Increased Transportation Costs and Rising Value of the Dollar Influencing Profitability Hogs in Saskatchewan

CANADA - The Saskatchewan Pork Development Board reports the rising value of the Canadian dollar and increased transportation costs in the wake of the Mitchell's closure are the biggest influences on profitability right now, writes Bruce Cochrane.
calendar icon 13 June 2007
clock icon 3 minute read

In general hog prices in western Canada are based on formulas that use the U.S. corn belt price and are adjusted based on regional factors and the exchange rate.

Sask Pork policy analyst Mark Ferguson says the closure of the Saskatoon plant won't have an immediate impact on prices however, he notes, higher transportation costs and the rising value of the Canadian dollar will affect profitability.

Mark Ferguson-Saskatchewan Pork Development Board

In the wake of the closure of the Saskatoon plant producers are now shipping their hogs to more distant markets.

Hogs are moving into Manitoba and Alberta at an increasing rate and also there's more hogs going down south to the U.S.

In our projections we've estimated that the extra transportation costs are going to be about four to ten dollars a hog depending on where the producer is located and whether they need to assemble their hogs at an assembly yard and how efficient their trucks are and how they're doing their transportation.

That's the primary effect of the Saskatoon plant closure is the increase in transportation costs and it's an immediate effect

In terms of hog prices, the Canadian dollar has been increasing in value substantially recently and it's increased to almost 95 cents and hog prices are determined based on formulas that use the exchange rate as a factor in that formula so every time the value of the Canadian dollar in creases the price that Canadian hog farmers get for their hogs decreases by that same percentage.

Ferguson admits in the longer term, if western Canadian slaughter capacity isn't replaced, there might be some adjustment of the formulas that could impact hog producers.

He says, if there is an abundance of hogs and a shortage of slaughter capacity, there might be a change but. he stresses, that is always the case.

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