Further Reduction of US Hog Herd a Requirement

CANADA - Manitoba Pork Marketing suggests, while any reductions in Canadian hog production will positively impact prices, the Americans will need to reduce their herd to stimulate any substantial price spikes, writes Bruce Cochrane.
calendar icon 21 December 2009
clock icon 3 minute read

As part of a federal pork industry restructuring plan Canadian pork producers are being offered the opportunity to exit the industry based on a tendering process.

Manitoba Pork Marketing CEO Perry Mohr observes, while the futures markets indicate prices could return to profitability in April, May and June, given the equity drain, producers will need a prolonged period of profitability to fully recover.

Perry Mohr-Manitoba Pork Marketing

While any reduction in supply will at some point in the future result in higher prices I believe, and I've got no evidence to substantiate this but I believe that most of the money that went out in the first round went out to producers that were already out of the industry.

They just finished their second tender period and it looks like, and again I've got no evidence other than speculative evidence to suggest that this time it's actually going to take some producers that still have pigs on their farm out of circulation and they're going to have a third tender period.

Obviously as Canadians we've already seen a significant reduction in our pig herd and we're taking measures to reduce it even further however to see a real positive spike in prices we're going to need to see the Americans reduce their herd further.

For example the CEO of Smithfield has gone public and said we've decreased our pig herd by X percentage, it's time you guys recognized that you have to do your fair share too.

Whether or not that's going to have any impact or not is debatable especially now as we see some positive changes in the market place.

Mr Mohr notes the financial institutions are watching the market trends very carefully and if we don't see some significant gains it won't be surprising to see them making tough decisions in terms of how they'll protect themselves and limit their exposure in a market that's been tough over the last three years.

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