(Ottawa, ON) August 17, 2012– Canadian pork producers are worried that ethanol policies and low crop yields in the United States due to drought conditions are causing grain prices to soar to a point where it is not economical to raise pigs in Canada. The current feed situation and lack of carry over stock from last year’s crop supports the argument that it is necessary to reduce grain usage for ethanol and to consider the amounts of grain essential for feeding livestock that is used to feed people.
“Grain is by far the largest cost component of raising pigs” stated Candian Pork Council’s Chair Jean Guy Vincent, “and marketplace realities are such that pork producers cannot simply pass along added costs to buyers. Margins become squeezed and producers need to either absorb heavy losses or, unfortunately, get out of business.”
The sense of anxiety over the availability of feed grain at an affordable price was only heightened when the United States Department of Agriculture recently cut its estimate of U.S. corn production and cut is forecast of U.S. 2012 /13 corn ending stock to 650 million bushels. This is the smallest ending stock since 1995/96 and is partially responsible for the 50% increase in future pricing in a relatively short period of time.
The United States estimates that 40% of the corn crop will be made into fuel for cars and trucks compared to 36% for feed. Hog producers have been vigorously competing for a resource that is in high demand and shows no signs of dropping without changes to global policies. The Canadian Pork Council encourages governments to review their ethanol policies in an effort to temporarily relax the mandates and targets for biofuel production in response to the crisis.
“The status quo is not sustainable for the hog industry. Pork producers need to work with all members of the value chain to address short and long term issues,” added Mr. Vincent. “The recent market conditions and feed prices were unimaginable two months ago and producers should not have to decide between losing their farm or increasing their debt to pay for unsustainable feed costs. We need the market to pay for the cost of providing consumers a healthy and safe food supply
Accurate and timely information will be vital to surviving the latest circumstances affecting the hog sector. Producers, processing sector, financial institutions and governments will need to work together in the short term to further strengthen the pork sector. A task group made up of producers and federal government officials has been established to review the situation and identify measures to assist the hog sector to manage through the latest challenge. The next few months are now expected to be ones of very heavy losses at a time when, only weeks ago, pork farmers were expecting to be in a much-awaited period of favourable economic conditions.
The United States government was able to intervene in the market and support US pork producers through USDA’s $100 million supplemental pork purchase. We want to react rapidly to the situation before it gets too far out of hand. Ethanol policy changes, ethanol demand on this year’s crops and unrecorded increases in the acres of crops planted in North America could have an effect on feed prices but information will not be available for several months.
The CPC will continue to work with the federal government but is encouraging producers to continue their due diligence to manage their working margins, liquidity and develop strategies to source affordable feed for the next year.The CPC serves as the national voice for hog producers in Canada. A federation of nine provincial pork industry associations, our organization’s purpose is to play a leadership role in achieving and maintaining a dynamic and prosperous Canadian pork sector.
For more information, contact:
Public Relations Manager
Canadian Pork Council
613-236-9239 Ext. 277