At the beginning of the year, the Canadian pork sector was looking at an increased demand after African swine fever had decimated much of the herd in China. Then, the world got turned upside down with the COVID-19 pandemic.
“What started as a year with so much promise and market upside due to that shortage of pork in Asia has basically shaped up as one of the worst years on record for profitability,” explained Mark Ferguson, the general manager of SaskPork.
The epidemic saw the shutdown of a number of packaging plants, in Canada and the U.S., which resulted in a backlog for processors and producers.
“Slaughter disruptions have been one of our main concerns and one of our main sources of issues since the pandemic started,” Ferguson added. Upwards of 40 percent of the hog processing in the United States was idled, and this depressed the prices south of the border. As a result, things took a downturn here in Canada as well.
“We use U.S. markets as components of our formulas to establish prices in Canada, so we don’t have an oversupply here, but we’re affected just the same, if not more, by this U.S. oversupply.”
There have been discussions with the processing industry to look at different models, perhaps moving away from the formulas using U.S. pricing. Some processors are even looking to do what they can to help the producers.
“Thunder Creek Pork established a floor price in recognition that the current pricing system has some issues, and so they put in a floor price of $1.40 a kilogram which was very timely and needed for producers,” explained Ferguson. Other processors have been looking at incorporating a component including the wholesale pork price, or cut out.
Going forward, Ferguson pointed out the demand for pork changed due to the pandemic, as restaurants that were forced to shutter due to the pandemic are slowly bringing back the purchasing, but the demand isn’t where it was before the pandemic. Exports, though, have been continuing strong, especially to China.
“It’s a very good thing – we’re moving lots of pork and everything we produce is being moved, but I think it was a shift in the markets that took some time to adapt,” explained Ferguson. There is also the issue of the inability for producers to get good prices when exporting to China. Click here to see more...