Higher U.S. hog supplies, increased feed costs and improved domestic demand for pork are among the key factors influencing the profitability of Canadian pork producers.
As a result of the significant impact of Porcine Epidemic Diarrhea on U.S. hog supplies one year ago, U.S. hog numbers continue to trend about 11 percent above year ago levels resulting in considerably volatile hog markets.
Tyler Fulton, the director of risk management with h@ms Marketing Services, says numbers are trending higher than what was anticipated and, even as recently as the June Hogs and Pigs Report, the USDA didn’t suggest we would be looking at hog supplies quite this high and that has put pressure on the market.
Producers in Canada are generally profitable. There is possibly a bit of a squeeze that could come later this fall as prices decline as they typically do at that time of year but also partially due to higher feed costs that we expect, largely because of the drought that was throughout a large portion of western Canada.
Those two factors are going to tighten things up and could send profit margins for producers into the red for some period of time and probably for most producers but it will be relatively short lived I think and next year is already shaping up to be, I think generally, a profitable year.
Fulton notes the domestic U.S. economy been performing better than it has in recent times, that has translated into some better domestic demand for pork and the demand side has probably been from where the strength has come.
He points out Canadian producers have benefited hugely from the exchange rate moving the way it has and the low dollar has probably made the difference between being competitive and profitable in Canada while U.S. producers have probably been struggling a bit.
