Maybe it’s because it’s an election year and everyone is scrambling to protect their turf, but the spin doctors are certainly out in full force. For the pork industry, the issue that continues to spin a complicated web surrounds the Canadian live-hog trade.
It started in March, when the National Pork Producers Council, along with some state producer groups and individual producers, filed countervailing-duty and antidumping cases against their northern neighbors. The claim is that Canadian pork producers receive subsidies from their government that help them stay in business, allow them to expand the breeding herd and ship pigs south to the United States. This has caused “prices to plummet in the U.S. market,” says NPPC.
The U.S. Commerce Department has released its preliminary report on the countervailing-duty investigation and disagreed with that assessment. The report did indicate that Canadian pork producers receive subsidies of varying degrees, but that they’re not illegal nor out of line. An initial decision on the anti-dumping case is due out this month. Final rulings are expected sometime in early 2005. NPPC’s spin is that, in the end, the Commerce Department will rule differently.
This whole action against Canada justifies a good head scratching. Sure, the trend since the late 1990s shows an influx of Canadian hogs crossing the U.S. border, especially weaned pigs — 2.04 million in 1999, 4.97 million in 2003, with the prospect of 5 million this year. But those shipments have not occurred without a growing demand. Many U.S. producers like and want Canadian weaned pigs to feed out in their facilities. This year’s Pork Industry Structure Study showed that producers running all sizes of operations are finishing Canadian hogs.
Yes, the U.S. breeding herd has been declining, but a good chunk of that is from U.S. producers who no longer want to farrow. There’s also the fact that finding money and land to build a farrowing house in the United States is a hassle. The trend away from farrowing has been occurring for several years, just as the supply of U.S. feeder and weaned pigs has declined, creating a void.
According to Canada’s version of USDA’s Hogs and Pigs Report, producers there have averaged 20 pigs per sow for the last 12 months, while U.S. producers are at 17 pigs. Now, there’s an advantage.
Relative to the market, the volume of Canadian pigs shipped to the United States is small. These days it usually takes a 20 percent to 30 percent market share to trigger a cautious look at a trade issue. Canadian market hogs and weaned pigs made up about 7 percent of 2003’s U.S. hog numbers.
Finally, let’s be honest, subsidies — whether direct or indirect — are part of U.S. agriculture’s landscape as well.
At one time, the concept of creating a more cohesive North American pork industry looked feasible. Today, I’m not so sure.
NPPC’s effort may be an attempt to halt the prospect that someday Canadian hogs will make up 20 percent or more of the U.S. hog slaughter. Perhaps it’s to prompt Canada to realign its subsidies to ensure comparable competition between the two countries. That’s what occurred following the 1984 countervailing duty case, which ended in 1999. But this is a different industry today, with different business arrangements.
Certainly, profits are hard to come by. Pork production experts and economists have said that margins will continue to narrow. They’ve also said the U.S. breeding herd needs to be smaller and more productive.
U.S. pork production has not posted dramatic declines; and according to the Industry Structure Study, everyone wants to grow their operations. It looks like 100 million hogs, give or take a few million, is the United States’ likely slaughter capacity.
Domestic pork consumption has growth limitations. The U.S. industry has touted the fact that selling more pork depends on expanding export sales. Mexican pork producers have their own perspective on that.
I believe in working to expand export markets, and in keeping countries honest in the effort. It just seems the Canadian battle was an odd one to pick.