December 12, 2007 / 5:33 PM / 10 years ago

Hog farmers plead for emergency loan aid

WINNIPEG, Manitoba (Reuters) - Cash-strapped Canadian hog farmers asked federal and provincial governments on Wednesday for emergency aid to help them weather soaring feed costs and prices hurt by the strong Canadian dollar.

Producers need to be able to borrow money from banks and other lenders to bridge the gap between hog prices that have recently plunged to 85 Canadian cents (84 cents) a kilogram from the long-term average of C$1.35-C$1.50 per kg.

Many farmers have used up their collateral, and need governments to step in to provide emergency loan guarantees, said Clare Schlegel, an Ontario hog farmer.

“That would allow them to pay their feed bills and pay their vet bills,” said Schlegel, president of the Canadian Pork Council. “It’s not a major ask at all.”

Canada’s vast expanses of land and large supplies of cheap feed grain led producers to boost hog production by almost 30 percent from 1995 to 2005, making it the world’s third-largest pork exporter after the United States and European Union.

But the economics have since turned against them. Record high grain prices, caused in part by surging demand for corn in U.S. ethanol plants, have increased Canadian feed costs by 60 percent in recent times, Schlegel said.

Meanwhile, the soaring Canadian currency has also squeezed the country’s pork and hog exports, making the shipments more costly as they try to compete with comparatively cheaper U.S. product.

The Canadian dollar’s rapid climb in recent months topped out at US$1.10 in early November. It has since retreated, but remains close to parity with the U.S. dollar and was at 99 U.S. cents on Wednesday.

The higher costs come at a time when pork prices have reached a cyclical low, and banks and feed companies are wary about extending more credit to the sector’s 11,000 producers, Schlegel said.

“It’s huge, it’s significant, and the very best producers in the country will not survive long-term unless something changes,” he said.

Canadian pig numbers were down 3.1 percent as of October 1 from the previous year, according to Statistics Canada data, which Schlegel said was a significant drop.

Hog producers in Europe and Australia are also cutting herds. But world demand for pork is forecast to remain strong over the long term, so Schlegel said he is confident prices will bounce back.

“We need to still be in the game when these future markets grow and develop,” he said, noting hog farmers were slated to meet with federal officials on Wednesday and Agriculture Minister Gerry Ritz on Thursday.

The loans would be repayable, with interest, although Schlegel said not all farmers will be able to recover from losses. The loan guarantees would help some exit the business.

He said the program would not constitute a subsidy, but admitted he is worried that U.S. farmers will raise concerns about export dumping, given the poor prices and record Canadian exports into the U.S. market.

“We would simply plead with them to take a look at the numbers and be aware that, in this downturn, the American pig herd is maintaining its size, and the Canadian pig herd is shrinking,” Schlegel said.

($1=$1.01 Canadian)

Reporting by Roberta Rampton; Editing by Rob Wilson

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