Roadmap for a Competitive Pork Industry

The Canadian pork industry has been in crisis for much of the past two years. Producer margins have been negative for much of 2006, most of 2007 and all of 2008. Losses are ongoing and have reached historic highs of $70 per hog in late 2007. The crisis is not limited to pork producers. Processor margins have been largely negative for the past two years. Additionally, input suppliers such as feed companies and veterinary practices are facing financial ruin, as producers are unable to keep their accounts current. The crisis is due to the convergence of four key factors (Toma & Bouma, 2008a): • The rapid rise of the Canadian dollar. • Rapid rise of input costs – notably feed grains. • New and intense competition from our major customer (the U.S.A.) • The lack of processor competitiveness in Canada. The Canadian dollar has risen in value relative to the U.S. dollar more than 20 % in the past year and over 60 % since 2002. This has had a two-fold effect: (1) the immediate reduction in prices paid for pork since all Canadian prices are based on the U.S. market and U.S. currency; (2) increased competition in all markets (domestic and export) from the U.S., which has become the world’s largest pork exporter. Feed costs have more than doubled in two years. World grain prices are at historical highs driven by new demands from bio-energy developments an