Herd Sell-off Should Lead to Higher Hog Prices

27 September 2012, at 7:52am

CANADA - A University of Manitoba agricultural economist predicts improved profitability within Manitoba's swine industry once the sell-off of breeding sows has been completed, writes Bruce Cochrane.

High feed costs and a depressed market for live hogs are being blamed for two of western Canada's largest pork producers filing for bankruptcy protection in recent weeks.

Dr Derek Brewin, an associate professor of agribusiness and agricultural economics with the University of Manitoba, blames the drought in North American along with the ethanol demand which has eaten up quite a bit of the corn stocks in the United States.

Dr Derek Brewin-University of Manitoba:

Corn prices, and all of our feed grains are based off of corn, we have corn prices that are as high as they've ever been, at eight dollars a bushel in Chicago.

That means that we're looking at very high prices in our feed wheats and feed barley here too. Usually hog prices eventually respond to that so, if we have really high feed prices for awhile, the hog prices will go up but right now all across North America we've got shortages of feed grains.

We've got very high feed prices coming into the hog barns and some of the hog barns around North America are selling off not just their regular pig crop but the sows, the breeding herds and that breeding herd has been part of the supply for awhile and so we actually have very low hog prices.

That's not going to last too long but it'll kill off the breeding herd in a few months. Then we will start to have, actually because we've got less sows around producing pigs, we'll start to have less total number of hogs in North America and prices will start to come back up but for right now we are in this period of time when they're facing record high feed prices and low output prices.

That's incredibly difficult for the hog sector in Manitoba

Dr Brewin notes Manitoba has two major processing plants.

He expects the economics of those plants will stay steady for quite awhile which will provide an incentive for producers to grow hogs close to those plants.