The Rural Voice, 2005-06, Page 57PERTH 1!I*
County Pork Producers NEWSLETTER
Are we competitive?
Any opinions expressed herein may
not necessarily reflect the views of
the Perth County Pork Producers'
Association.
It's been a while since I've
contributed to this column, and after
reviewing some of my past articles a
common theme has developed. All 1
write about is business related to our
industry. Unfortunately after
spending days in the tractor
cultivating and planting, thoughts of
improving our competitiveness —
personally and as an industry —
dominate my thinking.
Two years have passed since the
exchange rate increased 20 per cent
in a matter of months. I would argue
that our industry hasn't been the
same since. NISA funds have been
liquidated by necessity, credit for
expansion has been harder to cone
by. and receiverships at Premium
Pork and Acre T have changed the
way financial institutions' view hog
sector lending (more on that later).
Suffice to say that our income would
be $40 more per pig with a 63 cent
dollar versus the current exchange
rate. That's $80,0(0 more net income
per year per 100 sows farrow -finish.
Many of us have waited for a
corresponding decrease in our cost of
inputs to help offset the declining
income, but to no avail. I challenge
all producers to find one input whose
cost has been reduced by the
exchange rate.
Eighteen months ago Maple Leat
announced their idea of a "new
normal" to the industry. It was their
attempt to rationalize the effects of
exchange rate on their operations.
Five months from now our operation
will feel those effects. As we roll
from our current price formula (102.5
per cent) to the new normal (100 per
cent) and also undergo a grading grid
change with reduced premiums, our
income will drop approximately $5
per pig. I'm not sure if I'm supposed
to be delighted they are no longer
offering multi-year contracts. It
Russ Danbrook, President
519-356-2385
The Rural Voice is provided to Penh
County Pork Producers by the PCPPA
seems when you are a price taker. the
ability of others to negatively
influence both sides of the balance
sheet leaves the primary producer in a
dilemma.
As many of you know, I've been
to the midwestern states three times
in the last three months. Skeptical of
reports of record profits of U.S.
producers, 1 wanted a first hand
insight into their business. All the
following comparisons are in
Canadian dollars. Corn and soymeal
have been consistently priced $20
and $35 per tonne respectively lower
than Ontario. In fact soymeal could
have been booked last fall for 2005 at
$212/tonne. All other feed
ingredients such as limestone. dical
and others are routinely five to 15 per
cent cheaper. Those producers have
access to paylean (to improve feed
conversion and lean deposition) and
mecadox — both products unavailable
in Canada. Also common
mycoplasma vaccines cost 85
cents/pig less and the ability to
import those 'accines for your own
use will he terminated this fall.
On the revenue side. we are not
receiving U.S. price equivalency.
period. Taking everything into
consideration we are behind at least
$15/ pig. In short. a top Ontario
producer would struggle to compete
with an average American producer.
I had the opportunity to meet with
some U.S. bank managers and
discuss the ability of their clients to
survive the next downturn in the hog
cycle. One manager (who has some
small accounts marketing less than
20.000 hogs/year) believed that 30
per cent of his clients would he
operating from a cash position by the
end of 2005. This contrasts with
what's taking place in our industry
Many hanks are not interested in
growing their hog portfolio. and in
fact some producers are being de -
marketed. "We'll make the producer
an offer he can't accept" was one
hank's method of Dealing with
marginal accounts.
My sense is we are in the calm
before the storm. Sure we're getting
5175/pig now hut there are no
forward contracting opportunities for
this fall. Input costs have not dropped
to reflect exchange rate. and
meanwhile our competition continues
to get stronger. Hang on for the wild
ride ahead if demand begins to falter.
Finally. as many of you know. a
friend and fellow producer Bert
Groenestege. has been hospitalized
for the past sesen weeks. It's during
these difficult times that producers
Falb to assist one another during their
time of need. We pra) for a speedy
and health s recovery and look
forward to our return to your
community.:
- .Submitted by Phil.4nire+side,
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 • Vittono's BBQ Sauce
AVAILAdi F FROM.
Steve Hulshof (Kinkora)
Walter Bosch (Monkton)
Ted Keller (Mitchell)
348-8167
356-9000
348-9836
JUNE 200x:• 4