CANADA - A Farm Management Consultant with MNP says Saskatchewan is at a starting point in terms of looking at reinvestment in hog production capacity, writes Bruce Cochrane.
"Pork Investment in Saskatchewan" was among the topics discussed last week as part of Saskatchewan Pork Industry Symposium 2016 in Saskatoon.
Eric Olson, a Farm Management Consultant with MNP, says in the short term, the next year, we've got an over supply of pigs but long term, two to three years or five to ten years, given the processing capacity that's not being used there will likely be incentives for producers to build barns and get into the hog business.
What we're seeing right now, some producers are taking some hard looks at investing in some new barns, mostly existing producers.
In a lot of cases they're looking at maximizing their returns by maybe increasing their finishing capacity.
Really the big piece right now we're looking at is building costs. We haven't built a lot of new barns in the last five or six years.
There's expertise in how to build barns but there's not a lot of experience in terms of recent pricing.
Building costs have gone up quite a bit so, for most producers, looking at much it's going to cost to build would be the big piece.
Then looking at the regulatory side.
Depending on what province you're in, if you're in Saskatchewan, Manitoba or Alberta there's regulations that you have to go through to build a new barn.
We see a lot of the industry is talking about how to get some new investment in.
Going across western Canada, with the economics we've had in the last few years, it just hasn't been something producers have looked at so we're probably at a starting point to start looking at new investment in the industry.
Olson says, once the construction costs have been factored in, producers need to consider how the new production capacity will integrate into their existing operations and how the two will compliment each other as well as the cyclical nature of the hog industry and how to mitigate that price uncertainty.
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