The Rural Voice, 2004-04, Page 73•
PERTH folk
County Pork Producers NEWSLETTER
Pat Louwagie, President
519-393-6424
The Rural Voice is provided to Perth
County Pork Producers by the PCPPA.
Any opinions expressed herein may
not necessarily reflect the views of
the Perth County Pork Producers'
Association.
It was suggested that my first
article for this magazine should be a
summary of the Forum For The
Future and the Ontario Pork AGM
held recently in Toronto. David Kohl
was the keynote speaker at the forum
and challenged producers to think
outside the box. Realizing that
commodity prices are set globally,
but input costs are set locally, farmers
have to determine if they are staying.
growing, or leaving their business.
His research suggests that an annual
five per cent growth in net income is
necessary for those producers who
wish to grow in their business. •
The mood at the AGM was
depressing. Rising feed costs,
exclusion of meat and bone meal
from hog diets, threatening U.S. trade
action, strike possibilities at Maple
Leaf, and the devastating effect of the
rising Canadian dollar are all serious
issues that, taken by themselves,
are demoralizing. Put them all
together and you get the sense that
many producers are about to give up.
That is my summary of those two
days.
What I really want to talk about is
managing in the "new normal". A
couple of months ago I did an annual
review of our cost of production
(COP) and found that even though
our income per pig had dropped 20
per cent because of our rising
currency, the cost of our inputs had
not fallen accordingly. We sent
letters to all our suppliers (with a
cheque for 80 per cent of our
outstanding invoice) requesting an
immediate decrease in our cost of
their supplies or services. The
responses ranged from deep concern
to profane outrage. Needless to say
we got their attention, but I sense I'm
alone in this battle and I know 1 can't
win.
The common theme was "... it will
turn around, it always does, so just go
Thinking outside the box
back to the barn and produce more
pigs if you want to lower your COP".
My belief is that's what got us in this
mess to begin with. After two years
of $1.40/kg, it's apparent where the
industry COP is. You can only hide
from depreciation for so long, and
unless this industry gets serious about
real cost reduction we're in trouble.
The cost of genetics,
pharmaceuticals, feed additives, and
barn construction must fall if we are
to maintain a margin which allows us
to reinvest in Ontario.
David Kohl's challenge to think
outside the box. and a recent article
about Smithfield written by David
Kruse of CommStock Investments (a
U.S. advice service), are two events
that convinced me that we need to do
things differently at Ontario Pork.
Challenged with reducing feed costs,
Smithfield invited 31 feed
manufacturers to a meeting and told
them what Smithfield was prepared
to pay for toll milling and delivery -
$8 U.S./ton. There was no margin on
soy. no elevation on corn, and
pricing allowed for .5 per cent shrink.
1 thought I had a good deal in Ontario
for $25/tonne.
Ontario Pork has done a good job
of marketing the collective clout of
its producers, but the bigger
challenge would be to create an inner
circle (similar to Smithfield) where
potential suppliers will have to
respect our need to maintain margin.
Our Chair, Larry Skinner, has
reiterated time and again that he does
not want the Ontario pork producer to
go the way of the Alabama chicken
farmer who gets paid a mere few
cents per bird. If David Kohl is
correct that prices are set globally and
costs are set locally, it may be time
for producers to act collectively to
drive costs down. Our business is one
of the few where suppliers know
more about our COP, and as a result
our margin. than we know of theirs.
The prices of Tylan. Roundup.
Pioneer Seed. or Respisure, to name a
few, have not fallen to reflect the new
normal. On a recent trip 1 met a
producer from Wisconsin whose cost
for M+Pac (a mycoplasma vaccine)
was 47 cents per pig less than mine.
That alone will cost Ontario $2.5
million per year.
Now. before you relegate this
column to the garbage can. thinking
that all 1 want is to start a huvirig
group, think again. With our industr
in crisis we have the opportunit„ to
meet with suppliers en force and
demand that their margins come
under scrutiny. It's time to recognize
that our need to make margin and
true return on equity for our
shareholders is.what's important.°
— Submitted by Phil Amt ender
PERTH COUNTY PORK PRODUCERS'
PORK PRODUCTS
• Smoked Pork Chops • Fresh Pork Chops • Stuffed Loin Chops
• Smoked Sausage • Smoked Cheddar Sausage • Bacon Burgers
• Teriyaki Pork Steaks • Vittorio's BBQ Sauce
Steve Hulshof (Kinkora)
Walter Bosch (Monkton)
Ted Keller (Mitchell)
AVAILABLE FROM:
348-8167
356-9000
348-9836
APRIL 2004 69