July 6, 2009 / 9:18 PM / in 8 years

Canadian hog industry seeks government rescue

SASKATOON, Saskatchewan (Reuters) - Canada’s struggling hog industry has asked the federal government for C$800 million ($690 million) a year in aid to help rescue it from its worst downturn in decades, as prices tumble and export markets close their doors due to the H1N1 flu outbreak.

<p>Baby pigs in their pen on a small farm outside of Calgary, Alberta, April 2, 2009. REUTERS/Todd Korol</p>

Hog farmers will need the extra help just to meet drastically reduced industry targets over the next five years, the Canadian Pork Council said on Monday, after presenting its plan to Agriculture Minister Gerry Ritz last week.

The council is asking for federal loans of C$30 per hog to ease the sting of lower prices, as well as aid for farmers looking to get out of the hog business.

At present, farmers are selling slaughter-weight pigs for between C$120 and C$140 each, generating a significant loss, given costs of C$160 to C$180, said Stephen Moffett, a hog farmer in the eastern province of New Brunswick and an official with the Pork Council.

“If nothing is announced very very soon, we see a tremendous amount of loss of production,” Moffett said.

“We don’t want to see catastrophic losses. If the industry is going to downsize, which it already is, let’s control it a bit. Let’s try to make sure we don’t lose so much in any one region that you start to lose abattoirs (and) feed mills.”

The five-year loan program could be worth C$800 million annually, Moffett estimated, based on slaughter rates.

The Pork Council had initially asked the government for an outright payment per hog, but Ottawa is sensitive to trade complaints over subsidies, Moffett said. Loans would at least help farmers find credit that has become scarce since the start of the recession, he said.

Hog prices have been low for several years, but more so since spring, when more than a dozen countries banned Canadian pork products or swine after an Alberta pig herd became infected with the H1N1 virus, also known as swine flu.

Pressure on the industry has grown in recent years as the circovirus killed off many animals, a rising Canadian dollar squeezed export markets, feed costs shot up with higher grain prices, and, as of late last year, tighter U.S. food labeling laws took effect.

The Pork Council is also asking Ottawa to allow farmers more time to repay loans from an earlier assistance program and make changes to it, such as raising the cap.

Farmers getting out of hog production would get a C$500 per sow premium from the government on top of market value of their animals, under the Pork Council proposal.

Agriculture Minister Ritz said on Monday his department is studying the Pork Council’s proposal.

“We’re committed to delivering stable, bankable programs that work within trade agreements to make sure Canadian farmers can export their products to buyers around the world,” Ritz said.

“There’s no doubt the Canadian pork industry is going to have to adjust to new market realities and we’re going to keep working with producers themselves to make the transition as smooth as possible.”

Even with help from Ottawa the council projects a vastly downsized industry by 2014.

It hopes to see exports of at least 4 million live hogs to the United States, where packers are buying less from Canada because of the new country of origin labeling rules. In 2008, Canada shipped 9.3 million animals south of the border, its top market for live pigs.

The pork council sees total hog production declining to 25.5 million by 2014 from 31 million pigs in 2008.

($1=$1.16 Canadian)

Editing by Rob Wilson

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