NEWS
THE WESTERN PRODUCER | WWW.PRODUCER.COM | NOVEMBER 15, 2012
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HOGS | LOAN PROGRAM
Producer reaction mixed to hog loan plan Weanlings exempt | Because weanlings are often exported, it could be considered trade distorting
• Pigs were the most valuable agricultural commodity in Manitoba from 1999 to 2007, followed by canola, wheat and beef cattle. However, record high crop prices for canola and wheat pushed them above pigs in 2008. • The pork industry injects about $1 billion into the economy annually, providing more than 13,000 direct and indirect jobs. • Manitoba is the largest pigproducing and exporting province, followed by Quebec and Ontario. Pig production is valued at more than $730 million. • Manitoba is the third-largest pork exporter, behind Quebec and Ontario. • There are slightly more than 800 pig farms, most run by family farms.
BY ED WHITE WINNIPEG BUREAU
NIVERVILLE, Man. — A hog industry stabilization plan proposed for Manitoba has left producers feeling either abandoned or relieved. The difference in reaction depended on what they do in the industry. “It sounds like a stabilization thing, which makes sense if they can cover the fall and winter,” said farrow-tofinish producer Jerrold Siemens of Morris. “It helps bridge things, at least on a temporary basis.” However, the program offered nothing to weanling producer Matthew Eggenberger of Steinbach. “There is not very much done for us,” said Eggenberger, whose 300 sow farrowing barn is empty. “We always have to find our own way.” The Manitoba plan, which is still being formalized, will deduct money from hog producers when they sell market hogs to packers and then pay it back to them if they sell at prices calculated to be below the cost of production. Farmers will initially be paid out much more than they are contributing in levies, with the deficit covered by a provincial government-backed line of credit. Farmers will continue to pay into the program once profitability returns and the deficit will be paid off. Siemens said another loan won’t improve the industry’s long-term economic challenges, but it might allow farmers to weather the present short-term challenges until profitability returns. “It’s a creative way of accessing money on a short-term basis.” Weanling producers are excluded because the payouts are based on slaughter hog sales.
MANITOBA PORK FACTS
CANADIAN PORK FACTS
The Manitoba Pork Council’s stabilization plan will help “on a temporary basis,” says a producer. | FILE PHOTO
MATTHEW EGGENBERGER WEANLING PRODUCER
Manitoba Pork Council officials said that was partly the result of the program design, which relies on packer sales. However, it was also deliberate because weanlings are generally exported. The provincial government “wouldn’t even consider covering a hog that was being exported,” said council chair Karl Kynoch. Governments and industry insist
that programs to support hog farmers cannot be seen as trade-distorting, and there is no easy way to channel money to farmers who primarily export pigs to American buyers without creating a risk of U.S. trade action. Eggenberger said the program leaves weanling producers completely exposed, which is a harsh situation for a sector of the industry that has probably suffered more than any other. “We have taken a pretty big beating in the past,” he said. “Whenever prices (for market hogs) fall, many buyers push it all back to the weanling producer, and he gets almost nothing.” Eggenberger said he has fared better than other weanling producers
because he sold to a neighbouring farmer who treated him fairly. However, many southern Manitoba weanling producers went into the present slump already suffering because American buyers had reneged on contract sales . Eggenberger doesn’t plan to restock his barn until the situation improves, and right now that doesn’t look like any time soon. Siemens said the program might allow slaughter hog producers to limp through until next summer, if the program is structured right. “It’s always the details that make the difference in the end.” However, Eggenberger said weanling producers will continue to suffer, fail or quit.
• Canada produced two percent of the world’s pork in 2007, but Canadian pork accounted for 20 percent of world exports at 1.03 million tonnes. • Canada is the second-largest pork exporter after the United States, shipping pork worth $2.4 billion to 96 countries in 2007. • Canada is the world’s largest pig exporter, with sales of $700 million to the United States in 2007.
WORLD PORK FACTS • China produces and consumes more than 46 percent of the world’s pork. • The top seven pork producing nations are responsible for 90 percent of world pork production and exports. They are also responsible for 77 percent of pork imports. Source: Manitoba Pork Council
HOGS | LOAN PROGRAM
Loan hinges on levy to repay borrowed amount Credit without lender | The levy idea involves no federal money and so avoids potential trade disputes BY ROBERT ARNASON BRANDON BUREAU
PORTAGE LA PRAIRIE, Man. — The Manitoba Pork Council has developed a plan it says will help preserve the province’s hog industry. About 175 producers gathered inside a Portage la Prairie theatre Nov. 7 as pork council chair Karl Kynoch explained the details of a stabilization program for Manitoba hog producers. The program is a line of credit producers can access via the pork council. However, if hog farmers want to sign up for the program they must pay a $5 dollar levy on every hog they sell. “This is a totally new program. We’re trying to do what we can for the producers. In reality, they don’t want another loan… but cash injections (from government) are not on the
In reality, they don’t want another loan… but cash injections (from government) are not on the table. KARL KNOCH MANITOBA PORK COUNCIL CHAIR
table,” Kynoch said, during a break at the Portage meeting. “So we’re trying to offer them the access to some dollars to be able to pay the feed bills and to get through to the higher prices next summer.” Hog producers in Canada have been hemorrhaging money for months, as the drought in the U.S. Midwest this summer propelled feed corn prices to record highs. In September, Manitoba Pork esti-
mated that producers were losing $40 to $50 on every hog sold. Kynoch provided an example on how the program might work, in which production costs are $175 per hog and market returns are $145 per animal, based on cost and price averages. Under that scenario, a producer would receive a payment of $30 per hog, minus the $5 levy. So, if a farmer marketed 1,000 hogs, he would
receive a net payment of $25,000. Once markets improve and hog farmers are making profits, producers continue to pay the $5 levy on every marketed hog until they pay off the stabilization account. When the loan account reaches zero, the $5 levy is returned to the producer. “If you join the program, you would have to come to the pork council and sign the papers (saying) we can keep the levy,” Kynoch told the producers in Portage. “(But) you have to remember that the levy is refundable.” Andrew Dickson, Manitoba Pork general manager, said the program provides access to credit without going through financial institutions. Manitoba Pork staff and directors came up with the idea of a levy, partly because it avoids potential trade disputes.
“It’s not a subsidy,” Kynoch said. “The payment is a loan…. So this program is not countervailable. It’s green to trade.” The federal government is putting no direct money into the program, but if the Treasury Board supports the concept, it will guarantee the line of credit, which will probably be capped at $75 million. Ideally, Kynoch wants the program to be running by February. He added the program would be backdated to Sept. 1 or Oct. 1. That way, producers can get their hands on cash immediately, once it becomes available. “That’s very crucial because the industry is just out of cash right now. Sept. 1 is when the producers started into heavy losses and that’s what we need to cover,” he said. “The guys just need some dollars to continue on and get through to profit.”