Alta. can’t produce lowest-cost pork: report

Alberta can’t, nor should it, try to win a race to the bottom as a low-cost pork supplier, the provincial hog farmers’ board proposes in a new report on the state of the industry.

Alberta Pork on Monday released a report, titled The Way Forward, as a discussion document on the current state of the province’s pork industry, working toward a revitalization program for the sector.

The province has many competitive advantages for livestock production, the report notes, such as its large land base and lower population density, favourable climate to produce both crops (including feed grains) and livestock, a base of competent and adaptable production management skills and “relative proximity” to export to China, the largest and fastest-growing market for pork.

“Nevertheless, building a competitive pork industry will require a dramatic overhaul of the entire industry if there is to be any probability of success,” the report summary continues, outlining four “core principles” as the basis of a revitalization strategy:

  • establishing marketing capability built on product quality, supply assurance and customer-focused strategies that are “long term and of mutual interest” rather than trying to compete on cost;
  • organizing and building a highly connected industry linking customers to processors and processors to producers, capturing maximum value and driving out “unnecessary system and hidden costs;”
  • securing “cost-competitive inputs,” particularly feed grains and labour, and establishing a feed grain sector that can compete with U.S. corn; and
  • operating within “a favourable business and political environment that facilitates market access, regulatory reform and long-term financing.”

The report pointed to four factors as causing the current financial crisis in Alberta’s pork industry, including the rising Canadian dollar; the escalating costs of inputs, especially feed; “intense” competition from the U.S. and its dominant, large-scale, pork production systems; and a lack of competitiveness in the packing sector, which in Canada remains as a cost disadvantage to U.S. processors, estimated as high as $12 per hog, thanks to higher costs and discounted prices.

“This strategy is about leading the industry in a new way, not simply managing the status quo, nor building on long-term financial support from government,” Alberta Pork chairman Herman Simons said in a press release Monday, launching the new report.

No silver bullet

“There is definitely not a ‘silver bullet’ or ‘one size fits all’ solution for pork producers who have individual needs and challenges,” said Simons, who farms at Tees, northeast of Red Deer. “There are clearly no easy or simple solutions and we know that not all producers are going to survive.”

Alberta hog producers will get a copy of the summary of the 180-page Way Forward report by mail and can ask Alberta Pork for a copy of the full-length version. This report, Simons said, is not the strategy itself so much as a backgrounder to build a realistic plan.

The report, he noted, looks at five different pork value chains as possible models of success, including Danish Crown (Denmark), Agrosuper (Chile) and three U.S. models, Smithfield, Seaboard/Triumph and Meadowbrook Farms.

To develop the report and the revitalization strategy, Alberta Pork has hired Toma and Bouma Management Consultants and the George Morris Centre, the Guelph-based ag think tank.

A similar type of summary will also be prepared for farmers when the consultants complete their final report on a new revitalization strategy.

The report follows Alberta Pork’s proposal to government last year for a biofuels offset program, which if accepted would provide tax-funded direct payments to producers to offset 50 per cent of the difference in feed grain prices due to U.S. and Canadian ethanol policies.

The province responded last fall with a $165 million transitional farm aid program to help farmers handle the rising costs of fuel, feed and fertilizers.

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