Soaring costs erode pig profits


In the last six months the cost of raising pigs has soared. Hog producers are coping with massive feed costs, higher prices for pharmaceuticals, labour shortages, trucking shortages and bigger bills to heat their barns.


Hog prices were strong for most of 2021 and the healthy prices have persisted into 2022.


That’s the positive side of the story.


In the negative column, in the last six months the cost of raising pigs has soared. Hog producers are coping with massive feed costs, higher prices for pharmaceuticals, labour shortages, trucking shortages and bigger bills to heat their barns.


“We’re actually seeing pretty good pig prices right now,” said Darcy Fitzgerald, Alberta Pork executive director. “If you get a higher pig price but your cost of production matches (that increase), you’re no further ahead.”


As of mid-February, prices in Western Canada were trading around $210 per pig. That’s a huge jump from the summer of 2020, when prices were $130-$135 per pig.


But prices for feedgrains are at record levels, or near records this winter, thanks to the 2021 drought in Western Canada.


Fitzgerald estimated that prices are about 60 percent higher on feed barley, compared to 12 months ago in Alberta, and 75 percent more for feed wheat.


Alberta hog producers also import corn and soybean meal from the United States. Prices for those commodities are close to their highest point since 2014.


Twelve to 15 months ago, feed represented about 50 to 55 percent of the cost of raising a pig. Now it could be closer to 65 to 70 percent of the total.


It’s difficult to scrimp on feed, so producers have to absorb the additional costs. If feed prices were the only expensive item in the budget,they could probably find other savings to reduce the cost per pig.


But in the winter of 2022, it seems like all costs have risen.


In January, economicdashboard.alberta.ca reported that the price of natural gas had climbed 77.1 percent from November 2020 to November 2021.


“We use a lot of natural gas… to heat those barns,” Fitzgerald said.


“Electricity comes from natural gas, as well.”


The federal carbon tax, which is scheduled to rise in the coming years, will only push heating costs higher, and hog farmers will have to cover those costs.


Other prices have also spiked, seemingly out of nowhere.


“When we placed our last order to fill a certain prescription (for pigs) the bill was nearly 50 percent higher than when we ordered it just a while back, amounting to a few hundred dollars extra,” said Steven Waldner, a hog producer who farms southeast of Lethbridge. “We have also noticed other products doubling in price by weight.”


Then there’s the labour shortage. All farmers, including hog producers, are having to pay more for labour and spend more time finding workers.


A year from now, it’s possible that feed costs could be significantly lower for hog producers, assuming western Canadian and global crop yields return to normal in 2022.


But, in the longer run, producers could be stuck with higher prices for trucking, labour, medicines and heating.


That will affect the bottom line for years to come.


Since about 2020, Alberta Pork and other producer groups have been pushing for changes to the western Canadian pricing model, which determines what packers pay for pigs.


They have been asking for a system where the cut-out value from a pig’s carcass is shared more fairly between producers and packers. Farmers have made gains but the momentum behind that effort has slowed, mostly because the hog market has rebounded.


In the spring of 2021, George Matheson, former chair of Manitoba Pork and a hog farmer from Stonewall, Man., told his fellow producers to focus on what matters.


“One of the problems in the past… has been that our attempts to change the pricing system has been driven by emotion,” he said. “Let’s not stop our quest for pricing reforms just because prices have risen. A bad pricing system remains exactly that, regardless of how high prices are…. It’s a system that’s broken that needs to be fixed.”


Par : Robert Arnason (24/02/2022)

Source : producer.com (The Western Producer)

Photo : Archives | The Western Producer (tirée de l'article original)