Our producers must survive

If producers don’t survive, the rest of the industry won’t either.

That’s the blunt message Canadian Pork Council president Clare Schlegel is hoping the government will hear loud and clear. The Canadian livestock industry has been battling an economic crisis since last summer, when Canada’s high-flying currency helped sink cattle and hog prices and drive up feed costs.

“Currency has changed everything,” said Schlegel in a speech to livestock farmers at the Making Tough Decisions in Tough Times conference in London recently. “Everyone is important, but without producers and processors, there is no livestock industry.”

The low US dollar is largely being blamed for low market prices and soaring increases in feed costs, but according to Schlegel, Canadian hog farmers aren’t the only ones suffering – pork producers globally are in crisis, especially in export-dependent nations.

Canada exports more than 50% of its beef and pork production, but an increase in imported meat products – mostly from the United States – is driving down domestic consumption of Canadian meat. If the current growth trend continues, pork imports could soon outstrip Canadian pork exports, further adding to the hurt farmers are already feeling.

Schlegel says farmers are facing serious liquidity issues and need help to transition through this extreme period.

“We can’t depend on the government to bail us out long term, but we need help to transition through this extreme period,” he said. “We’re in a transitionary period and we need to figure out how we can compete effectively with US producers.”

Two scenarios are possible outcomes of the current crisis, according to Schlegel. The first is the disappearance of hog production from Canada. Although this may seem like a radical possibility, Schlegel points to Canada’s once-thriving textile industry which has now all but vanished. With continued low margins, high labour and input costs and a rising dollar, Canadian hog farmers won’t be globally competitive. And if pork imports into Canada continue to rise alongside that, Canadian pork producers won’t stand a chance.

“The Canadian government has to do something about this,” said Schlegel. “Simply saying that the economy will sort it out is unacceptable.”

The second potential outcome is that this current cycle turns out to be a new normal low. The 1998 price crisis in the hog sector was severe, said Schlegel, but it worked itself out over time as prices in subsequent years were good. The world sow base is shrinking, he added, which will cause supplies to drop, in turn leading to a price increase. In this scenario, farmers will have to work on getting costs in line and improving their competitiveness in order to weather the highs and lows.

In the short term, producers should focus on either getting through the crisis or exiting the industry. Attention should also be directed to boosting the livestock industry’s competitiveness. According to Schlegel, this includes gaining access to the Russian retail market, increasing funding for international promotion, and setting aside inspection fees levied by the Canadian Food Inspection Agency.

The next one to three years are seen by Schlegel to be transition years. The industry needs to work on improving efficiencies along the supply chain to bring costs and revenues in line with those of Canada’s competitors.

But it’s over the long term that Schlegel is looking to the government for help to create a stable business environment for farmers.

“The government has a responsibility and a duty to protect us,” he said. “We need a stable businesses environment where we can invest without fear of being taken out by currency fluctuations.”

He called on the government to help establish a global trading platform and create a regulatory environment that will create a sense of confidence in buyers of Canadian meat products – but isn’t prohibitively expensive. Farmers, processors and industry each have their own roles to play, from making it easier for buyers to purchase Canadian, keeping costs in line with the US, boosting efficiencies and promoting Canada’s image as a producer of safe, high quality food.

And he finished with some words of encouragement and optimism.

“There is a light at the end of the tunnel – global meat demand is increasing,” he said. “The future will not be easy but if we work hard at it, I think that we can make it.”

The Making Tough Decisions in Tough Times conference was initiated by the Ontario Pork Industry Council (OPIC) and supported by Farms.com, Ontario Pork, Ontario Veal Association, Ontario Agri-Business Association, and the Ontario Ministry of Agriculture, Food and Rural Affairs. Funding was also provided in part by Agriculture and Agri-Food Canada’s CanAdvance program, administered by the Agricultural Adaptation Council. Visit www.toughdecisions.ca for more information about the event.

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