Last month’s Ontario (Canada) Pork Congress reflected trends that not only impact our northern neighbor’s producers but the larger industry and the consumers who are producers’ ultimate customers.
Overall, as most observers are aware, the pork industry in Ontario is struggling. In fact, it’s still on its feet despite a flurry of sharp jabs and body blows over the past few years, suggested.
The Sebringville-area hog producer alternated between concern and optimism as he described an industry that seems to be in a “flux of change.”
“The past five years have drained the industry greatly,”Doug Ahrens, an Ontario Pork director told reporters during July’s Ontario Pork Congress. “But I think what we have left is a very viable industry—a tired industry, but a viable one.”
The litany of discouraging trend lines is well-documented: Continuing high feed prices andthe strong Canadian dollar have left many pork producers up north “feeling devastated,”Ahrenssaid.Some have quit the business entirely, and those who remain struggle with a volatile marketplace and difficult production challenges that make it a tough to stay in the black.
“Volatility seems to be one of the key things that frustrates producers,” he said, although he added that “there is some hope things will stabilize and turn around.”
The pressure on profitability has not eased, despite recentproductivity improvementsamong Ontario’s pork producers in the past few years, Ahrensnoted. He emphasized that Ontario remains one of the most cost-effective places in the world to produce pork—“and we’re also paid the least.”
Exploring the differences
Why is that? A recent and fairly comprehensive study by the Centre de Dévelopement du Porc du Québeccomparing the productivity and cost structures of Canada’s three main hog-producing provinces—Ontario, Quebec and Manitoba—versus Iowa and Minnesota showed that despite Canadian farmers’ production efficiencies, U.S. producers enjoy significant cost advantages with regard to feed and labor, averaging as much as 38 cents less in production costs per kilogram of live weight gain.
You don’t need a Ph.D. in ag economics to recognize that a gap that large is difficult to overcome when U.S. and Canadian producers are often selling into the same markets.
The study traced the cost differential to Canadian producers having to import corn, to the smaller average size of provincial pork operations and to a lack of specialization, as has become commonplace in The States.
It would be easy to apply a typical business analysis to the situation and declare that either Canadian producers become larger, more specialized and somehow innovative enough to overcome their inherent disadvantage or else move on to another line of work. That’s the way it typically works in manufacturing, and there’s no shortage of economists who would wholeheartedly endorse exactly such a scenario.
In the short term, a decline in Canadian pork production would benefit U.S. hog farmers, although pork processors might be adversely affected. And U.S. consumers wouldn’t notice any significant cost increases at the supermarket or when they sit down to a meal featuring bacon, sausage or other pork products.
But food is far more fundamental than the plethora of manufactured goods that supports our modern consumer economy, no matter where you live in North America. We might end up paying a bit more for all the clothing, tools, appliances, electronics and gadgetry we buy if certain producers disappeared, but other than temporary inconvenience and having to dig a little deeper into our collective wallets, most of our “lifestyle purchases” have multiple sources and little chance of a catastrophic shortage.
If strict market economics is the only metric applied to food production, then over time much of the developed world can expect production agriculture to follow the same path as manufacturing, in terms of being shifted to lower cost environments. Pressure on global food supplies would mitigate a wholesale departure of the livestock industry from North America, economists reassure us, but regionally, there’s no guarantee that production wouldn’t disappear in certain areas.
There are a lot fewer cattle in the eastern U.S. than there were a generation ago, and it’s not because it’s impossible to raise beef east of the Mississippi. It’s because relentless pressure on production costs drove most smaller producers and feeders out of business.
Could that happen on a larger scale, and in other segments of meat and poultry production? Without a doubt. Could livestock production end up overseas? Unquestionably.
And that would not be good. Not only are there concerns about food safety, environmental impact and labor protections in many foreign countries, but the overriding importance of domestic food security as global appetites for meat keep growing means that maintaining viable livestock production—both here and in Canada—is an issue of vital importance.
Ahrens had some brave words about the impact of competitive forces on Ontario producers. He saidthey are becoming more innovativeand more vigilantabout keeping a lid on costs.
“Over the last five yearsit’s been a pretty rough go, and we’ve definitely had our share of bruises,” he said. “But moving forward, we will be stronger.”
Let’s hope so.
Dan Murphy is a veteran food-industry journalist and commentator