Canada hog herd shrinks as outlook brightens

* Asian pork demand growing, higher prices seen in 2011

* Hog herd downsizing seen bringing benefits and risk

By Rod Nickel

WINNIPEG, Manitoba, Feb 3 (BestGrowthStock) – Canadian hog farmers
risk downsizing their herds too quickly, just as higher pork
prices look realistic for next year and Asian demand soars,
industry officials said on Wednesday.

Pork consumption is in long decline in the United States
and Canada, but Asian demand is rising, said Ted Bilyea, a
Toronto agri-food consultant and former executive
vice-president of pork processor Maple Leaf Foods (MFI.TO: ).

People in China and India are eating more meat, but Asia
has run out of arable land, resulting on greater reliance on
imports, Bilyea said.

Asian consumption, global economic recovery and drops in
livestock production in much of the world should produce higher
pork prices in 2011, he said.

The question is whether Canadian farmers can supply the
higher demand, he said, given conditions that have made raising
hogs unprofitable and the need for more focused marketing.

“We’ve just got to be careful we don’t over-shoot (in
downsizing),” Bilyea said on the sidelines of the Manitoba
Swine Seminar in Winnipeg. “My fear would be that if this is
not done carefully, we are going to get areas of the country
where we have plants that just don’t have enough hogs.”

The downsizing poses even greater risk to U.S. packers,
which have in the past imported Canadian hogs to round out
processing supplies, he said. John Morrell, a unit of
Smithfield Foods (SFD.N: ) said on Jan. 20 that it would close
its hog-processing plant in Sioux City, Iowa. [ID:nN20142234]

High feed costs, a volatile Canadian dollar, the U.S.
country of origin labelling law and association with H1N1 flu
have hit the Canadian hog industry hard.

Since late last year, 335 farms have accepted government
money to halt pig production for three years, resulting in a
5.6 percent reduction of the Canadian herd, not counting
farmers who quit without funding.

With the downsizing program, farmers can get out of the
business in a structured way, said Jurgen Preugschas, president
of the Canadian Pork Council.

“If we hadn’t done anything, everybody tries to hang on as
long as they can so it’s last man standing and ultimately at
the end, everybody’s weak.”

Canadian hog farmers have lost money steadily for four
years, leaving them unable to wait for better prices and
demand, Preugschas said.

“Our producers cannot hang on anymore.”

One downsizing benefit is that production will more closely
match feed supplies. In parts of eastern Canada, farmers are
forced to import corn, Bilyea said.

Both Preugschas and Bilyea said that angling for niche
markets is the best way forward, not simply mass production.

“We have to be understood as different in what we produce
without raising our costs in doing it,” Bilyea said.

Canada is developing a traceability system in its livestock
sector, which would reassure buyers when disease breaks out,
for example.

The industry should tailor production toward shipping
high-end meats to Japan, South Korea and Europe and leave
production of lower-priced pork to the United States,
Preugschas said.

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(Editing by Marguerita Choy)

Canada hog herd shrinks as outlook brightens