The United States and Canada look to be the top pork exporting countries for the future. As a result, borders may fade and a dominant North American pork export market could emerge.

In some ways, a North American pork industry is already starting to unfold as more Canadian feeder pigs are being fed and slaughtered in the United States. This activity is not new, but has been increasing since last summer, says Mike Brumm, University of Nebraska swine specialist. Feeder pigs bought from Canadian producers have increased from 2000 levels every week in 2001, he points out.

Last year, U.S. producers bought 2.26 million feeder pigs from Canadian sources, says Brumm. As of June 30, about 1.41 million Canadian feeder pigs had already been purchased. That number compares to 1.06 million head for the same period in 2000. Canadian born pigs currently represent 5.5 percent of the U.S. daily slaughter. To put that in perspective, Nebraska finished pigs account for 5 percent of the daily kill.

There are three significant reasons for the recent influx of Canadian feeder pigs, according to Brumm. The strong U.S. dollar allows for a favorable exchange for both U.S. and Canadian producers, a shortage of U.S. origin feeder pigs and the difficulties in building farrowing capacity in the United States today are all contributing factors.

Yet another factor is the increasing shift away from farrowing among U.S. producers.

To date, the situation has been mutually beneficial to both countries. " The effect on U.S. hog prices has been minimal so far," says Jim Mintert, Kansas State University agricultural economist. " Both countries are significant export players and Canadian feeder pigs won't affect the total supply curve of North American pork. If the pigs were finished in Canada, the pork would then compete with U.S. pork in the export markets."

Of course that's provided the United States has sufficient slaughter capacity for the number of hogs going to market. Feelings might not be as friendly if U.S. packing capacity once again tightens up. There's no danger of that happening in the short term, but there is concern for the fourth quarter of next year. USDA's June Hogs and Pigs Report offers some hope that packing pressure may not happen, but it could be close.

Adding to the sting of the low prices that would follow a capacity crunch, is the fact that Canada has excess hog slaughter capacity.

"I thought the amount of Canadian feeder pigs coming into the United States would slow when Canada increased its packing capacity, but that hasn't been the case," says Mintert.

Currently, Canadian packers don't bid competitively enough for market hogs to keep the feeder pigs at home. Past studies have shown that Canadian plants haven't been as efficient as large U.S. packers, so they've had to offer lower bids to make up the difference. That gap appears to be shrinking, yet Canada's packers must not be all that profitable, because the Maple Leaf Plant in Brandon, Manitoba is still running a single shift, despite having capabilities to run a double shift.

"Canada clearly has excess slaughter capacity," says Brumm. " The Maple Leaf plant could kill another 45,000 to 50,000 hogs a week, and right now the United States is only bringing in 60,000 Canadian feeder pigs per week."

There are a lot of questions about what will happen if U.S. slaughter capacity is challenged, but options may be limited. Mintert points out that many producers currently buying Canadian feeder pigs may be under a contractual arrangement and would be unable or unlikely to change suppliers.

So, chances are good that the pigs will continue to be finished in the United States. Exchange rates and low bids from Canadian packers are a couple reasons why selling U.S. hogs to Canada might be difficult, but there are other issues.

For one thing, a state must have pseudorabies-free Stage IV status to be able to sell hogs to Canada. That eliminates Iowa and parts of other states, like Minnesota and Nebraska. In addition, Canada is the No. 1 pork exporter to Australia and that country won't accept any pork of U.S. origin. So, for a Canadian packer to kill U.S. hogs it would have to keep the pork segregated, in order to export to Australia.

Mintert believes the slaughter capacity issue is something that Canadian and U.S. producers need to address together. It is one of the last obstacles standing in the way of a dominant North American pork industry.

"North America has a competitive cost advantage over the rest of the world in pork production," says Mintert. " The United States and Canada are similar when it comes to cost of production, but both have a significant advantage over Eastern European countries, like Denmark and the Netherlands. North America should be a significant supplier of pork to the world in the future."

Developing a North American pork industry, rather than two separate competing pork suppliers has been discussed periodically. But industry leaders from both countries would have to work together to make a North American market a possibility.