Archives

Alberta's pork industry evolves in response to market pressures and opportunities

Within the past three years, many of the factors which once made the Alberta livestock feeding industry competitive have changed dramatically. The soaring value of the Canadian dollar; rising labour costs; and record feed grain prices are causing Alberta's pork industry to evolve in response to market pressures.

Even though Alberta's pork producers are some of the most innovative and efficient in the world, the global price decline for hogs means Alberta producers are losing up to $50 per hog. The net result is that many producers are exiting the industry.

"Alberta's pork producers were already facing huge economic hurdles, and now the strong Canadian dollar, without a corresponding readjustment of input costs, is literally the straw that is breaking the camel's back," says Paul Hodgman, executive director of Alberta Pork. "We had two choices - do nothing and watch our industry wither, or be proactive and find a way to rebuild our industry for the future. We have chosen the latter."

That vision for the future is provided, in part, by the Alberta Pork Industry Recovery Plan drafted by Alberta Pork in consultation with industry stakeholders. The plan focuses on the fact Alberta's pork industry has many of the fundamentals to remain an integral part of the global hog industry:

• A Quality Advantage – great genetics and disease control;
• A Knowledge Advantage – highly trained producers and a strong agricultural research base;
• An Entrepreneurial Advantage – an ability to adapt new technologies and production techniques to match consumer demands; and
• An Infrastructure Advantage – high quality infrastructure, abundant land, water, feed, etc. as well as access to export markets.

Hodgman notes that "there are many export opportunities on the horizon for Alberta producers. For example, in five years from now China is expected to be one of the largest pork importers. However, in order for Alberta producers to seize the opportunities of these huge emerging markets of China and India we need to ensure the viability of the industry today." China has recently suffered a dramatic drop in hog production as result of herd diseases, while at the same time, demand for pork has increased with the growing middle class in both China and India.

Alberta Pork's plan is based on the fact the province's pork industry faces a transition challenge. As a result, the recovery plan is focused on helping industry achieve that transition. There are two main components:

(1) restructuring the current industry which includes a new business relationship between producers and our major processor combined with a comprehensive value-added processing and marketing strategy to help capture the emerging opportunities; and

(2) addressing the feed grain disadvantage in the interim along with operational constraints relating to labour and regulatory costs as well as seizing upon opportunities such as clean, renewable bio-gas energy production.

"Alberta's pork industry needs both primary production and processing to take advantage of the future opportunities," said Hodgman. "In order to keep our largest processor – Olymel – in Alberta, producers have been forced to accept reduced prices for hogs. There is an expectation that, by working together, we will see value-added and new market opportunities that will allow both producers and processors to prosper in the long term."

Aside from Olymel, the Alberta pork industry plan also looks to establish a general business climate in which further value-added processing and value chain development can occur. The industry hopes, with the assistance of government, to help producers and processors engage in restructuring discussions with the view to creating value-added value chain production models.

One of the primary causes of the current financial crisis facing producers is the vastly inflated cost of feed due to ethanol policies of government both here in Canada and the U.S.

Hodgman adds, "A key component of the Alberta Pork Industry Recovery Plan transition is that we need government assistance to address the current severe cash crisis with a focus on reducing the adverse impact of our increasing feed grain costs arising from biofuels."

The pork industry recovery plan is recommending the government implement a Biofuels Offset Program – similar to the highly successful Alberta Crow Benefit Offset Program from the 1980s – which would provide producers with government assistance until feed byproducts are available and new high yielding feed varieties are in production. The industry is also encouraging the government help remove restrictions on the registration of high yielding feed barley and wheat varieties currently limited by the federal Kernel Visual Distinguishability (KVD) regulations.

"Many of the key ingredients for a prosperous and growing hog industry are here in Alberta. Alberta Pork, with industry consultation, has carefully examined the best options to build a strong future for our industry," said Hodgman.

"By working together – producers, processors, marketers and the government – we can take the steps necessary to secure our industry's future."

© 2006 Meristem Information Resources Ltd.
Meristem® is a registered trademark of Meristem Information Resources Ltd. All rights reserved.
Legal Disclaimer