When Herman Simons crunches the numbers, the bottom line is anything but positive.
Last week, said the chairman of the Alberta Pork Producers Development Corp., hog farmers were earning about $1.15 per dressed kg of meat. That’s well below the $1.80 that many were hoping to get at this time of the year — when the market is usually at its peak — and about 30 cents less than their break-even point.
The consequence, said Simons, is producers are losing $30 to $40 an animal. And with income statements in the red for much of the past three years, many are pondering their future.
“When I started farming in 1992, there were about 1,600 to 2,000 farmers,” said the Tees-area producer. “Right now, we’re down to a little over 400.”
The difference now is that the fate of many operations is no longer in the hands of their owners.
“Right now we’re at a point that the people who are quitting, it’s predominantly foreclosures.”
Simons acknowledged that the decline in the number of pork producers has been accompanied by an increase in the size of the operations that remain. But, he pointed out, only about 2.5 million Alberta hogs are expected to be processed this year — about a million fewer than just a few years ago.
The effect of a shrinking pork industry extends well beyond the pig barns. If hog numbers continue to dwindle, the viability of Olymel’s pork processing plant in Red Deer will come into question.
“All of a sudden, the farmers here in Alberta won’t have their major market that they’ve always been shipping to,” said Simons of the worst-case scenario of the Olymel plant closing.
“What do we do then? There aren’t enough provincial processors that are capable of picking up the volume that is required for processing, so we would have to go to the States at a discount even compared to what we get now. That will just mean that more farmers will have to close their doors.
“It will be a spiral effect and it will have a major impact on the economy of Red Deer,” said Simons, pointing out that Olymel is the city’s biggest private sector employer, and the pork industry supports a broad range of suppliers and other businesses.
“It’s going to have a major wave effect on the whole economy of Alberta.”
Alberta pork producers’ woes reflect the convergence of several adverse factors.
The strong loonie has made Canadian pigs and processed pork less attractive to foreign buyers, and high grain prices have pushed up feed costs. More recently, country of origin labelling requirements in the United States have made Canadian agricultural products less attractive, and the concerns related to the H1N1 influenza outbreak have undermined global demand for pork.
“When H1N1 hit we were at break even,” said Simons, noting how pork prices tumbled thereafter.
The plight of the pork industry and the potential repercussions has been noted by the Red Deer Chamber of Commerce.
In May, it sponsored an Alberta Chambers of Commerce resolution calling for government action against country of origin labelling requirements. The Chamber plans to present a similar resolution at the Canadian Chamber of Commerce’s annual general meeting in October.
In recent weeks, the Red Deer Chamber has also been lobbying provincial and federal politicians to provide financial support to the pork industry.
“We’ve sent letters to every MLA in Alberta,” said Chamber president Mike Axworthy.
The local Chamber has also written Prime Minister Stephen Harper, federal Agriculture Minister Gerry Ritz and Ritz’s provincial counterpart, George Groeneveld. Federal officials said they’re looking into the situation and Groeneveld indicated that his government is pressuring the Canadian government to take action, said Axworthy.
Red Deer MP Earl Dreeshen is also supportive, he added.
The Chamber would like to see a “trade-neutral production/processing fund” established, with money provided immediately to get the industry through its current crisis. Axworthy thinks the pork industry is at a point where there could be a “landslide” of producers leave to the detriment of the local economy.
“The agriculture industry really plays a big role in supporting a lot of businesses.”
Simons welcomes the Chamber’s support.
“I think a lot of people have heard that there are problems in the industry. I don’t think that they’re fully aware of how big the issue is and what effect it will have in a very short basis.”
hrichards@www.reddeeradvocate.com