2008 Banff Pork Seminar
Pork producers must build on strengths in the face of crisisDate posted: January 21, 2008
The Canadian pork industry must benchmark effectively against the best of the industry, build aggressively on its strengths, and support those efforts with a stronger policy and industry development framework in order to survive, say three industry analysts who spoke at the 2008 Banff Pork Seminar.
The Banff Pork Seminar is an annual event that highlights the industry's most timely issues. This year's Seminar comes on the heels of one of the industry's most difficult years, with Canadian pork producers facing challenges such as proposed mandatory country-of-origin labelling in the U.S., fewer domestic processors, and high feedgrain costs driven by global demand for biofuels.
The use of benchmarking is key to tackling these challenges, says Greg Bilbrey of Agri Stats Inc, a statistical analysis and research firm based in Fort Wayne, Indiana. "Why would we not use benchmarking? Benchmarking against the best in the industry helps companies outperform the average and, in the process, can drive profitability."
Benchmarking can help the industry identify flaws in its strategy, such as a tendency to associate profitability with production, says Bilbrey. "While production is a key measurement of profitability, it's not the only one. Agri Stats found that the top 25 most profitable pork production companies did not necessarily have the highest production numbers. They did, however, have clear cost advantages. Fighting poor performance with lower cost proved more profitable than overcoming high cost with best production."
The Canadian pork industry's relatively high cost of pork production has affected its ability to be competitive with pork industries in other countries, says Bilbrey. "Canada's cost disadvantages to the U.S. have been key to the current challenges facing the industry. Canadian pork producers frequently achieve higher production levels than their U.S. counterparts but are more severely challenged with higher costs."
A question that's been asked is whether Canada will continue to have a pork packing industry, says Kevin Grier, senior market analyst with the George Morris Centre in Guelph, Ontario. "The answer is not as it is right now. The fact that we're shipping nine million hogs per year south of the border is a sign of weakness for both the processing sector and the Canadian pork industry as a whole."
However, there is room to be optimistic, says Grier. "Large scale pork processing is relatively new in Canada. Its participants know what needs to be done to become more profitable and efficient and are starting to do it. There are also a number of positives that Canada's pork industry can build on once it gets through its current crisis, such as its world leadership in disease prevention, available arable land, and market access."
The overriding question Canadian pork producers need to ask themselves, says Clare Schlegel, president of the Canadian Pork Council (CPC), the organization which serves as the national voice for Canada's pork producers, is whether its challenges are a symptom of a cyclical low or driven by new forces that will complicate the ability of the market to correct them.
Calling on the Government of Canada to be more committed to value-added business such as livestock, Schlegel wants the government to create a more stable business environment than what is currently available, as the pace of change of the Canadian dollar and the increase in value of feed on top of the low price in the hog cycle have created huge, unmanageable losses.
"My feeling is that this is not a normal low," he says. "In many ways, this is more than a financial crisis. It's a crisis of hope for the future of Canada's pork industry. In order to survive, we need the full engagement of every link in the pork industry, including the support of government. There is too much at stake not to."
Held since 1972 in Banff, Alberta, the Banff Pork Seminar is coordinated by the Department of Agricultural, Food and Nutritional Science, University of Alberta, in cooperation with Alberta Pork, Alberta Agriculture and Food and other pork industry representatives from across Canada. Program and proceedings of the Banff Pork Seminar are available on the Seminar Web site, www.banffpork.ca.
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