Hog farmers lay out “transition” proposal

Transition payments, adjusted advance payments and new loans to recover from international bad press due to the so-called “swine flu” are part of the Canadian Pork Council’s proposal for federal support from now through 2014.

The CPC on Monday rolled out a “Strategic Transition Plan,” which states that its proposal “respects the prudent role and capacity of government, while underscoring the primary responsibility of agricultural entrepreneurs to succeed or fail based on the merits of their efforts.”

Among other things, the plan’s view of successful restructuring in the hog sector includes substantial cuts in Canadian hog production, as well as in Canada’s level of exports of live hogs to the U.S.

“Producers know that in order to be profitable in future, they must be committed to change,” CPC chairman Jurgen Preugschas, a hog farmer from Mayerthorpe, Alta., said in a release Monday.

“They know that many of the fundamentals that resulted in strong growth in the past no longer exist but that new opportunities will arise. This plan outlines a roadmap to ensure the industry is still here to take advantage of those future opportunities.”

Hog industry leaders, according to the transition plan document, recognize that changes are needed “in both scale and strategy” to move to a business model that’s sustainable for farmers but can also supply Canadians with meat and processors with product for their domestic and export customers.

Specifically, the transition plan presented to federal Agriculture Minister Gerry Ritz Monday calls for a Hog Farm Transition Payment Program to aid producers for whom “simply exiting would mean a loss of everything they have — farm, house, animals.”

Such a program would differ from the federal government’s recent breeding sow cull in that producers who stayed in business are often “significantly worse off than those that exited.”

Such a transition program would need to be composed of a per-sow payment of $500, plus the market value of the animals. Animals would then go into the regular market and eligible producers would agree to keep the barns free of breeding animals for three to five years.

Such an initiative, the CPC said, would need to be retroactive to the end of the government’s original cull breeding swine program.

“Termed out”

The CPC’s plan also calls for adjustments to the Advance Payments Program’s emergency advances, which the council noted are now required to be repaid in September 2010.

“These loans need to be termed out over a 10-15 year period, allowing producers to manage the repayment schedule,” the council said in its plan. “In addition, by moving these loans off the Advance Payments Program balance sheet, a second year of emergency advances could be provided, and be available to producers regardless of whether or not they had used the initial advances.”

As well, the plan calls for H1N1 recovery loans, which the council said would need to correspond to the beginning of the H1N1 crisis in the industry and would be effective as of the second quarter (April to June) of 2009.

Eligible producers would be advanced a first draw on the program of $30 per market hog shipped in the first quarter of 2009; all subsequent payments would be based on the previous quarter’s shipments.

A formula would be established based on average of provincial cost of production, and for the third and subsequent quarters, producers would get a payment based on average provincial prices minus average provincial cost of production, continuing until average provincial prices return to pre-H1N1 levels.

H1N1 recovery loans would not be restricted by farm size, would be repayable over 10-15 years, would be subordinate to other loans and may require a farm plan, the council said.

“The criteria of the Advanced Payments Program is sufficiently restrictive, particularly caps, to preclude only its use in providing transitional financial support; hence the need for the H1N1 recovery loans,” the council said.

“The greatest threat that needs to be managed for the foreseeable future is consumers’ perceptions about the HINI virus flu pandemic,” the strategic plan warned.

“The summer of 2009 is only the commencement of an expected duration of many months (and) the issue of the pandemic will be at the forefront of news for an extended timeframe. Regaining consumer confidence, both domestically and globally, is vital.”

“Successfully restructured”

Beyond those financing plans, the CPC’s proposals call for strategic initiatives to support a “successfully restructured industry,” which the council said would include such characteristics as:

  • domestic disappearance of Canadian pork totaling 730,000 tonnes, up 150,000 tonnes from 2008;
  • exports of four million live hogs to the U.S., down 5.3 million from 2008;
  • total pork exports of one million tonnes, of which about 200,000 would be to the U.S.;
  • total domestic slaughter of 21.5 million head, down 200,000 from 2008;
  • reduced total production from 31 million pigs in 2008 to 25.5 million; and
  • domestic market share of 88 per cent, up from 75 per cent in 2008.

“It is understood that it is not in Canada’s interest to simply prop up the industry in an attempt to maintain the status quo,” the council said in its plan.

“However, it would be damaging to Canada’s interests in terms of its economic prospects and rural viability if the productive capacity of the Canadian hog industry was to implode.”

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