Canada Hog Markets - The Black Cloud that Lingers

CANADA - As we close the 3rd QTR hog market margins continue to hold up very well with the this quarter being a tremendous reversal of fortunes with OMAFRA’s Ontario Monthly Hog Market Facts showing Net Returns on their Farrow to Finish Swine Budget of $34.05 for July and $38.70 for August. As opposed to an average Net Return of $4.90 for the first half of the year, writes Bob Fraser – Sales & Service, Genesus Ontario.
calendar icon 1 October 2015
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Below shows numbers for the most recent five weeks.

Monday, September 14, 2015 Weekly Hog Market Facts
Compiled by the OMAFRA Swine Team

So why no seeming “joy in Muddville” calling on any Ontario producers. This email from the manager of Ontario Pork, Marketing Division to all producers shipping to Olymel is most likely the root cause.

“Everyone, I wanted to give you a further update on Olymel. As you are aware, they have had significant cooler problems this summer. These problems have become worse, not better. They were reduced to 66% capacity late last week; today they are down to 50% capacity at St.Esprit. I do not have a clear answer about when things may start to improve. A number of loads have had to be cancelled this week with short notice, next week they will only accept 50% of their commitment from all Ontario suppliers. We are developing alternatives if you need to keep animals moving. I will continue to provide further updates as they become available.“

As I have discussed in previous commentaries Ontario (Canada) swine industry suffer greatly from an inefficient packing industry. Due to some of the challenges outlined above Ontario presently has something in the order of 15,000 market hogs per week looking for a home. In a commodity business it takes little time for buyers to “smell that blood in the water”. Even if you’re not shipping to Olymel with all buyers having their door knocked on to take pigs none are inclined to do any producer a particular favour. As to the alternatives all of them probably involve an extra twenty-five dollar plus freight bill before considering what the “haircut” maybe on price from what you had been getting.

With a short week coming up for the Canadian Thanksgiving in two weeks to be followed relatively quickly with two short weeks at Christmas it is difficult to forecast this “black cloud” clearing before well into the New Year, if then.

View from one Canadian analyst that would be difficult to argue with -
Kevin Grier – Canadian Pork Market Review – September 14, 2015 ACTIONS

“The Ontario packing situation is not a problem that is going to be solved this year or next. Given the challenges facing packers in Canada there is no reason to expect expanded capacity in the province. There is hope for 2017 when the new plant is added to Michigan, but there is likely already numbers lined up for that plant. This issue is going to curtail growth and even result in a reduction in finishing and increased weaner shipments out of the province. “

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