Canadian Hog Farmers Take Cash to Slash Herds

Reuters reports that the downsizing represents 4.9 per cent of Canada's hog breeding stock and 3.3 per cent of the overall herd of 11.85 million hogs.

That reduction reflects only those farmers whom the government has agreed to pay to downsize. Many others who couldn't sustain losses while waiting through the application process have voluntarily closed their barns, said Martin Rice, executive director of the Canadian Pork Council.

"I fear we're seeing a lot more exit from the industry outside of the (government) program than I would have expected," Rice said in an interview on Wednesday.

The Canadian government is offering C$75 million (US$70.8 million) to encourage farmers to cut production. The hog industry has struggled from years of low prices, a volatile Canadian dollar that hurts exports and the United States food-labelling law that has slashed Canadian hog shipments to their biggest market.

Farmers bid for the funds through a process administered by the Pork Council, with the lowest bids per animal accepted first. The second tender finished earlier this month, bringing the total government funding committed to C$35 million for 190 farms.

More farmers are bailing out because a separate loans program, guaranteed by the federal government, appears to be worth less than first expected, Rice said. Lending institutions have proven more risk-averse and have rejected a large number of applications, he said.

As a result, farmers should surpass the Pork Council's target of dropping to 1.3 million breeding hogs by 2014, Mr Rice said.

A key goal of the industry downsizing is to support hog prices. But the strength of the Canadian dollar against the US currency has weighed against prices for Canadian farmers, since the hog industry relies heavily on the United States, Rice said.

He also acknowledges that downsizing the relatively small Canadian herd won't affect prices much as long as the US herd stays large.

"North America's still going to have burdensome supplies of pork for several more months," Mr Rice said.

The rapid herd downsizing has raised a concern for future supply from the pork processing industry, Mr Rice said. Maple Leaf Foods and Olymel are Canada's biggest pork packers.

In the short term, there may be more pork on the market as farmers slaughter their surplus pigs, but not enough to further weigh against prices, Mr Rice said.

Lean hog futures LHc1 on the Chicago Mercantile Exchange, which influence prices in Canada, have risen sharply since July and were 7 per cent higher than a year ago at US$66.85 per cwt around midday on Wednesday.