Window on the world of pork

The Banff Pork Seminar brings together the best minds in the pork business from across Canada, the United States and Europe.

Pork has arguably been one of the brightest sectors in Canada's agricultural portfolio in terms of productivity. Though this past year has been particularly tough for Canadian hog producers, that wasn't evident in the number of attendees at the 2004 Banff Pork Seminar, held January 20-23 in Banff, Alta. More than 700 industry stakeholders came together to discuss the future of their industry.

Comments made at the Seminar touched on issues facing the pork industry, from narrower profit margins to new animal welfare assessments, new legal liability concerns, the slow death of the hog cycle and proposed Country of Origin Labelling. Below are nine pieces that recap comments made by speakers at the Seminar.

Rick Andersen: Narrow margins new reality for pork industry

While there are no easy or quick fixes for getting the Canadian pork industry back into a profitable position, Rick Andersen, a Senior Vice President with Sparks Companies Inc. in Memphis, Tenn., says there will be overall growth in world hog markets and increasing demand for pork. However, margins will narrow for Canadian producers looking to capture some of that market, he says. Gone are $15 or $20 per head sustainable margins. The new reality will be $2, $3 or $5 per head longer-term average margins.

Can an industry attract capital and new equity at those narrow margins? Andersen says that the situation may mean forcing prices down to the point where Europe, Japan and other high-cost producers are forced to cut production. Reduced supply will eventually mean increasing prices.

Further retraction in the industry is almost essential. "An industry can't live without profit," he says. Adjustments will have to be made. In the short term it may mean shrinking hog inventories and production until demand drives a new expansion phase.

Average margins will likely never climb much above $10 per hog. However, with good financial management and hedging, he sees opportunity for industry leaders to do substantially better.

John LaClare: Tight business focus key to cash-strapped industry survival

Canadian hog producers need to demonstrate to lenders and capital providers they're doing everything possible to build a strong sustainable business, says John LaClare, general manager of production with Big Sky Farms Inc. in Humboldt, Sask.

It's a tough sell for the industry after 18 months of poor financial performance. But, current lenders and equity providers are the best source of capital for most producers. They've already made a commitment to the industry and they're more likely to continue to support it if we show we can hold this business on course.

"We need to be able to show we can produce a return, if not this year, then next, or fairly quickly for most of us," says LaClare. "We need to maintain a very tight business focus."

Other key points of his suggested recovery plan include:

• A need for long-term agreements with processors and more collaboration throughout the system. Direct producer ownership at the processing level is an option.
• More aggressive international marketing of Canadian pork. Increased exports means more Canadian processing, which will enable packers to run more efficient double shifts.
• Remaining proactive on animal welfare and environmental issues.
• Accepting the new reality and learning to live with lower margins.
• Reducing reliance on the U.S. market and increasing producer investment in export market development in other countries.

Penny Lawlis: Voluntary welfare assessments respond to industry critics

Initiatives across the Canadian pork industry to develop an on-farm system to assess animal welfare are responding to pressures on the agriculture industry to provide assurances that animals are properly cared for, says Penny Lawlis, an animal care specialist with the Ontario Ministry of Agriculture and Food in London, Ont.

Surveys have shown key players, including consumers, farmers, food retailers, media, politicians, scientists and vegetarians, all have opinions and all want to be listened to. "Surveys also show consumers are most concerned about how animals are raised, transported and slaughtered," she says. "They want information, but not too much information. They don't want to know how to raise pigs. They just need to know there are science-based standards for the care and handling of livestock."

Twenty years ago, the pork industry became the first livestock sector to develop a Code of Practice. When people ask about animal welfare in Canada, the industry has said it has a Code of Practice. "But that's not good enough any more," says Lawlis. "As others have pointed out, to win confidence you have to say what you are going do, then do it, then prove it. That's really what we are doing at this stage in developing Swine Animal Care Assessment."

Keith Wilson: Industry complexities drive legal liability

The increasing risk of farmers and ranchers running into legal liability issues is because of the increasing complexity of the industry and not because of any substantive change in law, says Keith Wilson, an agriculture lawyer based in Edmonton, Alta.

"We all recognize and see the whole business of agriculture and producing food is becoming more complex," he says. "With that complexity, in terms of mechanics and the practical side, comes increasing legal complexity," he says. "Producers are exposed to more areas of liability than they have been in the past."

There are real and potential risks facing the agriculture industry today, he says. While he's not aware of any producer being sued by a food processor for a product recall, he expects it will happen in the future. However, there are examples of environmental lawsuits, as well as injury claims from workers against their farmer employers. "The product liability issues will come," he says. "Producers need to understand the risks and put in place policies and procedures to help manage them."

Keith Wilson: Common law defines "reasonable" thinking conduct

Most livestock producers with employees are subject to Canadian common law when it comes to dealing with employee issues, says Keith Wilson, an agricultural lawyer based in Edmonton, Alta. Common law is the body of rules passed down by the courts with respect to principals and standard of conduct between people and the consequences they face when those standards are breached.

"Common law says every employer is under a duty to keep employees safe," says Wilson. "The court, in assessing whether you have breached your duty and are liable as a result, uses what is called the reasonable employer standard."

In law, the whole area of negligence is guided by a similar term known as the "reasonable man standard." By that the court envisions the actions of a reasonable prudent person, in a given situation, when appraised of the relevant information. What would that reasonable man or reasonable employer do? "That's the standard by which your conduct as an employer will be measured," says Wilson.

If it's found that a producer does not meet that standard - breached their duty - they would be liable. The liability will extend to those consequences that are foreseeable, such as loss of wages and health care costs.

Ken Clarke: Employee safety effort demands more respect

There is real importance to protecting workers not only from an ethical standpoint, but also from a cost standpoint, says Ken Clarke, Safety Officer, Chinook Health Region, Lethbridge, Alta.

Safety needs to be viewed like any other aspect of business, such as improving production and quality of a particular product, he says. "Safety ranks in importance now where quality was in the mid-'80s. Back in the mid-'80s, there were acceptable losses, in the automotive and electronics industries, for example, due to poor quality. Then the Japanese increased their presence in the market by producing products with good quality. Suddenly the emphasis on quality issues in North America changed. That's where safety is today."

Fortunately more businesses are beginning to refer to these as loss prevention programs rather than safety programs, he says. More business leaders are focusing on reducing losses rather than increasing profits. "To survive you need to patch the holes in your pocket before you worry about making more money," says Clarke.

Safety needs to be treated just like any other aspect of business that needs improvement in performance, he says. All improvements follow the same process. "First you identify the shortcoming, and develop corrective action, follow through to implementation and then monitor the changes," says Clarke. "Whether it's quality or production or something else, safety is just one of those areas."

Rocky Morrill and Harold Gonyou: Group housing concept more palatable for pigs and people

Building or converting a hog operation to a new design concept known as Large Group Housing (LGH) isn't problem free, but researchers and producers alike are finding it provides an improved production environment for both man and beast.

Peace Pork Inc. of Dawson Creek, B.C., research co-operators with the Prairie Swine Centre in Saskatoon, converted two feeder barns, which each housed 8,000 head in small pens of 20 to 25 pigs each, into group housing with large pens holding 1,000 hogs.

"The technology is a wonderful tool to tackle one of the biggest problems facing intensive livestock producers," says Rocky Morrill of Peace Pork. "And that's the issue of attracting and maintaining quality staff. It is possible to build a working environment for employees that is easier, safer and involves less stress."

Along with an improved working environment, the barn design makes sorting, shipping and improving target market weights easier to obtain; it makes for happier pigs in a better social environment; and it provides an excellent payback on investment. He estimates a four percent increase in detecting target weights improved hog throughput, which translates into an extra $20,000 in hog markets per year.

Another interesting aspect of LGH would be to determine what difference more exercise makes in hog muscle development, suggests Dr. Harold Gonyou, a researcher with the Prairie Swine Centre. Some research indicates pigs are walking a quarter mile or more per day in trips between the feeder, the sleeping area and back to the feeder.

Ron Plain: Pork industry expansion must be guarded

The tie between past production changes and industry profitability is not nearly as strong as it used to be and that's partly because of industry restructuring - more hog marketing by larger operations, regardless of whether demand is increasing, says Dr. Ron Plain, a professor in the Department of Agricultural Economics at the University of Missouri-Columbia. The traditional hog cycle is fading away.

"If you look at the long-term trend in U.S. pork production, we've increased about 1.5 percent per year for 72 years and that's basically the growth in demand for our product," says Plain. "I don't see any reason to expect something different in terms of growth in demand in the next decade, other than that same 1.5 percent growth rate."

That's why producers have to recognize that yes, there is a growing demand, but it's not growing at an infinite rate, he adds. As a result, there's a downward trend of barrow and gilt prices in the U.S. and that could continue until 2012. "If we don't change our production numbers by then, producers will be paying packers," says Plain. "The moral is that we can expand our industry, but not at unconstrained rates without ending up in a lot of red ink."

Rick Andersen and Kevin Grier: Cold reception for COOL

"COOL has been a divisive issue ever since it was introduced," says Rick Andersen, Senior Vice President of Sparks Companies Inc. in Memphis, Tenn., when speaking on the planned U.S. Country of Origin Labelling Law (COOL) at the Banff Pork Seminar. "It's nothing more than an 11th hour Farm Bill compromise that's been promoted by populist politicians, but never debated in Congress and therefore never been subject to public scrutiny."

Lawmakers argue that it's a consumer's right to know where food has come from, says Andersen. "But if that is the thinking behind COOL, why are there exemptions for processed products and food service? This is nothing more than shortsighted, anti-trade legislation with little economic merit, but substantial implementation costs. Those that know the meat industry have never been in favour of COOL."

Andersen figures that for the American pork industry, it could mean additional costs from $3 to $10/head, and the food industry as a whole could face additional costs of $3.6 to $5.6 billion.

Kevin Grier, a senior market analyst with the George Morris Centre, a Guelph-based independent agri-food think-tank, agrees COOL isn't good legislation for the American or Canadian pork industries. "The primary objective of COOL is to reduce imports and trade," says Grier. "It has nothing to do with food safety or a consumer's right to know.

"Only the American cowboys want this legislation," he adds. For the Canadian pork industry, it could mean American packers won't take Canadian hogs because of the increased handling costs associated with them. If six million Canadian hogs don't go south, it could have an even more staggering impact on the American industry. It could lead to the elimination of three or four American packing plants, lost jobs and close to $4 billion of lost economic activity, says Grier.

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