With the processing and packing industry re-settling after Maple sells one plant in Ontario and closes another in the Maritimes, it also makes good sense to see what is happening in Western Canada.
Maple Leaf, and as they said they would way back when they announced their restructuring is placing most of its eggs in the Brandon, Mb plant. That is good news for producers in Manitoba, Saskatchewan, and to a lesser degree in Alberta, but makes good sense from a competitive position. It is also good news for Saskatchewan hog producer that the former beef plant in Moose Jaw is reincarnating into a hog processing plant, scheduled to come online in December.
All of these changes during an economic upheaval in the hog industry making it mostly positive with what is happening in the industry, at least in western Canada.
This fall, Olymel is getting questions surrounding their new Olywest 2010 Plus pricing contract.
Kevin Grier Senior Market Analyst George Morris Centre Guelph, Ontario said recently at the time most people signed, the new contract showed a positive spread from the old Olywest 2008/09 contract of 3 to as high as 6 plus cents.
In early November, the spread has switched the other way favoring the old contract by up to 9 cents one day. It was hyped as better than the old series.
“In reality, if you do the historical comparisons, it is about the same, just different,” said Grier. “The reason it has come to the fore in terms of people’s thinking is the rapid decline in prices recently.”
That same week, it looked like the Alberta price would be 40 cents lower than the September average price. The decline was way too fast for people to handle. If prices were higher, no one would be worrying too much about price differentials between the new and old, he said.
Grier said naturally, both Olymel and Maple Leaf, Lethbridge, Ab have been trying to sign as many producers as possible to long term contracts to avoid short term loss of their supply base to Thunder Creek. That is the name of the Britco Moose Jaw operation. Producers in southern Alberta are watching the development of Thunder Creek Pork and will be seeing how their pricing compares to other options.
[That’s the essence of competition…]If they offer to pay the freight (as Britco does), there are a lot of producers in the area, over time, that will strongly consider going to Moose Jaw since it is closer than Red Deer. There was a new finishing barn opened in Coaldale a couple of weeks ago.
“My understanding is all those hogs will go to Moose Jaw. Thunder Creek will not be a large plant but it does make a difference,” said Grier.
Meanwhile, Sturgeon Valley Pork is making great strides in the industry. The company has a new small plant that is expanding capacity. Management and owners are highly regarded in Alberta. They have worked hard to make a name for the operation since purchasing ‘Edmonton Meats’ 8 – 10 years ago. It now has a partnership agreement with approximately 21 producers. It is marketing ‘Sturgeon Valley’ pork to many different kinds to restaurants, retailers etc. The operation received funding from the Alberta Agriculture grant program, ALMA.
Grier said currently, there is a small feed cost advantage in Western Canada. It will take the end of the corn harvest and a settling out of the prairie grain availability in Western Canada before we know exactly what the advantage settles out at. Barley has not risen as fast as corn plus there is lots of feed wheat.
“A grain spread advantage as well as growth developments in the packing sector are positive, but there remains a serious negative undertone in Alberta,” he said. “The current market prices (hogs and grain) will continue to cause more producers to leave the industry. Any profits realized earlier in the year went to pay creditors. Farm families in Alberta are under a lot of pressure and their way of life has been seriously eroded over the last few years. There are some serious problems out there.”