Canadian Feeder Pigs to US Producers

The Canadian swine industry continues to shrink in size. We won’t know the exact numbers of pigs until the results of the July 1 inventory count is released by Statistics Canada in late July. However, we are seeing the impact of their financial woes in the US.

There has been a sharp drop in the number of Canadian SEW and feeder pigs crossing the border so far this year compared to previous years. In 2010, 2011 and 2012, the number of Canadian pigs per week thru the first week of June averaged 90,019, 90,285 and 92,307 pigs per week. For the same period this year the number has fallen to 81,456 head per week, a marked reduction.

So far this year, we are averaging almost 10,000 fewer Canadian born pigs per week growing to slaughter in our production facilities. Some would argue this is good for the US industry and it expands shackle space access for US born pigs. Others will say the loss of the high health and good doing Canadian pigs keeps upper Midwest producers from utilizing their production facilities to their fullest extent.

I suspect 3 primary reasons for the decline in Canadian feeder imports. The on-going confusion regarding the final settlement of the Country of Origin Labeling World Trade Organization case has had an impact on which plants will accept Canadian origin pigs. The new COOL labeling regulations with 3 categories of products for US plants has many processors unwilling to accept Canadian pigs until the issue is finally settled in the WTO court.

A second reason is the strength of the Canadian dollar relative to the US dollar. In March of 2009, the exchange rate $1 US for every $0.7785 Canadian. This morning the rate is $1 US for every $0.9813 Canadian. It’s great for Canadians to purchase our goods and services but the sale of their goods into markets versus our goods and services is now at a competitive disadvantage.

If I am a Canadian producer getting $35 per weaned pig delivered in the US, in 2009 this converted to $41.52 Canadian. Today it converts to $32.61 Canadian. This is a $9 Canadian decline per pig just because of currency exchange rates.

Finally, feed grain prices in Canada are as high as they are in the US. Like US producers, many Canadian producers are examining their production and price risk options, with many deciding to exit the industry.

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