Return to Profitability Expected by Mid-2013

14 September 2012, at 7:41am

CANADA - The manager of industry and policy analysis with the Saskatchewan Pork Development Board is predicting a return to profitability within the western Canadian hog industry by next May, writes Bruce Cochrane.

Because of drought corn prices have climbed to over eight dollars per bushel in the US fueling a corresponding rise in feed markets in western Canada. Mark Ferguson, Sask Pork's manager of industry and policy analysis, notes barley is currently at just under five dollars a bushel, deliveries this fall are probably going to be priced above five dollars a bushel and feed wheat is over seven dollars a bushel.

Mark Ferguson-Saskatchewan Pork Development Board:

Last year the price to feed a hog was probably about 95 dollars per hog and currently what we're seeing is a feed cost of around 115 to 120 dollars per hog and the total cost of production is probably over 180 dollars per hog.

Just to put that into perspective current cash prices are around 120 dollars per hog this week. That demonstrates probably about a 60 dollar per hog loss.

However, despite the current situation, it's important to remember that the hog business is a cyclical one and we do have seasonal and multi-year price fluctuations that do impact profitability and by May of next year we expect most producers to be back into positive cash margins.

Basically, with current North American industry losses, there will be herd liquidations and fewer markets hogs on the ground by next summer and that's what the market is expecting to happen, that there will be higher prices next summer and there has been an opportunity to lock in prices of 170 dollars per hog so there's definitely going to be better times ahead.

Mr Ferguson says, although prices have slumped, there were some opportunities to lock in higher prices and there may be again and, depending on how the upcoming USDA reports go, feed prices could come down. He recommends watching the markets closely and taking advantage of opportunities when they present themselves.