With USDA’s December Hogs and Pigs Report comes speculation about farrowings and hog slaughter numbers for the year ahead. Additional speculation comes in the form of considering what might develop out of Canada.
The United States’ (read that the National Pork Producers Council and its members) actions involving countervailing duty and antidumping cases against Canada could change pig flow patterns between the two nations. Of course it’s too soon to tell what will evolve. After all, the agencies investigating the situation haven’t release final rulings yet. For now, a preliminary ruling contends there’s no need for countervailing duties, while an early ruling on the antidumping case initiated a duty.
How long that will remain in place remains to be seen. “Who’s paying the duties is negotiated between buyers and the sellers,” says Steve Meyer, president of Paragon Economics. “So it will vary dramatically depending on who you’re doing business with.”
For now, little has changed in terms of Canadian hogs and pigs entering the United States because most of those sales are done via pre-arranged contracts. In the long run, however, things could change more.
Lynn Steiner, president of Steiner Consulting Group, points out that the value of the U.S. dollar has dropped by 22 percent in the past two years. Add on a 14 percent antidumping duty, and “Canadian producers are getting 67 cents on the dollar for pigs they send to the United States today,” he notes.
Chris Hurt, Purdue University agricultural economist, agrees that the U.S. dollar’s decline and the antidumping duties provide less incentive to send hogs to the United States. “Those two factors will cause Canada to be less growth oriented than it has been in the last five years,” he notes.
He points to the Canadians’ experience with BSE and losing export markets as additional reasons to slow pork production growth there. “Pork producers saw what happened to the Canadian beef producers,” he notes. “If you’re too dependent on exports, your industry is highly vulnerable.”
Over time, Hurt looks for the flow of live hogs from Canada to the United States to slow. He expects Canada to expand packing capacity, which will consequently have them shipping more product across its southern border.
“I think the United States will expand more than Canada will in the next five years,” says Hurt.
Not everyone agrees, however. Bob Brown, an independent livestock and meat market consultant in Edmond, Okla., believes that business relationships with U.S. and Canadian producers will prevail, and that Canada has a lot of grain and a lot of incentive to grow. “It’s such a stew of issues to build a hog building in the United States that I think it will be a rare thing to start a new facility,” he notes. “There’s not going to be a tremendous amount of growth in terms of hog buildings in the United States. Growth will come from north of the border.”
Certainly there remains plenty of details to figure out between the two nations in the future.