Where have all the hog farmers gone?

They’ve gone to Manitoba, where they’re enjoying some good years in the face of a long list of challenges

“We’re under a great deal of pressure from society,” Matheson says. Yet Manitoba processors are also eager for the province’s farmers to produce an extra 1.4 million hogs a year. Photo: Chris Procaylo

Despite losing nearly 14,000 pig farmers since 1971, Manitoba still produces more pigs than any other province, accounting for just under a third of Canada’s total pork production, and well over half of its exports.

For nearly three decades, Manitoba has had a front row seat on the peaks and valleys of Canada’s hog industry. They’ve seen it all: the boom of the ’90s, the fallout from H1N1, the decade-long moratorium against barn building, a strong dollar, a weak dollar, porcine epidemic diarrhea, a disappearing labour force.

The question now is, what’s next?

Clearly, evolutionary pressures are intense, and George Matheson, who farms near the town of Stonewall with a capacity to produce at most 1,200 hogs a year, knows he’s no longer a typical farmer.

Today, though, Matheson is chair of Manitoba Pork. “I may well be one of the smallest, if not the smallest, producer in the province,” he says.

The 59-year-old got into pigs in 1982, and since then he has watched most independent pork producers leave the business, and he has also watched the size of the remaining farms expand.

The numbers tell the story. Today, only about 220 levy-paying hog farmers remain active in Manitoba, and only 500 total farms have pigs on them.

The province produces roughly eight million pigs each year (it peaked at 9.45 million in 2007), so that means the remaining producers are putting out about 16,000 pigs per farm.

“There are fewer producers, but more production,” Matheson says. “And of course we have the two largest producers in Canada with Maple Leaf and HyLife being here as well.”

The reasons why so many hog producers have left the industry can be complex and intermingled, but trade disputes, environmental restrictions and market pressures have each played a role, among others.

Plus, pork is also vulnerable to the same stresses as other farm sectors, including succession pressures. “A lot of people have just plain retired,” Matheson says. Committing to year-round livestock production isn’t always attractive to a younger generation, especially in the face of worn out infrastructure and uncertain profitability.

In fact, it’s maybe even a bit worse in pork. In recent years grain farming has been more lucrative, Matheson explains, and crop farming can come with the added benefit of some downtime over the winter months.

It points to what’s different for pork this time, says Perry Mohr, general manager of [email protected] Marketing Services, which markets pigs for 144 pork producers in Manitoba and Saskatchewan.

The drop in the number of hog farms has been even faster than general farm consolidation, Mohr points out.

“During the 10 years previous to this, there wasn’t a lot of money to be made,” says Mohr. “So a lot of these guys that maybe weren’t quite as efficient or their banks weren’t quite as patient with them throughout those years, a lot of them were basically forced out of the industry.”

“Their barns were old, the capital investment was too big for them, they were at an age when they didn’t want to reinvest, and they had no son that wanted to take over, so they shut down,” he says.

The survivors

There’s another key too. The farms that stayed with pigs tend to be mixed farms, Mohr says. “The most sustainable mode, given the factors that impact hog prices, is the farrow-to-finish hog producer who produces his own feed,” he says.

Matheson’s compact farm — complete with tree-lined drive and white-trimmed Victorian home — isn’t farrow-to-finish, but does utilize 360 acres of cropland to feed its herd. The land also allows for efficient distribution of manure as fertilizer, in addition to acting as a buffer against high feed costs and market flux.

On a different scale, Starlite Hutterite Colony made the decision to “to try walking (their) grain off the farm instead of hauling it” following the end of government freight subsidies in the 1990s and hasn’t looked back since, says James Hofer, who manages the colony’s 600-sow farrow-to-finish operation. “When you have your own grain, that becomes a natural hedge. You’ve got your inputs locked in, they’re in the bin and you can weather the storm.”

But even with its feed, Starlite is evolving beyond traditional western crops like wheat and barley. “We’ve been growing soybeans at Starlite since there were varieties that could be grown in Manitoba,” Hofer explains. “After a couple years, we said, hey, this is something that is going to be long-term, and we set up our own soymeal processing plant, so that is how we feel we’ve been able to stay in the game and drive costs out of production.”

But all the grain in the world can’t save Starlite from the one universal problem plaguing pork producers and processors across the province — labour shortages. Finding employees willing and able to work in processing plants and pig barns continues to be problematic, with many operations turning to temporary foreign workers.

“We don’t actually have a lineup of people,” Hofer says. “In fact there are colonies that are shutting down their operations because they don’t have people who want to work in a hog barn.”

Other colonies are bringing in people from outside their communities to fill the gaps, and in the city of Brandon, Maple Leaf Foods has used the temporary foreign worker program to bring in about 1,000 employees, with 800 becoming permanent residents.

At HyLife’s Neepawa processing plant, about half of its 1,000 employees were brought in as temporary foreign workers.

However, changes introduced by the federal Conservatives in 2014 have made bringing in foreign employees more challenging. The new Liberal government has promised to review the changes, but unless a major policy shift occurs, further restrictions will come into effect July 1.

Given comments from MaryAnn Mihychuk, the Trudeau government’s employment minister, an open door seems unlikely. Responding to Canadian Meat Council claims that processing plants are short nearly 1,000 meat cutters, Mihychuk told the Canadian Press in January that “in the present circumstance, where we are seeing such economic hard times across the Prairies, it would be a very unusual circumstance where we had to resort to temporary foreign workers to fill a position.”

Mihychuk said the solution is better training and recruiting, not foreign workers.

It’s a suggestion that doesn’t sit well with the Manitoba Pork Council’s general manager, Andrew Dickson, who doesn’t buy the idea that unemployed oil and gas workers will gravitate to Manitoba’s hog industry.

“You will find some guys wander back to Manitoba who were out in the oil patch, but those are the ones who came from Manitoba,” says Dickson. “I mean, some of these people are very skilled trades people… are they going to stay with the hog industry, even if they come? As soon as the oil industry turns around, they are gone.”

The search for a new model

If it seems like Manitoba’s pork industry has just gone from one crisis to another — be it new disease, a strong dollar, country-of-origin labelling, capital shortages, consumer backlash, labour constraints or spiking feed costs — it’s because it has, says Mohr. But finding a model of hog production less prone to fluctuations won’t be easy.

At one time Manitoba hog farmers sold pigs through the Manitoba Hog Marketing Commission, which became the Manitoba Hog Marketing Board in 1972. The board’s monopoly on the sale of slaughter hogs ended in July of 1996, allowing producers to choose direct marketing, broker services or what is now known as [email protected] Marketing Services.

Now, Dickson would like to see the federal and provincial governments get behind a proposed Hog Stabilization Program to help buffer some of those market forces.

Manitoba generated just over 57 per cent of Canadian pork exports in 2015. “So when you produce a commodity that is reliant on an export market, you are subjected to commodity prices which go up and down based on supply and demand,” Mohr says. “You are subjected to all kinds of forces, most of them beyond your control.”

Now, the pork sector is aiming for a new program to help producers access working capital. “What we’re looking at is trying to provide some protection for working capital for producers,” Mohr says, adding pig farmers across the country have similar cash-flow problems.

So far, the plan hasn’t attracted government approval.

And the need for more pigs

The idea of a price stabilization program began percolating in 2012. Feed corn prices were skyrocketing just as the industry struggled to recover from a 2009 collapse caused by the double-whammy of H1N1 concerns and country-of-origin labelling or COOL. And although feed prices have dropped since then and COOL has also been repealed, farmers are now faced with incoming animal care regulations that are requiring expensive barn retrofits.

Maple Leaf has committed to switching all its barns to free open housing by 2017, while Quebec-based producer Olymel — which relies on hogs from Western Canada — has committed to phasing out sow stalls by 2022.

All hog producers will need to use open sow housing systems by July 2024, in line with the Code of Practice for the Care and Handling of Pigs that was introduced in the spring of 2014.

However, there’s a possible silver lining in the growth of premium products and niche markets.

“Now the processors are trying to differentiate their products and that has me as excited about the future as anything,” says Mohr. “We’re going to antibiotic-free for one thing.”

“I’m not going to stand here and say the pork is better, but what I will say is that there is a demand for it,” Mohr quickly adds. “We’re starting to produce what the consumer is asking for — and the key part of that is that the consumer is willing to pay more for it.”

While he doesn’t have a crystal ball, Mohr does have a few predictions to make as he prepares to leave his position and head into retirement.

“Honestly, and I can say this because I’m on my way out, I would say that the decrease in the number of farmers will abate itself. We’re pretty much at the bottom,” he says.

Matheson agrees. “We just have to continue to do the right thing,” he adds. “We’re under a great deal of pressure from society right now. On animal care, environmental sustainability and food safety, they watch us more closely than they have ever done before, but as long as we continue to do the right thing, I don’t think there will be any risks in expanding, quickly or otherwise.”

Dickson would like to see more barn proposals come forward throughout the year in order to expand capacity and build the sector’s efficiency, and he noted Suncrest Colony has just completed building a new hog barn in the Rural Municipality of Hanover, using an existing permit.

“We’re not expecting a flood of these, but we’re hoping we’ll see a steady number of barns as we go through the next five or 10 years,” he says.

“We had a good year as an industry as a whole in 2015… we produce a great product and people still consume it,” Dickson says.

“I think the future will be reasonably bright, but we will be cautious in this part of the world and we will continue building on the good things that we’ve done in the past.”


Big farms, big net incomes

A weak Canadian dollar has added a 30 per cent bonus to hog prices, says Perry Mohr, general manager at [email protected] Marketing Services, who notes that Canadian hogs are still pegged to American dollars.

It’s a development that could drive industry expansion.

“If you look at when the hog industry really expanded the last time, it was when we had a really weak dollar,” Mohr says. “If the dollar was weak for 10 years, it would really boost the industry.”

Mohr also believes 2016 will be a profitable year, even if hog prices drop a bit in the fourth quarter as American producers begin to recover from the devastating porcine epidemic diarrhea virus that killed millions of pigs in that country. Next year is also setting up to be a profitable one, with at least four new packing plants opening in the U.S., driving up demand for hogs.

“This year, 2016, the U.S. producers are predicted to make a small profit, let’s say it’s $5 a hog. Most of our guys this year will make around $25 a hog, based on what we know today,” says Mohr. “Last year U.S. hog producers made about $8 per hog… our guys made about $30 a hog.”

According to Janet Honey at the University of Manitoba’s department of agribusiness and agricultural economics, net market income for Manitoba pork producers jumped from $115,500 in 2011 to $808,300 in 2014, before dipping to lower estimates for 2015. In a report prepared for the university, Honey indicated the average net operating income per pig farm was over $735,200 in 2014, up from $303,000 in 2013.

Mohr notes that low oil prices have also played an important role in increasing profitability in the hog sector, lowering some production costs and lessening efforts to divert grain to fuel production, while also devaluing the Canadian dollar.

“As far as profitability, it has been difficult over the last eight years or so — with the exception of 2014 and part of 2013 and 2015 — but I think that for mixed farms such as the Hutterite colonies and myself that produce grain as well, it has proven to be a pretty good system to, as the old saying goes, not have all the eggs in one basket,” says Manitoba Pork chair George Matheson. As for future growth, he says it will take careful collaboration between producers, processors, government and consumers.

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