pig producers have caused many to quit the business, unable to compete with larger, more cost efficient operations.  The alternative is to look for a niche market opportunity to add value to the pork in order to remain profitable.  Two years ago, George and Shelley Matheson, of Stonewall, Manitoba decided to downsize their 100-sow unit and focus on developing retail sales of “natural” pork.  Being only half an hour from Winnipeg, with 600,000 potential customers, they saw an opportunity to capitalize on the increasing interest in how food is produced. “When you sell direct to the public and people come to the farm, they are very interested in how the pigs are reared, the diets we are using, the ages of the pigs and the breeds,” George explains.

Although there is no official definition of “natural”, the Mathesons believe that it means operating a production system where pigs can fulfil their natural behaviour and are fed simple rations made on the farm from homegrown cereals.  Sows are kept outside all the year round and have small sheds with deep straw to keep warm in the winter.  They go indoors into conventional crates to farrow and, after weaning, the piglets stay inside until they are 50lbs, when they move into biotech barns with deep straw bedding.  Although most of the finished hogs are still sold into the commodity market, eight per month go to Interlake Packers at St. Laurent. There they are custom killed, butchered into retail sized cuts, the hams and bacon smoked and everything vacuum packed.  “We sell quarter, half or whole hog packs with 33, 66 or 132 pounds of pork and each has nine different cuts,” says George. “Good packing ensures the product will last at least a year.”

With many customers coming to the farm to collect the pork, the Mathesons are keen to show them the animals and explain how they are produced. “People are detached from agriculture these days, so they really enjoy seeing what we are doing and are very interested,” George explains. “They see the pigs outside or on deep straw and they like it.”  The Matheson also rear 1000 chickens on pasture each year, during the summer and say they are so popular, they could easily sell 10,000. “People tell us that the taste is very different from mass produced chickens,” says George.

In addition to selling directly from the farm, the Mathesons attend farmers’ markets and produce markets in the area. They recently participated in a seminar on buying food locally, which was attended by 140 people and try to attend as many local food-related events as possible. “Shelley is the marketing guru and has produced a leaflet on our products and is working on a website,” George says. “We want to increase the pork sales and eventually be able to sell all our pigs direct to the public.”  He believes that adding value in this way and producing feed from grain produced on the farm can be profitable. “We can definitely improve our marketing and Shelley has a good way of making our products sound attractive.”

The Matheson’s four children are also involved on the farm on a daily basis. “They all have their chores to do and this gives them an exposure to farming life, says George. “Most kids don’t know that the little pigs grow up so quickly and become pork and bacon!”  The children also help out showing visitors the animals and go to the farmers’ markets.

With the mainstream pork industry in such dire straights, selling direct to the public is an attractive option for some small producers, despite the additional work involved. It has an added benefit for the industry at large through helping the public understand livestock rearing methods and letting them talk directly to the people producing their food.

Photo captions:

Hannah Matheson – The Mathesons’ youngest daughter, Hannah, who helps with chores on the farm

Biotech pigs – George Matheson (right) and his son Austin with pigs in one of the biotech shelters

Manitoba Swine Seminar – Hiring the right staff requires thorough planning

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Making sure you are hiring the right person requires thorough planning, says Shirley Hoult, Director of Human Resources for the Puratone Corporation, speaking at the Manitoba Swine Seminar 2008 on January 31, in Winnipeg.

The first step, she said, is to review the job you are hiring for and study your options.  Are you looking for full time, part time or casual workers?  Did the last person leave because of a problem related to your business?  If so, how can you fix the problem before hiring someone new?

There are many ways to advertise for new workers, Hoult noted.  In addition to the usual means of communication – newspaper ads, websites, job fairs, word of mouth, school presentations and local bulletin boards, Hoult also suggested using cinema ads, flyers in mailboxes, billboard signs, placemat and menu ads, windshield flyers and accessing foreign worker programs. Advertising, she said, should include an introduction to your business, with clear and concise information about the job and the qualifications required, contact information and the deadline for applying.

Once you have the applications in, make sure that the candidate is able to comply with biosecurity requirements and is able to work in a farm environment, for example doesn’t have any allergies or suffer from asthma.

In preparing to interview prospective workers, Hoult urges that you make sure the person(s) conducting the interview is knowledgeable about the job.  “Ask each applicant the same questions,” she said.  “Provide information about the company culture.  Listen rather than talk.  Set a minimum score and identify the top two candidates.”

It is important to ascertain that the new employee is comfortable with the pay range for the position and to check all references, Hoult said. She also recommended that the new hire be tested out with a trial day on the farm to see if he is up to the work and fits in with the farm culture.  She also advised following up with new employees at 30 day intervals to make sure that all is going well and to be able to correct any problems quickly.

Puratone, she said, provides a disciplined on-the-job training program with a 12-week training manual that covers all sections of its farms. Each employee also has his own development plan.  “You should also provide frequent performance feedback for new

employees over the first 90 days and at regular intervals thereafter,” she said.  “Pay should be linked to performance and there should be annual evaluations tied to both team and individual results.”

Of course, she noted, it is better to be able to retain existing staff than have to hire someone new.  “The key is to create a positive, respectful workplace where workers receive recognition for a job well done and everyone is treated fairly and consistently.”

Manitoba Swine Seminar – Animal nutritionist touts benefits of auto sort finishing

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With equipment, feed and production costs near record high levels, hog producers have to be pro-active at finding new ways to raise their pigs more efficiently, says Dr. Marvin Wastell.  One solution discussed by the Omaha, Nebraska-based animal nutritionist (he is associated with Gro Master, Inc.) is the use of large group auto sorting systems for managing growing/finishing pigs.  Wastell was in Winnipeg on January 31 to explain the

benefits of the systems to producers attending Manitoba Swine Seminar 2008. In addition to higher production costs, he noted, consumers are demanding consistent quality and many care that the animal products that they buy come from animals that were raised in a friendly environment.

In December 2005, Wastell reported, swine producers from five different countries met with a group of scientists in Le Mars, Iowa, to discuss and evaluate raising hogs in large pens using Auto Sorters.  The producers learned that there is an economic improvement potential of up to $16 US per pig marketed by raising pigs in this way.

He noted that there were rumours at one time that Auto Sorters resulted in some pigs dying. He dispelled that myth by citing results in northwest Illinois where 21,000 Auto Sort spaces have been installed with no fatalities.

He compared the results of using an Auto Sort system versus a small pen on the Blue Marsh Hog Farm near Plum Coulee. Manitoba.  The Auto Sort system resulted in slightly higher average daily weight gain, considerably less man hours involved in marketing (2.7 as compared to 32 for the pigs in the small pens) and more than $1 per pig less in labour costs.

A South Dakota producer found he could sell his Auto Sort-raised hog carcasses for $5.44 more than carcasses from hogs raised in small pens.  His production costs were $1.31 a head less. Wastell added that Hormel, an American packer in attendance at the Le

Mars meeting, reported that pigs marketed by producers with auto sorters have a $5.70 increased value over producers who don’t use auto sorters.

“A second question that is frequently asked is how many pigs can be sorted by a given sorter.” Wastell noted.  “One manufacturer recommends 1000-1400 pigs per sorter, but there are several different systems.”  Food court design can also have an effect on pig gains, he said.  A Saskatchewan producer was able to increase average daily gain by 160 g/day by changing the design of his food court.  Large pen auto sorting is not for everyone though, Wastell noted. “Preplanning is a must,” he said.  “The system must be designed for pig flow and people and training for pigs and people is a must.  There also

has to be changes in management procedure. “To be successful the AutoSort system requires a commitment from the producer, the employees managing the barns, the distributor and the manufacturer.”

International Roundup – Pork features well in environmental survey

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European retail chains are requesting more documentation regarding the environmental aspects of the products they purchase. Especially in the UK, the terms “food miles” and “carbon footprint” are gaining in popularity. The agricultural faculty of the University of Aarhus in Denmark recently carried out a life cycle analysis of pork from Denmark, the Netherlands and the UK on behalf of the Danish Meat Association.

The term “Food Miles” means the amount of greenhouse gas emissions (g CO2) during the transport of foodstuffs from the producer to the consumer. “Carbon Footprint” refers to the entire life cycle of a product and its greenhouse gas emissions. This term covers the entire value chain.

In the calculation of greenhouse gas emissions, the soybean crop growing in Argentina, the feed production in Denmark and the entire pig production chain including fertiliser production, slaughtering and meat dispatch was included. Through adding all emission values, a realistic value of greenhouse emissions can be calculated per kilo of pork.

According to the life cycle analysis, 1kg pork contributes 3.6kg CO2 equivalents to global warming. As a comparison, replacing a normal 60-watt lamp with an energy saving lamp burning for an hour provides a yearly reduction of 13kg of greenhouse emissions. Transporting by truck to Munich or by ship to Tokyo, the amount increases to 3.7-3.8kg CO2 equivalents per kg pork. This indicates that “Food Miles” do not have much of an environmental effect and represent less than 1% of the entire emissions in the production chain.

The study revealed no large differences between Danish, Dutch and British greenhouse gas emissions for pork.

International Roundup – New record for US pork exports

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The US pork industry achieved its 16th consecutive record-setting year of exports in 2007, according to statistics compiled by the US Meat Export Federation (USMEF). One of every four pounds of pork traded today originates from the US.

Overall, pork exports increased three percent in volume compared to 2006, surpassing 1.3 million metric tons, nearly 2.9 billion pounds. The value of those exports jumped 10 percent over 2006, exceeding $3.15 billion.

Japan remains the top destination and accounts for 36 percent of the value of all US pork exports. It imported 358,582 metric tons during 2007, valued at $1.152 billion and a six percent increase on the year. “US Pork is perceived as the highest quality product available,” said Greg Hanes, USMEF Japan director.

Mexico is the second highest importer of US pork and pork products although this market saw a 22 percent decline in imports during 2007.

China/Hong Kong was the largest growth market for US pork exports, jumping 91 percent to 169,160 metric tons, nearly 373 million pounds, valued at almost $271 million. Exports to China/Hong Kong surpassed exports to Canada in volume, with 148,576 metric tons or 327.5 million pounds, but Canada remains the No. 3 market in value of pork exports at $491.58 million, a 12 percent jump over 2006.

International Roundup – Ethanol powering US meat and poultry price rise

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Soaring meat and poultry prices in the US are being fuelled by the country’s ethanol policy, says economist Dr. Tom Elam, president of Farm Econ. “You cannot use the combined grain crops of Australia and Indonesia for US fuel and not have an impact on corn, soybean and food prices”, he explains. Elam expects food price inflation to rise five or six percent in 2009 and estimates the cumulative costs to the food industry of the renewable fuel program will be about $100 billion from 2005-2010. The program mandates minimum ethanol production and provides tax incentives for ethanol use.

As part of his analysis, Elam compared what would have happened without the federal bio-fuels program with what has happened. According to his findings, farm level corn prices in 2008 would have averaged about $2.77 per bushel without the program. Ethanol tax credits have added $1.33 per bushel, and may drive corn to more than $5 a bushel in 2009, he says.

Elam has calculated production costs per animal have increased by 53 cents per chicken; $3.40 per turkey; $38 per hog and $117.50 per fed beef animal.

International Roundup – Ethanol boom running out of gas

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Development of new ethanol plants in the USA is grinding to a halt, according to a recent report by Jon Birger in CNN Money’s Fortune Magazine. Cargill has announced it is scrapping plans for a $200 million ethanol plant near Topeka, Kan. and the bankruptcy sale of an unfinished ethanol plant in Canton, Ill. was approved in early March, says the article.

Plans for as many as 50 new ethanol plants have been shelved in recent months, as Wall Street pulls back from the sector, says Paul Ho, a Credit Suisse investment banker specializing in alternative energy. Financing for new ethanol plants, Ho says, “has been shut down.”

The reason for the slowdown is runaway corn prices, notes the report. Spurred by an ethanol plant construction binge, corn prices have gone stratospheric, it says, soaring from below $2 a bushel in 2006 to over $5.25 a bushel today. As a result, it’s become difficult for ethanol plants to make a healthy profit, even with oil at $100 a barrel.

Industry Crisis

Posted in: Economics, Production by admin on July 12, 2011 | No Comments

Surprise at January census data 

With anecdotal evidence of a significant number of producers quitting production, especially in Alberta and Saskatchewan, there was surprise at the December pig census data released by Statistics Canada in January, which showed only a 1.9% drop in breeding stock numbers.  Total pig numbers, down 6%, perhaps better reflected the liquidation that is taking place, although a significant proportion of this is likely due to the increased numbers of pigs being shipped to the USA for finishing or slaughter.

Alberta showed the biggest drop in number of breeding pigs, at 4.9%, while total pig numbers fell 10.6%. However, a survey carried out by Alberta Pork in late 2007 suggested that about 15% of producers intended to quit and that there were possibly another 15% that had already started the process of running down their operations and therefore did not respond to the survey. Saskatchewan had the next biggest drop in breeding pig numbers, at 3%, while numbers in Manitoba fell by only 0.6%. Ontario and Quebec also showed modest reductions of 1.6% and 1.3% respectively.

Table 1:  Percentage change in pig numbers – December 2006 to December 2007

                                             CAN                          AB                 SK                     MB

Total pigs                                  -6                         -10.6               -10.3                    -2.0

Breeding stock                       -1.9                           -4.9                 -3.0                    -0.6

Other pigs                              -6.5                           -5.0               -11.1                    -2.2

< 20kg                                      -1                         -11.3                 -5.1                 +13.4

20-60kg                              -11.4                         -11.3               -18.0                  -12.3

> 60kg                                   -7.3                         -10.7               -10.4                  -11.4

It seems likely that the unexpectedly low reduction in breeding pig numbers reflects the time taken to dispose of inventory and the difficulty in getting sows slaughtered at the end of 2007 and into 2008 was probably also a factor. Many producers seem to have taken their decision in the late fall and the reduced numbers will be shown more clearly in the April census data.

Numbers of pigs in the weight classes from weaning to slaughter were significantly down, indicative of the large increase in numbers being shipped to the USA. For Alberta, numbers in the <20kg, 20-60kg and >60g categories were all down about 11%, and similarly in Manitoba, where numbers fell by around 12%. In Saskatchewan, pigs in the 20-60kg category fell by a massive 18%, as the province’s two largest production companies continued to increase the number of pigs finished in the USA. 

While the January figures do not truly reflect the situation on the ground, they do show a trend towards a steady reduction in the national herd, which seems likely to continue for some time. With or without the federal Cull Breeding Swine Program, we are likely to see a further 10% reduction in sow numbers during 2008.

New government support includes cull sow program

Federal Minister of Agriculture and Agri-Food, Gerry Ritz, announced changes to the Agricultural Marketing Products Act (AMPA) at the end of February that will provide producers with better access to cash advances. He also announced a new sow cull program designed to assist producers who are either reducing their herds or exiting the industry altogether. Both the Canadian pork and beef sectors are now considered by the government to be facing “severe economic hardship” and therefore can qualify for emergency advances under the amended Act.

The requirement for livestock producers to use business risk management programs as security for cash advances has been removed and inventory values will be used instead.  This provision means that producers will not be limited by the value of their CAIS/Agri-Stability reference margin for the advance. Producers will also not have to use payments from these programs (such as interims, targeted advances or final CAIS/AgriStability payments) to repay the loans, unless they are in a default position.

The amendment has added “severe economic hardship” as a trigger for an emergency advance. When the “severe economic hardship” condition is declared, the requirement that the security for the advance be in first position is removed and the maximum amount of the advance raised to $400,000. The advance will be based on 50% of expected market price times the number of animals in inventory.

“Producers will have quicker and easier access to cash advances,” says Minister Ritz. “And, if all producers take advantage of the improved program, an estimated $3.3 billion in advance payments will be available.” 

“This is much needed help,” says Canadian Pork Council (CPC) president Clare Schlegel.

He notes, while this isn’t new money, the proposed changes to the APP will provide the breathing room livestock producers have been asking for. However he admits, “It doesn’t get us out of the woods by any stretch of the imagination but it is much needed help.”

In addition to these measures, a new $50 million Cull Breeding Program will provide support for hog producers taking steps to exit the industry or who permanently down size their operations. The objective is to reduce the national breeding herd by an additional ten percent over and above normal annual liquidations to more accurately reflect market conditions. Producers will be eligible for a per head payment for animals slaughtered and reimbursement for slaughter and disposal costs based on several conditions including that they depopulate at least one barn and not restock for three years.

 Sows and boars marketed from November 1, 2007 until the date when program applications become available will be eligible for a $225 payment per animal less the selling price received. The marketing of these animals is not subject to the restrictions for animals marketed after the applications become available, when slaughtered sows and boars must not enter the human food chain.  For the latest information, go to the CPC website, www.cpc-ccp.com

Provinces announce more help for livestock producers

 Western provincial governments have responded positively to requests for assistance from livestock producer organizations as the high price of feed and low market prices continue. In February, producers in Alberta received an additional payment under the Alberta Farm Recovery Plan (AFRP), which was designed to compensate all farmers, not just those with livestock, for the high feed, fuel and fertilizer costs.  Re-appointed Agriculture Minister George Groeneveld delighted pork producers attending the Alberta Pork Congress in March when he hinted that the AFRP would likely be extended for another year. 

 Manitoba’s Agriculture, Food and Rural Initiatives Minister Rosann Wowchuk also announced support for cattle and hog producers.  The province, through the Manitoba Agricultural Services Corporation (MASC), is making $60 million in loan support available to hog producers at attractive interest rates, which will assist producers facing significant cash flow challenges. Producers will be able to borrow $35 per slaughter hog and $10 per weanling sold between October 1, 2007, and May 31, 2008. Loans will be termed over eight years with the maximum amount being $2.5 million.

Principal payments on these loans will be deferred for the first three years. The first year interest rate will be 2.25 per cent on borrowed amounts of up to $1.5 million with 4.5 per cent charged on any remaining loan amount. All loans will have an interest rate of 4.5 per cent for years two and three and six per cent for the last five years. An additional interest rate reduction of one per cent will be available for young farmers for the first three years.

 “The livestock industry in Manitoba and across Canada has been under significant pressure,” said Wowchuk. “Producers in Manitoba need assistance and our government is committed to ensuring our farmers in this important sector receive support to maintain their farm businesses today and position the sector for future profitability.”

Saskatchewan’s pig producers are being offered early access to their expected 2008 AgriStability payout under a Targeted Advance Payment (TAP) program.  The 2008 program announcement came two months after Saskatchewan pig farmers went public with notices received from the agriculture income stabilization (CAIS) office, saying the farmers’ TAPs from the 2007 AgriStability program were going to be much less than what the office had originally informed them they would receive or, in some cases, zero.

Little comfort from Hogs and Pigs Report

 The USDA Quarterly Hogs and Pigs Report, released on March 28, provided little hope for pork producers in the USA and Canada, suggesting that there is going to be a lot more pork on the market than expected. Virtually all the inventory numbers set new records for March. All hogs and pigs came in at 65.909 million head, which is 6.5% more than last year and nearly 3% above pre-report estimates.  The breeding herd inventory was slightly larger than last year and the market herd saw a jump of 7.2% from last year to 59.77 million head, a much bigger jump than estimates had predicted. USDA also revised its 2008 pork production forecast by adding 90 million pounds to the first-quarter estimate to reflect higher-than-expected hog slaughter in February.

 First-quarter pork production is expected to be 5.96 billion pounds, a massive 10.5 percent above the same period last year.  Total commercial pork production in 2008 is expected to be 23.1 billion pounds, 5.4 percent above 2007.  First-quarter liveweight prices for 51-52 percent lean hogs are predicted to range between $40 and $41 per hundredweight, 12 percent below the same period a year ago.  Worse still, stocks of frozen pork on January 31, 2008 were 563.6 million pounds, 16 percent above year-earlier levels.  Continued build-up of cold stocks may signal a slowdown in pork demand.

 The one bright spot is that January 2008 pork exports were more than 353 million pounds, almost 27 percent above January 2007. 

 Kevin Greer, Senior Analyst at the George Morris Centre, says in his Alberta Pork Hog Market Report that, based on US forecasts and a par dollar, producers are in for a very difficult year. He predicts 110-index prices of $1.15-$1.20 per kilo in the second quarter, “over $1.30” in the third and a drift down to $1.15 to $1.20 in the last quarter of the year.

Smithfield to reduce sow herd by five percent

 Smithfield Foods announced in February that it will cut its US sow herd by 4-5% or 40,000 to 50,000 sows – a move that will ultimately result in production of 800,000 to 1 million fewer market hogs annually.  The company raises 18 million market hogs annually at present and said that it was introducing the changes immediately, although the effects on the number of pigs marketed will not be seen until early 2009.

 “Given the economics for raising hogs today, we cannot continue on the current path; something has to change,” said C. Larry Pope, president and chief executive officer. “Grain costs continue at record levels, with the potential of escalating, given the current US government policy favouring corn for ethanol. Today the economics are very challenging, and we believe that these increased costs will translate eventually into still higher food costs for the American consumer. In the meantime, Smithfield is taking immediate action to improve the efficiencies of our live production operations.”

 Murphy-Brown, Smithfield’s production division, announced last year that it was moving towards group sow housing, which for existing farms, will likely result in fewer sow places, especially in those locations where the opportunity to construct additional space is limited. Also, in North Carolina, changes to environmental regulations may lead to the need to reduce animal numbers. Therefore, although Smithfield cites economic conditions as the reason for the cutbacks, it seems likely that these factors played a major role in their decision.

 “Other hog producers will likely follow Smithfield’s lead and trim production,” believes Ron Plain, agricultural economist at the University of Missouri.  Also, he suggests, more cutbacks will be needed to push hog prices high enough to cover production costs. “This is not enough of a cutback to turn things around,” he said of Smithfield’s action.

European prices on the turn as pig numbers plummet

 The European average pig price increased by about 10% in the first quarter of 2008 and industry commentators expect further rises to continue as pig numbers throughout the region fall. There is hope that this signals a return to profitability for producers, whose costs have soared due to increases in feed prices. Census figures published so far this year show reductions of up to 10% in pig numbers. In Hungary, the Czech Republic and Poland the sow herd fell by 10-11%, between December 2006 and December 2007. Data from Northern Ireland show an 8% reduction in sow and gilt numbers, while reports from Europe’s largest pig producing nations – Spain, Germany and Denmark – also suggest significant herd reductions.

 Despite the promise of better times to come, half of Denmark’s pig producers are at risk of going out of business in the next two years, according to Henrik Jeppesen of the country’s Fionia Bank.  Producers are concerned that his view by could be an expression of no faith in the ability of producers to survive the current shakeout in the European pig industry.  They fear that, if the bank starts a credit squeeze, producers will not be able to invest in new housing and equipment and that could signal Danish production grinding to a standstill.  A Danish Bacon and Meat Council spokesman is quoted as saying that during second half of this year there will again be enough profit for Danish pig farmers to “cover their expenses”.

 Meanwhile British producer organization, the National Pig Association, continues its creative campaign to persuade the country’s retailers to pay producers more for their pigs, while increasing public awareness of the situation the industry is in. In February, a group of producers took to the recording studio to record the song “Stand by your ham”, which received massive publicity around the world. Then, in early March, this was followed up with a rally in London, when around 1000 producers and supporters lobbied MPs and received a high profile in the media (see Stuart Lumb’s article in The View from Europe in this issue)