Stronger Canadian Dollar Puts Pressure on Canada’s
Pork Industry
Mildred
Haley
The stronger Canadian dollar has
led to a surge in U.S. exports to Canada and declining
U.S. agricultural imports from Canada (see "Canadian
Dollar Reaches Parity With U.S. Dollar").
One exception, however, has been U.S.-Canadian trade
in live swine. In the first 8 months of 2007, U.S.
imports of live swine from Canada increased 11 percent
over the same period in 2006.
The stronger Canadian dollar has
made Canadian pork less competitive on international
markets against products priced in depreciating
currencies, such as the U.S. dollar. Because the
Canadian pork industry annually exports over half
of its pork production and about a quarter of its
live pig crop, the increasing value of the Canadian
dollar has been squeezing margins of Canadian slaughter
plants and operations that export live animals for
finishing in the United States.
The inability of the Canadian processing
industry to compete against products of the highly
efficient U.S. pork processing industry contributed
to closures of slaughter plants in Québec,
Saskatchewan, and Manitoba in 2007. Lower hog prices
offered by remaining Canadian processors reduced
incentives to finish young swine in Canada. Consequently,
the southward flow of young swine to specialized
finishing operations in the United States has increased
(see "Hog
Operations Increasingly Large, More Specialized").
Growth in U.S. imports of slaughter hogs has been
particularly strong, with imports in 2007 20 percent
higher than in 2006.
Canadian swine prices are effectively
set in the United States, and USDA forecasts lower
hog prices into 2008. This trend will likely accelerate
the downsizing already taking place in the Canadian
pork industry. Statistics Canada has reported lower
stocks of sows and bred gilts in every quarter since
April 2005. Most breeding herd reductions, however,
have occurred in Provinces with relatively low production.
Larger, more efficient herds in Manitoba and Ontario
have taken smaller cuts.
For 2008, USDA’s Foreign
Agricultural Service is forecasting a fourth consecutive
year of slowly decreasing pork production in Canada
and a third consecutive year of small decreases
in pork meat exports. However, exports of live finishing
animals, as well as slaughter-ready hogs, to the
U.S. will likely stay high. Large Canadian swine
production operations will face fewer marketing
alternatives as the Canadian processing industry
continues to draw down slaughter capacity. The U.S.
imported an estimated 9.6 million head of Canadian
swine in 2007—68 percent were animals fed
to maturity in the U.S. and 32 percent hogs meant
for immediate slaughter. In 2008, imports are expected
to total 9.7 million head, with roughly the same
proportions of finishing and slaughter hogs.
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