An economist with Farm Credit Canada says, despite the prospects of higher feed costs and rising interest rates there is room cautious optimism within the pork sector.
As the Canadian economy recovers from the disruptions caused by COVID-19, livestock producers are being advised to be prepared for higher interest rates and higher feed costs, amid uncertain consumer demand and overall availably of product.
Farm Credit Canada Principal Economist Craig Klemmer says the swine sector, in particular, has gone through quite a wild ride.
Looking back, we had COVID disruptions, plant closures. That really hurt pricing as we saw some inventory buildup. As we saw that recovery, we saw some really good growth and some significant improvements in margins for the hog industry. At the same time those margins were offset partially because of higher feed costs.
I think we were sitting with quite a bit of optimism and then we got some news about the hog herd in China being near pre-pandemic levels and that’s been weighing down prices for producers so, moving forward, it’s a bit of a mixed story. There’s still a little bit of uncertainty about what that global supply of pork is going to be. I think there’s some skepticism about some of the numbers out there but it has impacted pricing.
If we look at where we are right now, I think the bottlenecks of processing have been removed so that’s a reason to be happy and optimistic. There’s still a very strong demand for pork domestically as well and there are still some disruptions out there that are creating opportunities for Canadian exports. I think there’s some things that we can be really happy about and, like with other sectors, there’s some things that are some watch out factors, high feed costs and trying to weigh what this overall global demand is going to look like and what are those true numbers of inventory out there.
~ Craig Klemmer, Farm Credit Canada
Klemmer says, while higher grain and oilseed prices will mean higher feed costs, we are current in terms of processing and there’s still fairly good demand for beef and pork domestically and internationally so there is reason to be optimistic. However, he says, when making future investments the potential impact of higher interest rates needs to be considered.
