Pork Commentary: Canada Update26 October 2016
CANADA - Canada is our home, and like most people, our home is where our heart is, writes Jim Long President – CEO Genesus Inc.
Below is what is currently happening in Canada’s pork production:
Canada is a major pork and hog exporter. 2016 Pork Production to date is 1.605 million tonnes. Pork exports have been around 810,000 tonnes, which is equal to half of Canada’s pork production. On top of this, 4.282 million live pigs have been exported. If you add it all up, over 65 per cent of all of Canada’s pig production leaves Canada as either pork meat or live pigs. Canada relies on exports and market access like no other country in the world.
Canada’s pork exports have gotten a big boost from China this year (so far, up 350 per cent). The United States is Canada’s largest market for exporting pork and live pigs.
Robert Hunsberger of Ontario does a weekly Canadian hog economic summary sheet. His calculations for this week are below (in Canadian dollars):
- Producer profit per pig (average production): -$27.37/pig
- Producer profit per pig (excellent production): -10.10/pig
- Packer Kill + Cut Margin/pig as of Oct 14, 2016: +$56.86/pig
- Current calculation of average profitability the next 12 months: -$6.70/pig
It’s a bad time for producers, and a great time for packers. Everyone gets a turn in the wheelbarrow.
We expect that the current negative margins will result in fewer pigs being produced a year from now. There has never been anything but lower production when producers lose significant money. We expect history will repeat itself.
Canadian Packers are benefitting from the tight packer capacity in Canada and the USA. Canadian producers will benefit from the new plants in the U.S. when they start up in 2017.
Canadian producers are benefitting from a lower Canadian dollar compared to the U.S. dollar (76 cents). This is a large benefit when hog prices are based on the U.S. prices less lower basis due to trucking costs to USA. The higher U.S. dollar is why Canada will continue to export small pigs to the U.S. There will be little expansion in finishing barn space in Canada.
Canada’s pressure from having to export over 65 per cent of its pig production puts an emphasis on costs, productivity, and technology uptake. Canada has some of the lowest costs of production in the world driven by high productivity, including use of the best genetics (Genesus is the largest Canada-owned genetic company).
We don’t expect net growth in the Canadian pork industry in the future. Lenders are not positive due to the hog prices and export exposure. Canada will stay a player, but relative to the growth of total global production, it will be less of a factor in the years ahead.
According to the European Commission, the EU exported a little over 2,754 tonnes during the first eight months of the year. This represents a 32.9 per cent increase from last year. China is the leading driver of growth, increasing by 96.8 per cent.
There is no doubt that Europe has been the big beneficiary of China’s import demand. This is leading to better prices for European producers. Last week, Spain’s price was $0.63/lb in U.S. dollars liveweight, while the price in the U.S. was $0.35/lb liveweight. That’s a difference of over $75 USD per hog. Part of the difference is the lower packer margins in Europe compared to the United States.
Genesus Press Announcement
Genesus is pleased to announce the appointment of Helena Echberg as its new Director of Business Development.
Born in Denmark, Helena has been involved in the swine industry throughout her entire life. After graduating from the Aarhus University of Business in 1994, Helena started her career in international swine equipment sales.
In 1997, Helena moved to Quebec, Canada, where she still resides today. Through her own distribution channels, she has represented Danish swine equipment companies in North and South America for the past 20 years.
Helena brings a wealth of production expertise, international contacts, language skills, and leadership, all of which will contribute to Genesus’ global growth. Genesus is fortunate and excited to add Helena to the team.
|Author: Jim Long, President & CEO, Genesus Genetics|
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