Ontario, Canada Hog Markets30 August 2012
CANADA - In my years in the swine industry I have increasingly been impressed by the adaptability of pork producers of all the agricultural producer species and the ones in Ontario in particular, Bob Fraser.
They have an innate ability to filter “all the noise” and play the “long game”. They tend to stick to their game (primarily with a land base), remember how “feeding hogs” has contributed to their wealth over time and adapt technology, markets, and resources to sustain them. I doubt that you would find or more wily or impressive group of entrepreneurs anywhere in the world. I salute them.
In my last column in July I suggested we certainly have years better than another but we tend to always get rain. Well, in August the weather turned and we’ve got rain. Perhaps too little to late and as always some with more rain than others but if we consider the seven counties that surround Stratford, Ontario and make up 80 per cent plus of the Ontario pork production, most appear that they will certainly have an average crop with some above average.
In any event as everything continues to be early the combines will soon roll and end the discussion. Edible beans will probably start before the month is out with soybeans, then corn hard on their heels. Of course the Ontario crop contributes virtually nothing to the setting of price. However having crop in “your” bin is a great aid to adapting and surviving.
If we take a look at the OMAFRA Weekly Hog Market Facts compiled by John Bancroft, Market Strategies Program Lead, Stratford OMAFRA firstname.lastname@example.org we see the expected erosion of estimated margin after feeder pig and feed for the last five weeks from $34.69 to $17.91. A considerable drop but still a reasonable margin.
However looking forward at results as shown by John’s excellent work on margins we see an extended period of tough sledding.
The Hog Margin Tracker for August 17, 2012
- Pigs marketed this week showed a realized margin of $22 per hog based on a market hog value of $177, a feeder pig cost of $58 (placed on feed May 4), and a feed cost of $97 per pig. The expected margin when the pigs went on feed in May was $25. The difference is the primarily realized the rise in feed cost.
- The pigs that went on feed this week (August 17) are to be marketed the week ending November 30 show an expected margin of $8 per pig. This is based on a formula feeder pig purchase value of $19, an estimated feed cost of $107 per pig and an estimated market hog value of $136. The estimated feed costs and market hog value are based on the basis adjusted closing futures for lean hogs, corn, soybean meal and the Canadian dollar for Thursday, August 16.
Finally a common topic of conversation everywhere is liquidation, an attempt to get a handle on who may be exiting the business. In the sales game one gets to hear lots of things. The challenge is to separate the facts from the bull feathers. For example is the six herds you’ve heard of exiting, are they really six herds or the same herd you’re hearing about six times? Here is what I have that I believe to be reliable. The production manager of the boar stud (Ontario Swine Improvement) we do business with has a list of some seven producers amounting to about 4,000 sows that have quit breeding –i.e. have stopped their standing semen order and haven’t gone elsewhere. So this should be as reliable as any, if you’ve stopped breeding you’re probably headed to the door. Then hard to believe this has all just fallen on OSI. Although OSI is one of the larger studs in the province it is only one of six. So may be reasonable to assume there’s at least another 4,000 sows exiting with other studs elsewhere. If this “cowboy arithmetic” were anything like right would represent a 2.5 per cent plus decline to the Ontario herd already.
However wouldn’t read too much into this all being driven by market conditions. The market may have provided the catalyst but at least four of these producers that I know a little bit about have some combination of – labour hassles, pooched barns, family dynamics, all of the above that could drive the decision regardless of the market. We tend to look a the industry as if it’s one huge monolith making some huge collective decision to market forces when the reality is it is literally hundreds of individuals making decisions from combinations of hundreds of reasons. There probably lies the strength to adapting rather than dying.
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