August 15, 2009 / 5:40 PM / in 8 years

Canada to spend $75 million to shrink hog production

WINNIPEG, Manitoba (Reuters) - Canada will pay some farmers to stop raising hogs and offer loans to help others restructure, assistance that drew praise from Canadian hog farmers and concerns from a top U.S. farmer group.

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

Agriculture Minister Gerry Ritz announced the assistance for the reeling industry on Saturday.

“We know Canadian hog producers can become profitable again, but we have to face tough realities to make our pork industry lean and competitive,” Ritz said at a university farm research center.

The government will ask farmers to bid for funding totaling C$75 million ($68 million) to stop hog production for at least three years. Farmers have complained that they lose C$40 per hog they sell because of high feed costs and weak prices.

Banks will offer long-term loans at market rates backed by government credit to allow viable hog farms time to restructure. Short-term credit will also be available for operating costs such as feed and payroll.

“We think it’s going to make a huge difference,” said Jurgen Preugschas, president of the Canadian Pork Council and a hog farmer in the western province of Alberta. The loans will give some farmers the liquidity they need to stay in business, while allowing other farmers to halt production, he said.

HOG INDUSTRY CRISIS

Canada’s hog industry faces its biggest crisis in 60 years, with high feed prices, a buoyant Canadian dollar and a U.S. food-labeling law.

Export bans, by some countries over fears about the H1N1 swine flu virus, prompted about 1,000 hog farmers, or 11 percent of Canada’s total, to leave the industry in the past year [ID:nN28158619].

The Canadian Pork Council had asked for repayable loans estimated at C$800 million annually based on each hog farmers market to compensate them for lower prices due to H1N1. They also asked for a premium of C$500 per sow slaughtered to encourage downsizing of the industry.

Government loans are a concern to the National Pork Producers Council which represents struggling U.S. hog farmers, Nick Giordano, the council’s vice-president, said in an interview from Washington.

“Producers can’t get bank loans, so the Canadian government is stepping in. That’s clearly a subsidy,” said Giordano. “Money is flowing to producers that wouldn’t otherwise. That’s a concern to U.S. producers.”

The council will wait to see details of the assistance -- especially the size of loans available -- but is keeping all options open, including lobbying the U.S. government to take trade action, he said.

The Canadian government has not capped how much it will spend on the loans, Preugschas said.

He said it is unclear how much production the Canadian government can remove with C$75 million, but the Pork Council’s target is an 18 percent reduction in total production to 25.5 million pigs by 2014.

Canada typically ranks 7th or 8th in world hog production.

The government also announced it will establish a C$17-million fund to find new customers for Canadian pork.

The assistance isn’t enough, said Wayne Easter, agriculture critic for the Opposition Liberal Party. “You can’t borrow yourself out of debt,” he said of the loans.

However, he added that funds to reduce hog production are a step in the right direction.

The National Pork Producers Council will call on the U.S. government on Monday to help its own hog farmers. It will ask the government to buy up surplus pork to support prices, but not to offer loans, Giordano said.

Editing by Chris Wilson

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