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U.S. Market Attractive On Several Fronts

Article-U.S. Market Attractive On Several Fronts

Martin Rice, executive director of the Canadian Pork Council, says 3.17 million Canadian pigs under 110 lb. were shipped to the U.S. for finishing in 2001. That's about 12% of all pigs born in Canada. Why are Canadians shipping pigs south instead of finishing them? After all, Canada, like the U.S., is suffering from a shrinking rural population. Sending pigs south means fewer jobs in finishing barns

Martin Rice, executive director of the Canadian Pork Council, says 3.17 million Canadian pigs under 110 lb. were shipped to the U.S. for finishing in 2001. That's about 12% of all pigs born in Canada.

Why are Canadians shipping pigs south instead of finishing them? After all, Canada, like the U.S., is suffering from a shrinking rural population. Sending pigs south means fewer jobs in finishing barns and processing plants. In fact, Maple Leaf Foods' brand new, state-of-the-art processing plant in Brandon, Manitoba can only source enough hogs to run one shift — half its capacity.

Feed Price, Quality Plight

Owning a hog barn on either side of the 49th parallel doesn't guarantee a profit, of course. The advantage seems to lie with American finishers, particularly in the Midwest, with abundant supplies of cheap feed. And, Canadian producers have found they can net more dollars by supplying the pigs than they can by finishing them at home.

“The Canadian hog finisher is at a $20 (US$) disadvantage to the American finisher in the Midwest,” says Larry Friesen, a farrower and spokesman with the Manitoba Pork Council. “It all comes down to corn subsidies in the U.S. Farm Bill. The Canadian government has neither the will nor the means to subsidize grain production, whereas the U.S. government has both. You can buy corn for $1.50 to $1.75 a bushel, so feed has become a very small component of your inputs. We cannot afford to feed pigs, economically, if we have to compete with the U.S. Treasury,” he concludes.

Canadian finishers have always had to import American soybean meal. However, in recent years, other grains used in hog rations have been difficult to find in western Canada, too.

Canadian grain producers, struggling to find any crop that can be grown profitably, have taken millions of acres out of feedgrain crops and planted them to a wide range of higher-returning specialty crops instead. Grain supplies in western Saskatchewan and Alberta have been further reduced by a severe drought that's now entering its third year. At the same time, wheat and barley crops in eastern Saskatchewan and Manitoba have become heavily infested with Fusarium head blight, the fungus that produces vomitoxin.

Friesen prefers to buy grain from western Canada farmers to finish his hogs, but the vomitoxin problem makes it impractical. “There is virtually no barley left in Manitoba to feed our pigs,” he says. “Right now we are importing grain from Saskatchewan, but vomitoxin is moving west. I don't think that it can stop the industry, but it is a cloud hanging over us and we'll need to have a few dry years to get rid of it.”

Contract-Driven Expansion

The Willow Creek Hutterite Colony near Cartwright, Manitoba, and three other colonies combine pigs with the same genetics and same health status to fill an 1,800-pig transfer truck destined for the U.S. every week. The colony has been exporting early weaned pigs since they constructed a new 1,200-sow barn four years ago. Each week, 250 of the 700 weaned pigs are shipped to U.S. farms under contract. The rest are finished on a separate site.

Colony weaned pig manager Tim Hofer says they expanded the sow herd with the export market in mind. “Before we finished the barn, we had a contract ready to go,” he says.

The difficulty of finding good, clean grain and growing manure disposal problems contributed to their decision to enter the export market.

“Americans are willing to pay a premium for a steady, incoming supply of quality pigs,” Hofer explains. “We have a guaranteed price no matter what the price fluctuation is. It's really a type of diversification. It really helps with the cash flow.

“Last year we made $960,000 (Canadian$) profit on the Isoweans and about $600,000 (Canadian$) profit on the [home-raised] finishers. If we were going to build another barn, we would build a 2,400-sow, Isowean barn.”

Weaned pig production is particularly profitable because Willow Creek Colony's sow productivity ranks among the highest in North America — averaging 28 pigs weaned/sow/yr. Hofer credits the colony's production success to its highly trained and stable workforce.

“This barn has been running 3½ to 4 years and we still have the same labor that we started with,” Hofer explains. “You can't teach a farrowing technician or an AI technician anything in six or seven months. It takes a couple of years to train them. That is what you need for sow production — good, dedicated labor.” In private barns, a 50% annual staff turnover is not uncommon, he adds.

Profit Opportunity

Canadian producers are attracted to the U.S. market because of the opportunity for higher returns. But, no market would exist if Midwest hog finishers weren't interested in sourcing Canadian hogs, reminds Greg Gates, director of marketing for Sioux Nation of Sioux Falls, SD. Gates purchases Canadian weaners for customers in Iowa, Minnesota and the Dakotas.

“We've been sourcing KPA pigs out of Canada for our independent farm customers for the past two years,” he explains. (KPA stands for Keystone Pig Advancement in Canada and Keystone Pig of America in the U.S.) “We've had tremendous luck with their health and productivity, and they are very, very well liked by the packer. The genetic cuts, the meat quality, the scores and the performance of these pigs have been very good.”

Gates says Sioux Nation supplies about a million pigs to U.S. finishers annually. About 200,000 of those come out of Canada. He expects pig placement to grow to about 1.2 million this year, with roughly 25% brought in from Canada.

The popularity of KPA genetics has played a large part in the recent increase in weaned pig exports to the U.S. KPA, headquartered in Oakville, Manitoba, has only been in business since 1995, but has quickly become a major player in the North American swine genetics market.

“Our pigs are popular with both the farmers and the packers because we have done a lot of genetic work to make our product useful to them,” says KPA President Pat O'Meara. “We measure carcass and meat quality traits on nucleus pigs from our terminal lines each week at East 40 Packers in Brandon, Manitoba.” KPA has contracted Bob McKay of the Manitoba Swine Research and Development Consortium to do this work. Weight, length, loineye depth and area and backfat thickness are measured in the carcass. Meat quality measurements include loin color (using Minolta technology), loin texture, marbling score and 24-hour loin pH. Drip loss is measured from one pork chop removed from each carcass, O'Meara explains.

“The producer is trying to get a fast-growing, lean hog that saves him money and gives him maximum packer premiums. Our pigs seem to be getting the best of both,” he continues.

Writing Contracts

Contracts for Canadian weaned pigs headed for the U.S. are no different than those offered to domestic farrowers. Pigs can't be over 21 days old and must weigh at least 8 lb. High health standards have to be guaranteed. All pigs destined for export receive a farm-specific ear tattoo at 3 days of age to prove point of origin.

“Our pigs are shipped when they are 18 days old (on average) and we aim for a shipping weight of about 13 lb.,” Hofer says. “You don't get paid for a pig under 7 lb., half price for pigs between 7 and 8 lb. and full price for anything over 8 lb.”

Hofer's three-year contract, set to expire in April, was renegotiated last fall. The original contract, $30 (US$) per pig, was bumped to $31 and the contract extended for another three years. “We pay our vet bills, and right now, they pay the trucking,” Hofer adds.

Three days before shipping, a veterinarian inspects all the pigs. “If he sees anything wrong or anything abnormal with any pig, he will put a red mark on it and that pig is not allowed to go on the truck,” says Hofer. “If they don't meet the health standards, they don't go out of our barns. Pigs that don't meet the weight requirements are kept back and we finish them ourselves.”

Willow Creek Colony's contract was arranged by KPA. “The genetic companies quite often set up the Isowean contracts,” Hofer explains. “We only have 1,200 sows and aren't too involved in that stuff while the genetic companies sell thousands of Isoweans. They have better contacts down south and it would take too much effort for us to go look up contacts ourselves.”

Editor's Note: Exchange rate was $1.00 U.S. = $1.62 Canadian at this writing.

Lorne McClinton is a freelance writer based in Yellow Grass, Saskatchewan, Canada.