Alberta Hog Production Direction… has the industry reached the tipping point?

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About 30 years ago there were 15,000 hog producers in Alberta. The Alberta Hog Producers Marketing Board (AHPMB) was a single-desk marketing agency and had assembly yards located across the province. There were half a dozen major and medium sized pork processing plants. The Alberta hog industry back then was a busy industry on many fronts. Who could have imagined that within 30 years the hog infrastructure in Alberta could have changed so dramatically. To be fair similar changes to hog industry production infrastructure have occurred in most other provinces.
By 2001 the AHPMB was no longer marketing hogs and morphed into the present Alberta Pork organization. At the processor level consolidation saw only one major hog processor, Olymel, survive along with a couple of medium sized regional players. At the producer level change was truly drastic – from a high of 15,000 there are now less than a thousand survivors. Of that, 50% are classified as hobbyists, 20% are Hutterite colonies and 30% are independent or producer groups. Depending on methodology it seems less than 100 major producers provide up to 80% of the hogs grown in Alberta. Hog marketing has become a com-plex process – almost half of Alberta hogs at 1,307,000 head (slaughter, weaners, sows) are exported to other provinces or the US. At the same time Olymel imports over 800,000 owned/contracted hogs from Saskatchewan for processing at their Red Deer facility. Processor control of production is part of hog marketing in North America. But it begs the question why is Olymel not sourcing most its hogs from Alberta. Why are 600,000 Alberta weaner hogs sent elsewhere for finishing and marketing.
What has changed the face of hog production has been the advent of massive production facilities of 5,000 to 10,000 sow breeding operations. These corporate operations, some owned by processors, have the capital to invest in sophisticated production technology and advanced hog genetics. Such operations if well-managed, create significant economies of scale and impressive sow production efficiencies. Clearly smaller producers could not compete with such economic production realities. Back in its heyday 30 years ago a 500-sow far-row to finish hog operation was considered a viable hog business. To expand into the new world of huge industrial hog production required not just highly-skilled management expertise but access to investment capital that could reach into the millions for a single operation. That reality saw an exit of small and medium sized producers from the hog business. That exit was pushed along by a market pricing formula which consistently saw Alberta hog producers receive the lowest prices for slaughter hogs in North America. The rationale for that remains baffling to outside observers, especially in comparison to higher prices received in neighbouring provinces. However, as production became more consolidated and owned by processors, pricing formulas become more opaque, particularly when independent producers and colonies are faced with an almost monopoly processor in the province. Alternate hog markets are accessed outside the province, but distance and restricted processor access have a habit of discouraging profitable marketing outside of the province. Other opinion and his-tory would suggest that there is much more to that story.
What has been real is that with a consistent lowest market price situation, hog producers did not have the incentive to stay in business in Alberta. The only option was to get really big or get out – it’s the latter that most choose. It was a different situation in Saskatchewan and Manitoba – as here there was an exodus of smaller producers out of the industry, but there was much more development of large scale hog production including the construction of new large processing plants. Manitoba in particular seemed to be a hotbed of new and larger operations – in fact the Manitoba government put a moratorium on new hog barn construction to control the expansion. That moratorium has since been lifted.
Clearly investors, producers and processors in Saskatchewan and Manitoba saw success and profitability in major hog production facilities, in comparison, that optimism lagged in Alberta. Change did occur here and the result is that the sole major processor grows most of its own supply in Saskatchewan. The question is how can more Alberta hogs be grown, fed and slaughtered in this province. The other concern is has the industry reached a tipping point where most production will indeed be controlled by one entity – is there still room for independent and colony producers to stay in the hog business. Maybe its all too late. More next time.