Last month, the U.S. International Trade Commission voted 5 to 0 that U.S. pork producers were not being injured by “unfairly traded” Canadian hog imports. This means that the 10.6 percent anitdumping duties placed on live hogs have gone away. Canadian producers or exporters that paid the duties will get a refund. This puts to rest the saga that began when the National Pork Producers Council filed antidumping and countervailing duties cases against Canada in March 2004.

What this will mean to the future of the North American hog market is anybody’s guess at this time.

“I am very concerned that the expansion of the North American swine herd will be larger than it would have been if the ruling would have gone otherwise,” says Steve Meyer, president Paragon Economics. “When we get to the other side of the hog cycle U.S. producers will lose a lot more money because these practices have been allowed to stand.”

As it stands, Canada sent 8.5 million live hogs to the United States in 2004, most of them in the form of weaned pigs to be fed out in American finishers and processed in American packing plants. That has become a popular business model for many U.S. Corn Belt producers, and the implications for producers on both sides of the border are significant.

“The duties had affected some business decisions. Canadian producers started thinking that sending pigs to the United States was much riskier than before,” says Martin Rice, executive director of the Canadian Pork Council. “Canadian producers had an economically attractive business relationship with U.S. finishers, but the duties created a lot of concern.”

Even with the Canadians winning the case, Canadian confidence in the U.S. market’s stability could erode.

So what could that mean for U.S. producers who have relied on Canadian feeder pigs for many years?

“U.S. producers could produce more feeder and weaned pigs to fill the demand, given time,” says Meyer. “It would have to be in a more isolated area, probably the Western Corn Belt, maybe in areas like the Dakotas.”

There likely will be slight shifts rather than big structural changes to the pork industries in both countries.

The Northern Corn Belt is attractive for finishing hogs, but many producers don’t want to deal with a sow herd, says Ron Plain, University of Missouri agricultural economist. At the same time, certain areas of Canada have weather that’s more conducive to a sow herd, but with less access to feedgrains for finishing pigs. Because of this, Canada’s finishing industry hasn’t developed like it has in the United States. A big Canadian investment would have to be made before finishing capacity increased.

“We’ve seen finishing barns that had some space being filled, but we haven’t seen a lot of new barns being built,” says Rice. “Producers held off building to see whether the duties became permanent. Still, long-term planning has been affected.”

Even if Canadians increase their finishing spaces that’s only one step in the process. “More finishing barns without more slaughter capacity doesn’t do much good,” says Plain.

Canadian slaughter capacity does seem to be increasing. One Canadian plant plans to move to a double-shift, increasing its capacity by 25,000 to 35,000 hogs a week. No one knows when or if the Maple Leaf plant will move to a double shift, but that also would increase shackle space. There has been talk of a plant in Saskatchewan, but right now it’s just talk.

If Canada increases its packing capacity that pork will have to go somewhere, and the Canadians can’t possibly increase their pork consumption enough to absorb the extra supply. That means it will be exported. The United States now takes about 40 percent of Canada’s pork exports. The other 60 percent will compete with U.S. pork in the global market.

“The stronger Canadian dollar is going to be a challenge for Canadian pork exports,” says Meyer. “I’d guess we’ll eventually see some cutbacks in Canadian pork production.”

Today, if the U.S. dollar was as strong against the Canadian dollar as two years ago, cash hog prices in Canada would be 25 percent higher, says Rice. This has affected both Canadian producers and processors, and has led to some tempering of Canadian production growth.

Currently, the United States and Canada make up about 1.9 million tons of the 4.4  million tons in the world pork export market.

“The U.S. industry has become the largest pork exporter in the world, excluding inter-EU trading,” says Clare Schlegel, CPC president. “The U.S. pork export record would not have been attainable without Canadian swine.”

At the root of the trade case is differing farm policies between the two nations.

“Canadians point out the enormous grain subsidies the United States pays, and the United States complains about Canadian pork subsidies,” says Plain. “When you look at competitiveness, it doesn’t take a large subsidy advantage, just a small one will have large effects.”

Canada subsidizes whole farm programs, but doesn’t target any specific commodity, whether its hogs, dairy or crops. Rice says Canada tried to make its farm policies more in line with international rules. He points out that its pork industry is 10 percent of Canada’s agriculture complex and can’t force the other 90 percent to change.

Meyer counters by saying that Canadians need to drop subsidies, so that their pork producers respond to market signals regarding supply and demand. He adds that the United States couldn’t adopt Canadian farm policies or North America would end up with an oversupply of millions of hogs.

Still, there may be some opportunities to work together, such as combining the United States and Canadian Hogs and Pigs Reports. Meyer says the Canadian report asks some questions in a more specific manner than does USDA, so adopting some of the Canadian questions may be good for everyone.

“If we can remove the notion that imports are bad, so that North America can compete with Brazil and the European Union in the world pork market that would be positive,” says Rice. “We need to listen as well as talk to make that happen.” 

“This trade case has taken a good deal of our time and energy,” says Slegel. “Now we can go back to making the North American pork industry larger and more successful.”