Lean years: Hog farmers weary as 'perfect storm' persists

When Manitoba hog farmer Lauren Wiebe joined hundreds of fellow pork producers at an emergency meeting in Morris, he just wanted to find some solutions and maybe a little support.

Like many farmers in the ailing Canadian hog industry, the owner of a 10,000 farrow-to-weanling operation in the southeastern town of Grunthal is suffering from the perfect storm — a combination of factors that's seen the industry hit by 2½ years of straight losses.

"I'm on my knees an awful lot more praying for witty ideas and new opportunities to develop," Wiebe says.

While other provinces have held rallies to boost pork industry support, the Manitoba Pork Council took an unusual step by calling the June 22 meeting.

Held on the stampede grounds in the southeastern town of Morris, it was a sombre affair attended by everyone touched by the ailing industry, including farmers, veterinarians and representatives from feed and trucking businesses.

And though it was a chance to hear from politicians and meet with other producers in the same situation, it was also an opportunity for some farmers to learn about an issuing burning at the back of their minds: how to get out.

Gerry Friesen, a mediator with the Manitoba Debt Review Board, was allotted the largest chunk of time so he could inform producers about the steps they can take to restructure debt or plan for bankruptcy or foreclosure.

At the very least, he wanted farmers to know his door was open. "Talking to people always helps," he says, noting that he, too, suffered from compounding financial troubles that eventually caused him to leave the industry two years ago. Calls have since multiplied.

Worst crisis in decades

Wiebe has been busily seeking out new clients for his baby pigs, once valued at $38 each but now worth $10 to $15, but even the minor successes he's had were not enough to prevent cutbacks. He has laid off a fifth of his employees — nine of his 45 workers.

"It was tough," he acknowledges. "We classify ourselves as a family, and we're a family-owned farm and our employees are like extended family to us."

He's one of the lucky ones so far. More than 3,300 hog producers have exited the Canadian industry since 2006, just before the troubles began, leaving 8,310 hog farms as of April 1, 2009.

"We are in the middle of the worst crisis that I've ever seen in the 30 years since I began raising pigs," said Karl Kynoch, president of the Manitoba Pork Council. "This thing has gone beyond a financial crisis. It's into a human emotional crisis even."

The federal hog industry group, the Canadian Pork Council, goes even further, characterizing it as the "worst circumstances of the last 60 years" and a situation that threatens "imminent catastrophic implosion."

The council is lobbying for Ottawa to fork over emergency loans to help farmers stay afloat and a buyout program to help those who want to exit the struggling industry. Under the $800-million proposal, farmers would receive loans to cover losses during the H1N1 influenza crisis, while producers agreeing to leave the industry for three to five years would be paid $500 per sow on top of market value.

There's been no federal government response yet to these latest requests.

H1N1 extends woes

Without help, the council forecasts "tremendous" economic losses.

"I think we have the potential to lose another 50 per cent of our industry, which translates to about 42,000 jobs across Canada and probably some $7 billion in economic activity," Canadian Pork Council president Jurgen Preugschas says.

An untimely confluence of troubles is responsible for the industry's woes. The Canadian dollar's appreciation lowered the prices hog farmers received, an ethanol subsidy in the United States caused their grain costs to rise and a worldwide economic downturn added to the pains.

Red-tape troubles for meatpackers due to labelling legislation in the United States — called country-of-origin labelling, or COOL for short — also slowed to a crawl Canadian exports of live hogs to the U.S., where they are finished and slaughtered.

But it was H1N1 influenza, dubbed swine flu by some media outlets, including the CBC, that prolonged the crisis.

"Producers could've made some money this spring and summer. It wouldn't have stopped the erosion, but for some it would've helped them survive. But H1N1, it just completely took out any hopes of a spring rally," says Kevin Grier, a market analyst for the agri-food think tank George Morris Centre.

A number of countries closed their doors to Canadian pork when the new swine flu was detected in hogs on a central Alberta farm in late April.

Many were small importers of the Canadian meat, but Russia — a large market — pounced on the opportunity since it's building a hog industry of its own, Grier says. China, too, banned Canadian pork but only from Alberta, which represents a fraction of Canada's hog industry.

Even maintaining an appetite for pork at home could do little for the industry, since exports — worth a hefty $2.7 billion, according to 2008 figures — represent a large proportion of revenues.

Finding a solution

"We are losing producers on a weekly basis," sighs Kynoch of the Manitoba Pork Council.

Most concerning for him are the farmers in their 60s who stood on solid financial ground three years ago but now stand to lose everything, including their homes, which are often tied to the farm. "If they shut down today, they have nothing. They have lost their savings, their retirement, everything."

In Manitoba, the number of hog producers has fallen to about 800 from 1,400 three years ago, a 40 per cent drop. Though Kynoch notes that the true figures won't be known until "the smoke clears."

Maritime provinces have been particularly hard hit, with Nova Scotia's hog industry dropping from 90 farms to a mere 13, according to Statistics Canada.

A solution is far from simple. The industry essentially needs a controlled trimming of the fat, allowing pork producers to leave a now congested industry to reduce supply.

"Ultimately, what happens is the pork supplies go down, prices goes up and the industry returns to profitability," market analyst Grier says.

But he warns that though loans and buyouts would appear to help farmers weather the storm, any benefits could be quickly stripped away.

"The flip side of the coin is the Americans are aware of this, and as soon as we do it… I strongly believe that they will slap a tariff on our hogs and on our pork.

"The Americans are frothing at the bit already," Grier says, pointing to the U.S. National Pork Producers Council.

Profitability by next year: expert

The U.S. group has accused its Canadian counterpart of seeking a "bailout" that would have a "lethal impact" on American pork producers by shifting financial pain south of the border.

And the Canadian Pork Council has shot back at the U.S. organization, taking aim at its new food labelling rules, which caused a painful drop of 36 per cent in live hog exports to the U.S.

"We were disappointed in their reaction. A lot of what we are experiencing is due to actions taken by the United States, in terms of the COOL legislation. For them to argue that [is]… basically speaking out of both sides of your mouth ," said Preugschas, the council's president.

But the truth is Canada can't reduce its hog numbers alone. A North America-wide plan is needed.

And the harsh fact remains that with or without help, a continued exodus is likely. Only then will the industry see a ray of sunshine.

Market analyst Grier predicts that the industry will see "some semblance of profitability" return by next year, but by 2011 the hog industry will be about 20 per cent smaller than its 2005 peak.

Wiebe, though, has no intentions of becoming one of the casualties.

"We've been involved in [hog farming] for last 28 years. It's become a way of life. It's become a way to raise your family. And it's just something that's ingrained in me. I am a farmer."