Sask hog farmers eye profit after several lean years

After some lean years when Saskatchewan pork producers were either losing money or barely breaking even, they are poised to turn a profit in 2014.

Pork industry says 2014 could be best year in almost a decade

After several years when Saskatchewan pork producers were either losing money or barely breaking even, they are poised to turn a profit in 2014.

"We're going to be in record profit territory this year if everything goes good, the way we're predicting," said Don Kolla, manager and part-owner of Cudworth Pork Investors Group. It operates a 1,200-sow farm about an hour's drive northeast of Saskatoon.

"We've had a few rough years since 2007," said Mark Ferguson, manager of industry and policy analysis with the Saskatchewan Pork Development Board (Sask Pork). "High feed costs and low prices have really hammered the industry. So when you look at the futures prices for both grain and hogs for 2014, it's looking really good."

Ferguson said this summer producers could make $40 - 50 per hog.

"We haven't seen profitability like that in a long time," he added.

Drought had major impact

The price of feed spiked a couple of years ago after drought devastated the U.S. corn crop. That, along with a high Canadian dollar and low hog prices, sent Saskatchewan's pork industry into lean times. Now it's all turning around, renewing optimism among pork producers.

Kolla figured the cost to feed his herd has dropped by about 25 per cent.  That is significant considering feed makes up 60 per cent of his operating cost.

Meanwhile, hogs are fetching a higher price, up 40 per cent from four years ago. That is partly due to a shrunken supply of hogs after the industry downturn and an outbreak of porcine epidemic diarrhea virus in the U.S. which killed some piglets.

Producers are taking extra precautions to make sure the virus does not spread to Canada.

The drop in the Canadian dollar is also helping the bottom line of producers here, since prices are set in the U.S., and much of the pork produced in Canada is exported.

Bankruptcies across Western Canada

The economic turnaround is timely, according to Ferguson.  

"There were a number of companies, and not just in Saskatchewan but in Western Canada, that were going through bankruptcy procedures," he explained. "And I think it was a struggle for any existing farm."

Another aspect of the turnaround is the addition of a new packing plant in Moose Jaw, just a few of years after Saskatchewan lost its main pork processing plant, Ferguson said.

So will all of these changes set the stage for a rebound in Saskatchewan's pork industry?

"Well we sure hope so," Ferguson said. "In truth, it's going to take a number of years before investors and producers regain confidence that we're going to have ongoing profitability."

But he does not expect to see a spike in the price at meat counters, since a change in hog prices can take a long time to work its way through the system. And, he said, pork is already a good value.

Between the years 2006 and 2013, the price of pork chops rose by 15 per cent, compared to 19 per cent for sirloin steak and 33 per cent for chicken, according to Statistics Canada.  

Meanwhile, Don Kolla is getting ready to celebrate twenty years of running his hog farm, a real accomplishment considering the volatility of this industry.