Shrinking hog production in Canada
The Canadian sow and pig herds have shrunk over the last ten years. In 2014, about 25 million hogs were produced. That’s slightly below the 2013 output and about 6 per cent lower than the 5-year average.
The sow herd saw a small year-over-year increase at the end of 2014, mostly because of more favourable profit margins compared to 2013 levels. The sector enjoyed record prices in July 2014, due to tight supplies resulting from Porcine Epidemic Disease (PEDv) in the United States.
The USDA March report of hogs and pigs shows the hog inventory is up 7 per cent and the breeding herd is up 2 per cent year over year. Hog prices have declined markedly with recently increased supplies. Canadian hogs exported south of the border may face more pressure than last year and we should see prices flatten throughout the next few months.
Pigs and profits: what will the new Codes of Practice change?
The industrial production of hogs has been challenged by growing consumer concern with farm animal welfare. And large global retailers have been supportive of these concerns; many have announced new guidelines for pork suppliers.
These developments helped to drive the development of the Code of Practice for the Care and Handling of Pigs (2014) in Canada. Producers are now required to fit new barns with group housing at an estimated cost of $2500-3000 per sow or to retrofit existing barns by 2024. Those costs will depend on the scale of operations, but some industry estimates reveal it will be about $700 per sow to convert from individual stalls to group housing for a typical herd of 1200 sows.
While some studies suggest consumers are willing to pay for enhanced animal welfare, it’s too early to estimate the impact to profitability. Larger farms will be better suited to absorb the additional costs than the smaller and/or independent producers. And there’s concern that this won’t be the last change in codes; it was another change in the Code of Practice in the 1980s that prompted a move from group housing to individual stalls.
Expanding global exports and consumption = Opportunity
Canada exports more live hogs than any other country, and is projected to be the world’s sixth largest producer in 2015. We are also a major supplier of pork meat in the world market.
World pork consumption is estimated to continue to grow 11 per cent between 2014 and 2023, largely driven by emerging economies such as China, Viet Nam and Brazil. U.S. pork consumption and imports are likely to grow by 13 per cent and 12 per cent respectively for the next 10 years. With the increasing odds of consumers and countries refusing pork from antibiotics-treated and/or controversial animal-welfare production systems, it may be necessary for Canadian producers to consider various options.
The Canadian hog sector needs to assess the risks of falling behind other global exporters. Transitioning will cost producers, but so would losing market share in this expanding world market. Not all markets are created equal: some are volatile but offer premiums, while others offer stability but tighter profit margins.
To share the opportunities and thrive in the global competition, it’s critical for the Canadian sector to look ahead into the challenges and lead the charge to provide solutions.
Joe Chen, Agricultural Economics Intern
From FCC website https://www.fcc-fac.ca/en/ag-knowledge/ag-economist/an-outlook-for-the-canadian-hog-sector-look-around-and-look-ahead.html