We take down the old calendar, recount the year's highlights, then hang a brand spankin' new one. For the more business-minded, this clean slate serves as a good time to review short- and long-term goals.
With that mindset, I think it's time to take a harder look at developing a more congenial relationship with our neighbors to the north.
Clearly, the U.S. and Canadian pork industries have become more integrated. In recent years, 10-12% of the hogs slaughtered and processed in the United States were born in Canada. Eight to 10% are brought in as feeder pigs for finishing; another 2-4% are delivered as market hogs.
Both countries enjoy a reputation of being able to produce abundant supplies of high-quality, safe pork for the domestic and foreign customers we share. Both countries are refining national identification and tracking capabilities centered on premise identification.
Keep a Lid on Expansion
The past 12-18 months have been exceptionally profitable for U.S. producers. Normally, low feed costs and good market prices spell e-x-p-a-n-s-i-o-n. But, as the December Hogs & Pigs report showed, a good deal of self-restraint is being practiced.
The limited growth we're seeing should not be confused with inactivity, however. Truth is, there's plenty of activity on both sides of the border.
No less than a dozen U.S. and Canadian companies have announced plans in the last six months to refurbish existing packing plants or build new ones.
When packers begin talking about new slaughtering/processing facilities or adding shifts at existing plants, we mentally tabulate the impact of the shackle-space shuffle, reworking where sow herds will reside, the flow of feeder pigs and market hogs.
This mental exercise is an important part of short- and long-term planning to ensure the pigs and plants are located in the most efficient, cost-effective proximity.
Yours, Mine and Ours
Considering how intertwined our respective pork industries are, we still tend to aggravate one another with protective positioning.
In 2004, the States charged that illegally subsidized Canadian hogs were being dumped into the States at less than their cost of production — thus harming U.S. pork producers. Months of hearings, court rulings and appeals later, the U.S. International Trade Commission ruled that Canadian pigs were not harming U.S. producers. In the interim, both sides spent millions on research and legal fees to build their cases.
Recently, the Canadian Border Services Agency (CBSA) decided that U.S. corn exported to Canada is being subsidized and dumped. Therefore, a $1.65/bu. duty will be imposed on imported U.S. corn. This action will add an estimated $2 to every weanling pig, $16-18/finisher, and over $40 to the annual cost of feeding a sow in Canada.
In an effort to take the sting out of the imposed duty, the CBSA offered to compensate Canadian producers that finished hogs on U.S. corn — providing those hogs are slaughtered in the States.
This new twist is sure to put downward pressure on the U.S. market, and you can bet your Christmas gift cards that another trade action suit will be filed on behalf of U.S. pork producers because the Canadian subsidy is not available to all producers.
And around and around we go. Is anyone looking at the big picture here?
I bring this discussion to the forefront because I think it is high time that U.S. and Canadian pork industries begin a dialogue that factors in the long-term viability of what has become a North American pork industry.
We are in a transitionary period, realigning who will farrow and raise the pigs, who will slaughter and process them most efficiently. A notable portion of U.S. and Canadian pork producers are dependent upon each other.
The strength and profitability of our industries rely on their abilities to build solid alliances that will present the most economical balance of product and processing.
A good place to start would be to synchronize the respective countries' quarterly pig crop and breeding herd counts. Currently, the U.S. Quarterly Hogs & Pigs report is released, then a month later Statistics Canada reveals their latest hogs, pigs and breeding herd quarterly counts. Surely, it would be mutually beneficial for these reports to be gathered and released at the same time.
The pork industries in the United States and Canada face similar challenges and opportunities. Good decisions require the sharing of good information. A more harmonious trade relationship, joint efforts to solve major production challenges and, possibly, addressing foreign and domestic consumer concerns simply makes sense. It would make an excellent New Year's resolution.