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U.S. demand for Canadian pork seen stable

(Resource News International) — Exports of fresh, chilled and frozen pork products to the U.S. from Canada are expected to hold stable and could increase slightly in calendar year 2009 from levels seen in 2008.

But shipments of Canadian feeder pigs to the U.S. will be down significantly, according to an official with the Canadian Pork Council.

“U.S. demand for Canadian feeder pigs has been declining rapidly as no one wants them due to credit line issues and the implementation of COOL (country-of-origin labelling) rules,” said Martin Rice, executive director with the Ottawa-based CPC.

Tyson Foods, the one packer in the U.S. still willing to import Canadian feeder pigs, will only take them if a huge price discount is applied, he said. The price discount was linked to the COOL requirements.

“We are also hearing of major reductions in purchases of Canadian feeder pigs because importers cannot get assurance of credit from lenders,” Rice said.

“U.S. moneylenders are looking at anyone buying Canadian feeder pigs as a high-risk venture as they are unsure as to who these individuals will be able to sell the pigs to.”

Slower purchase pace

U.S. imports of Canadian feeder pigs from Jan. 1 to near the end of March totalled 1.13 million head, Rice said. During the same time frame last year, the U.S. had imported 1.68 million feeder pigs.

The U.S., during calendar year 2008, imported a total of 6.8 million feeder pigs, he said.

“Based on the purchase pace seen so far, sales of Canadian feeder pigs to the U.S. in 2009 could easily be down 40 per cent from 2008,” Rice predicted.

He also pointed out that without Canadian feeder pigs, U.S. processors will be looking at the possibility of having to deal with a lot fewer pigs, which has implications for the U.S. hog industry.

“With the shortage of pigs to work with, the U.S. processors are going to have to make a choice: either cut back in supplying their offshore export program or forget about being able to service the domestic sector,” Rice said.

Each U.S. packer will have to make its own choice on whether to supply the export or domestic sector, but at some point this will become a reality, he said.

“When the shortages occur, the U.S. market will then have to find other sources of supply,” Rice said. “When this occurs, more Canadian pork could be imported into the U.S.”

COOL became enforceable in late March and there were still quite a few Canadian pigs in the U.S. pipeline, he said. The U.S. supply of hogs is also currently robust and because of that, the supply shortage was not likely to start appearing until sometime down the road, possibly the May-to-July timeframe.

Big players benefit

“With the shortage of pigs for processors will come higher pork prices for U.S. consumers,” Rice said, noting that the only people who have benefited from the COOL rule are the big companies.

U.S. imports of fresh, chilled and frozen pork from Canada in calendar year 2008 totalled 307,000 tonnes, down from the 2007 level of 354,000.

“In 2009, U.S. imports of Canadian pork products will be about the same or possibly higher depending on when the shortages occur,” Rice predicted.

If U.S. processors decide to supply U.S. domestic needs instead of the export sector, Canada could also benefit from that decision as it was well positioned to cover any shortfall.

Canadian processors made the decision some time ago to not be as reliant on the U.S. market for sales and the move has paid off, Rice said.

“Canada used to ship well over 400,000 metric tonnes of pork to the U.S. at one point, which accounted for 80 per cent of Canada’s exports,” he said. “With only 307,000 tonnes of pork products going into the U.S. in 2008, that represents only 28 per cent of Canada’s export market.”

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