Justin Shepherd, senior economist with Farm Credit Canada, told a number of pork producer meetings recently that the outlook is for improvement by spring, but that’s coming from a position of losses for both hog producers and pork packers.
Hog producers can anticipate a return to profits by May and continued slow improvements as the year unfolds.
Part of that is because feed costs are coming down because corn prices are declining. But soybean meal costs are holding steady as soybean prices hold up because of strong demand for vegetable oils for biofuels, he said.
He spoke recently to zone meetings for Huron, Perth, Waterloo, Wellington, Grey/Bruce and Simcoe/York.
He said the Canadian economy is weak and likely to stay that way while the United States is on the rebound.
He expects the Bank of Canada will begin to ease back interest rates in the summer, but about three million Canadians whose mortgages will come up for renewal this year and next will still be facing substantial increases when their five-year deals expire.
That will curb consumer spending and have an impact on inflation.
On the other hand, the labour market remains tight and wages are increasing which usually results in greater spending and pressure on inflation.
He said the Bank of Canada will be keeping a close watch on wage rates and the United States monetary policy.
He warned that if Donald Trump wins election in November, he is likely o follow through on his promise to increase tariffs on everything. That will directly impact Canadian hog and pork prices.
He said Canadians have been buying more pork, not because they prefer it, but because beef is too expensive. That’s why the technical demand for pork is running lower than actual consumption. Both pork and chicken inflation rates were lower than the overall inflation rate for food last year.
He said the food price index will be increasing at a lower pace, but not to expect a decline.
While Canadian consumption of pork is good news, about 70 per cent is exported and a big customer, China, is producing so much of its own that it is in a sharp sow culling phase. It ramped up production capacity after African Swine Fever forced a sharp reduction in the national herd – some estimate as much as 50 per cent – and nore has more production capacity than needed.
The United States remains Canada’s prime pork export market followed by Mexico which takes 12 per cent. Shepherd said the pork industry needs to seek more export markets and there’s potential to the west because of the Trans-Pacific Partnership trade agreement.
