Canada’s struggling pork industry plans to restructure

EDMONTON — As Canada’s hog industry teeters on the brink of collapse, producer Herman Simons is thinking about his children and trying to be optimistic about the coming year.

EDMONTON — As Canada’s hog industry teeters on the brink of collapse, producer Herman Simons is thinking about his children and trying to be optimistic about the coming year.

Simons moved to Canada from Holland 21 years ago with only two suitcases and a dream of owning his own hog farm. Working hard and encouraged by governments to expand, Simons saw his operation near Tees, Alta., flourish as he and other Canadian producers put pork on dinner tables around the world.

But over the last three years thousands of hog farmers have been driven out of the industry by low prices, high production costs, protectionist U.S. trade rules and, more recently, by the effect of H1N1 on pork markets.

Simons and other producers who have toughed it out aren’t making money but are determined to come up with a strategy that will allow their once thriving industry to bounce back. Or at least survive.

“We have to crawl out of the hole and there will still be a few months of losses,” said Simons, who is chairman of Alberta Pork.

“China has reopened its market — that is positive — and the prices are slowly creeping up, although not fast enough for a lot of producers. We have to do things differently.”

Producer groups such as the Canadian Pork Council and Alberta Pork are trying to restructure the industry so it can compete in the face of a strong Canadian dollar and high feed costs.

But competing on price alone is no longer an option, they say. The long-term plan involves transforming the country’s pork from a mere commodity into a recognizable brand.

The idea is to showcase the high quality of grain-fed Canadian pork, which is firmer, less fatty, has a better texture and is produced under better health safety rules than pork in other countries. The hope is that consumers will pay more for a better product.

Such an image remake takes time. The challenge is to ensure that pig farmers survive in the shorter term.

In 1986, there were more than 36,400 hog producers in Canada. By the end of this year, that number will be down to about 7,000. Most of the remaining producers are running larger farms, but even the big operators are going out of business.

The federal government is encouraging some producers to get out of the industry for at least three years by offering a buyout program that allows them to keep their homes and their farms.

Earlier this fall, the first batch of 75 farmers was approved for buyouts worth $10 million. Another 500 producers have applied for the second phase, worth $24 million. A third phase is expected in January.

Ottawa has also announced a program to guarantee bank loans to producers who want to hang on until the market climbs out of the deepest trough anyone can remember. The guarantees could cost taxpayers up to $400 million if all the loans were to default.

Industry leaders are watching the loan program closely to ensure that it delivers the help politicians have promised. There are reports that some producers are having a hard time getting the money from banks and credit unions.

“The chartered banks have to do tests on the farms as far as viability, and right now there is not a single farm that can show viability because we are losing money,” Simons said.

Jurgen Preugschas, chairman of the Canadian Pork Council, said part of the long-term plan must involve producers working more closely with retailers and meat packers.

Preugschas said the industry must be changed to ensure that producers get a better return for their pork. That could involve owning or having a financial interest in processors and retail outlets.

Provincially based producer groups must also be willing to help develop a national Canadian pork brand that will register with consumers in other countries, he suggested.

“No single province is big enough to roll out their own thing. When you travel to a place like Japan they don’t talk about Manitoba pork or … Alberta pork. They talk about Canadian pork.”

The industry also wants to expand exports to growing markets such as India, South Korea and Columbia. There is also a plan to encourage consumers to buy Canadian pork instead of cheaper meat from the United States.

Simons warns that if Canada’s pork industry doesn’t achieve a successful makeover, the result will be even fewer hog producers and pork processing plants.

He frankly admits he won’t encourage his children to get into the hog business.

“To be quite honest, at this point I would tell them it would be probably better to look outside (the industry) first, because we don’t know if we are going to be around next year.”