Hog producers want to survive… but it may just be too late for independent operators

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Last May, the hog producer organizations of western Canada, BC Pork Producers Association, Alberta Pork, Saskatchewan Pork, and Manitoba Pork Council invited the four largest pork processing, Maple Leaf Foods, Olymel, HyLife and Donald’s Fine Foods to discuss the state of the pork industry in western Canada. To those observers of the trials and tribulations of the Alberta hog industry, this request seemed almost like a desperate last stand. The invitation was to the senior management of all four companies, three agreed to the meetings, Olymel acknowledged the invitation, but haughtily referred the producer groups to talk to their marketing department. Olymel is a Quebec-based hog processor with a large plant in Red Deer, so maybe the intent of the formal request was lost in the translation. However, as longtime observers of Alberta hog industry politics will recognize, that disdainful attitude by a hog processor towards producers has been part of industry troubles for over 40 years. I cite the heyday of the Alberta Pork Producers Marketing Board and nefarious processors like Peter Pocklington of Gainers Meats. The marketing mischief and political battles were legendary. The government of the day did what it could to promote peaceful co-existence, but I suggest their action or lack thereof back then, was the genesis of the state of the Alberta hog industry woes today.
Since then, the Alberta hog industry has undergone epic changes, the most obvious being it went from 15,000 producers to a few hundred independent producers and Hutterite Colonies today. The big processors followed the US example and just set up or bought their own primary hog production barns, thereby eliminating pesky independent producers and their demands for fair hog pricing and marketing. That has seen the Olymel hog plant own or control over 60% of their processing needs. They seem rather close to being able to tell the independent producers, “we don’t need you anymore,” no wonder they didn’t really care to meet formally with the producer groups. Maple Leaf Foods, the giant Manitoba pork processor, also owns tens of thousands of sows and vast production and finishing barns on the prairies and eastern Canada. Donald’s Fine Foods from BC is a relatively new player compared to the other processors and is a significant buyer of market-ready hogs in Alberta. The hog industry in BC is all but non-existent, having only a handful of commercial producers left in the Fraser Valley, and Peace River district.
Hog marketing in western Canada and particularly Alberta has suffered from a systemic dysfunctional hog pricing system for the past 40 years. It’s a whole other story, but the result is that independent producers in this province consistently receive the lowest prices for their hogs on the continent. There has been in some enlightened advancement in hog pricing in other jurisdictions, in many areas of the US prices are established by wholesale pork values called the “cut out” price. It’s a fairer way of giving producers a share in the true value of a pork carcass, which reflects in higher prices. In fact, to address hog marketing issues in Quebec, the provincial government there legislated mandatory cut out pricing for hogs marketed in that province. Ironically, Olymel, which is owned by hog producers, is trying to quash that legislation which favours their own producers – go figure. Perhaps western provincial governments need to take a similar legislated approach to bring some peace to the industry. Two other processors HyLife and Maple Leaf, possibly seeing the writing on the wall, are offering either/or cut out pricing or other incentives to help keep hog producers in the business. But therein lies the ominous reality.
It would seem that the big processors over the past 30 years have been relentlessly acquiring hog production operations to control the supply into their processing operations. They also use long-term contracting for some of their supply. If this trend continues, they won’t need independent producers at all, perhaps that is the new reality the hog industry needs to finally accept. Maybe from a provincial perspective, the Alberta government needs to put into place significant incentives to build new massive high-tech hog processing plants with more giant hog farms all owned by integrated operators like Olymel, HyLife or Maple Leaf Foods. If the day of the independent hog producers is done, let’s get into the big leagues of pork production – jobs and economic development would be significant.