Canada

Executive Summary

The rate of expansion in the Canadian hog industry over the next two years is forecast to slow. The outlook for 2004 points to Canadian pork output reaching about 1.94 million metric tons, an increase of about 1.6% above the estimated 2003 level of 1.91 million metric tons.

Recent increases in Canadian pork production have been export driven. Pork exports are projected to reach 975,000 metric tons in 2003, almost 13% greater than a year ago and more than triple the level of 301,000 metric tons ten years earlier.

Live hog exports to the United States during the January-June period were 10% above the same period in 2002. Post forecasts that 6.6 million Canadian hogs will be exported live to the United States during 2003, an increase of almost 15% over last year.

Hogs and Pork

The number of hogs on Canadian farms on July 1, 2003 was almost identical to the inventory at that time one year ago. As of July 1, the inventory of hogs on farms stood at 14.6 million head, 0.2% lower than the same time last year. In recent quarters, growth in the Canadian hog sector has been slowing from the rate of expansion in recent years that often averaged 5.0% annually.

Hog producers saw their profits diminish or experienced losses as a result of weaker market prices for hogs and escalating feed costs over a two-year period beginning in mid-2001. For 2004, post forecasts a modest increase in the hog herd to about 14.9 million head, or an increase of 1.2% from the 2003 beginning inventory.

Pork

Increases in Canadian pork production in recent years have been export driven. Pork exports are projected to reach 975,000 metric tons in 2003, almost 13% greater than a year ago and more than triple the level of 301,000 metric tons ten years earlier. On the other hand, domestic consumption during the same period averaged only single digit increases and per capita disappearance has remained relatively constant at about 28 kilograms (carcass weight equivalent).

The outlook for 2004 points to pork output reaching almost 1.94 million metric tons, an increase of about 1.6% above the estimated 2003 level of 1.91 million metric tons. An additional factor affecting pork exports in late 2004 is the U.S. Country of Origin Labeling (COOL) regulation, which could result in an increase in Canadian hog slaughter in the final quarter of the year if COOL impacts Canadian live slaughter hog exports to the U.S. more so than Canadian pork exports.

Hog Prices

Hog market prices in the second quarter of 2003 showed strength over last year, but by the start of the third quarter weekly prices fell below year ago levels reflecting in part, ample supplies of beef in Canada related to the BSE situation. The c ontinued relative weakness in hog prices over the past 15-16 months is expected to result in a reduced rate of hog industry expansion into 2004.

Live Hog Exports

The trend to lower slaughter exports to the United States continued throughout the first six months of 2003, but the decline was more than offset by the sharp rise in exports of feeder pigs. Year-to-year, the increase in the January-June period was 10% above the same period in 2002 and there is no evidence to suggest that the rate of exports in the second half of 2003 will subside.

An important hog processor in Manitoba temporarily curtailed production in July 2003 (citing poor profitability linked to Japan sales and to the general appreciation in the Canadian dollar in 2003) with a resulting increase in live slaughter hog exports to the United States. Also, much of the recent increase in feeder exports to the U.S. has come out of new operations in Ontario, which became the leading export province of feeder pigs early in 2003. As a result, post forecasts that 6.6 million Canadian hogs will be exported live to the United States during 2003, an increase of almost 15% above the prior year.

For 2004, given the anticipated increase in the breeding herd and the associated larger pig crop, post projects live Canadian swine exports to the United States to increase from the 2003 level. The U.S. Country of Origin Labeling (COOL) regulation scheduled to become effective in September 2004 is forecast to result in a decline in live hog exports in the final quarter of 2004 but Canadian hog industry officials continue to work toward expanding opportunities with major U.S. packers (for slaughter hogs) and with U.S. hog finishers (for feeder hogs) to mitigate the impact on live animal trade in the post COOL period.

Pork Trade

Exports
The strong increase in Canadian pork exports evident in recent years continued in the first half of 2003 posting a 24% increase over the level for the same period last year. For all of 2003, the year-to year increase is expected to be tempered because exports in the final quarter last year so strong, but on balance, post forecasts exports during 2003 to reach approximately 975,000 metric tons, almost 13% above the year earlier record of 863,000 metric tons.

In the first six months of 2003, Canadian pork exports to the top three markets, the United States, Japan, and Australia accounted or more than 83% of the total with the United States alone accounting for 55% of the total.

For 2004, pork production prospects suggest continued growth in Canadian pork exports to the world. Total Canadian pork exports during 2004 are forecast to reach 1.0 million metric tons for the first time in history.

Imports
Canadian pork imports in the January-June period of 2003, mostly from the United States, fell sharply off last year’s pace showing a decline of 20%. The Sudden Acute Respiratory Syndrome (SARS) outbreak in Canada’s two most populous cities weakened economic activity, sharply reduced foreign visitor travel to Canada, and dampened overall demand for imported pork. In addition, Canadian storage stocks of pork were exceptionally high during the first half of 2003. For 2004, the outlook is for a modest increase in demand for certain fresh or frozen pork cuts provided storage stock levels return to more normal levels.

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Source: USDA, Foreign Agricultural Service - Annual Livestock and Products Report - September 2003