According to Andrew Dickson, general manager of the Manitoba Pork Council, hog producers are preparing to euthanize hundreds of thousands of young pigs over the next several months. This action is in response to the lack of grow out facilities in the U.S. as U.S. producers back out of contracts due to prices that may not even cover feed costs.
Dickson reports that Canadian producers are losing between $40 and $50 per head and the market for weaned pigs in the U.S. has dried up. Manitoba producers export 3.5 to 4 million pigs annually into the U.S.
Implementation of mandatory Country-Of-Origin Labeling (COOL) has also been cited as a reason for reneging on contracts to buy weaned pigs. Authorized in the 2002 Farm Bill, the COOL legislation is slated to go into effect this fall. The legislation would require product labeling to designate the country from which the hogs were sourced. This will force processors to segregate products by country of origin and some retailers have vowed to buy only "Product of the USA". To reduce costs and simplify operations, some packers are now saying they will not buy Canadian-sourced pigs thus suggesting that U.S. producers feeding Canadian-born pigs may have no where to market their hogs.
Steve Meyer, economist with Paragon Economics, examined the impact of the current situation in a recent Daily Livestock Report. He reported that feed prices are continuing to skyrocket. Futures markets imply breakeven costs in excess of $80/cwt (over $160/head) by year’s end. He is forecasting that third and fourth quarter hog prices will not even cover the non-pig costs.
Sources:
Winnipeg Free Press, April 11, 2008
Daily Livestock Report, April 14, 2008