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COOL Expected to Result in Contract Renegotiations

by 5m Editor
29 April 2009, at 12:30pm

CANADA - The Manitoba Pork Marketing Cooperative expects the full impact of US Country of Origin Labelling to become more evident as Canadian pork processors begin re-negotiating contracts, writes Bruce Cochrane.

Mandatory US Country of Labelling along with calls for additional voluntary labelling measures have virtually eliminated the US market for Canadian butcher hogs.

Manitoba Pork Marketing Co-op CEO Perry Mohr says the number of Canadian slaughter hogs moving south has dropped substantially.

Perry Mohr-Manitoba Pork Marketing Co-op

We were probably averaging two thousand a week last year.

Now we're probably averaging 400 to 600 per week.

Those hogs are not flowing into what I would call the A markets, they're flowing into the B and C markets so the actual revenue that you're deriving out of those sales is less than you normally would have.

Not only from a pricing perspective but from a freight perspective, we're having to go further to find markets that will buy our pigs so it's having a detrimental impact.

I think the real crux is going to come when Canadian packers start to analyze the impact of the fact that producers in Canada have fewer options available to them.

The fact of the matter is that most producers that have had long term relationships with a Maple Leaf or a Springhill or an Olymel price their hogs on a formula that, typically the contract lasts anywhere from one to three to five years.

So most of the producers that are in a farrow to finish type situation in Canada that have been selling hogs to Canadian processors have one of these one to three to five year agreements and there's been no impact on those hogs.

Like I mentioned earlier some of these contracts will expire this summer and the packers will have the ability to adjust those formulas and speculation would suggest they're not going to be increasing the price.


Mr Mohr says it will be interesting to see how Canadian processors respond as contracts come up for renewal.