Earlier this week, six commercial hog farmers in Alberta submitted a united request to Alberta Pork, presenting three critical questions regarding the organization’s work and position on hog pricing. The group met virtually with Alberta Pork board directors and staff to advocate for reducing hog production, in response to pricing problems that producers continue to face. Alberta Pork agrees that this pricing issue needs to be resolved immediately.
As requested by this group of producers, Alberta Pork is making its response to their questions public and providing some additional references at the end of this article to highlight related topics.
Does Alberta Pork think packers are paying enough for producers’ pigs?
Alberta Pork believes the current pricing system is not working and does not provide an equitable share of the pig’s value for producers.
Since Alberta Pork’s annual general meeting (AGM) in November 2018, producers have asked Alberta Pork to become more involved in finding value for pigs marketed. Over the past two years, many small positive steps and some large positive steps have been taken by Alberta Pork on producers’ behalf.
The most notable example is the formation of the Western Pork Boards’ Pricing Committee, including representation from B.C. Pork, Alberta Pork, Sask Pork and the Manitoba Pork Council. Discussion has been taking place, starting in late 2019, among pork board general managers and processing procurement managers to highlight the need for pricing reform. In May 2020, the committee formally requested meetings with Olymel, Maple Leaf Foods and Donald’s Fine Foods, to discuss hog pricing issues. Meetings with all packers took place last summer, with subsequent meetings being hosted in the fall and again in early 2021. As a result of these meetings, a summary of the discussion was prepared, showing how cost of production estimates versus revenues have been negatively impacting producers for years. This two-sided dialogue has spurred packers to create helpful short-term changes in the summer of 2020, including the implementation of temporary pricing floors, and in the case of one packer, beneficial modifications to new pricing formulas. While not all packers have committed to long-term changes, the committee continues to press the issue and looks forward to furthering cooperation and change.
Shortly before Alberta Pork’s 2019 AGM, a production economist was hired to focus on issues related to cost and revenue, as they are linked. Following that hiring, the Alberta Pork staff, under the board of directors’ instruction, has completed several projects to this end and continues to pursue others, including the creation of an economics website section featuring pricing and supply reports, packer contract details, a pricing calculator, economic research, and information on cost of production that is necessary as a benchmark for all economic considerations.
Alberta Pork’s web resources are tools for producers to benefit their businesses. In the case of the weekly Pricing Report generated by Commodity Professionals Inc. and distributed directly to all producers weekly by email, the initiative is cost-shared between Alberta Pork and the Western Hog Exchange (WHE). This was done to ensure the information generated for WHE shareholder members could be widely distributed to all producers in Canada, shedding light on hog pricing issue and ensuring greater information transparency for everyone in the industry.
To further this pricing effort, Alberta Pork has asked other provinces across Canada to work together through the Canadian Pig Pricing Coalition to strengthen the awareness of the pricing crisis producers have been experiencing, while working together to encourage packers to address producers’ concerns. The coalition is working to formulate strategies to bring awareness to packers, governments, and news media.
During Alberta Pork’s 2018 AGM, upheld at the 2019 AGM and modified at the 2020 AGM, Alberta Pork continues to be the provincial producer organization committed to a per-head payment for implementing the Canadian Pork Excellence (CPE) program. This has been a steep hill to climb, as certain decisions provincially and nationally have affected Alberta Pork’s ability to use CPE concerns as leverage for broader pricing discussions. Despite the challenges, Alberta Pork continues to raise the issue with the Canadian Pork Council (CPC), Canada Pork and the Canadian Meat Council (CMC), as well as with individual packers.
Alternative business risk management is another topic of focus related to pricing. In 2019, Alberta Pork formally lent its support to a request made by the Western Hog Exchange (WHE) to secure a $4-million guarantee from the Agriculture Financial Services Corporation (AFSC), with the goal of creating new forward contracting options for producers. This program could have been a very effective tool for producers, but, unfortunately, WHE eventually rescinded its request when Olymel introduced its forward contract. As a marketing agency, WHE has the ability to directly negotiate prices on producers’ behalf; Alberta Pork had these powers removed by producers and the provincial government in 1996.
As such, Alberta Pork is no longer a hog marketing agency. However, Alberta Pork’s capacity to instill change is through its relationships with stakeholders, including packers and government, by voicing producers’ concerns in a constructive and factual way. Other organizations that are singularly focused on negotiating price have the option to take different approaches. Ultimately, Alberta Pork will support all producers in their effort to achieve an equitable value for their pigs in the marketplace.
Alberta Pork has always and will always support producers’ decisions on tackling hard issues. But it is important to recognize that producers are all still individual businesspeople and will act in a manner that best supports their own operations. Alberta Pork will continue to bring awareness to the plight of pork producers and the actions they are compelled to undertake to sustain their farms. Alberta Pork continues to drive for cooperation and collaboration within the industry.
Does Alberta Pork feel Alberta producers should have their pigs priced according to the structure used in Quebec?
Alberta Pork believes that producers in Alberta should receive an equivalent price to producers in Quebec, and that producers in Alberta could potentially see even higher prices in the future.
In Quebec, hogs are priced according to a legal arrangement between producers and packers, overseen by an independent arbitrator. In Alberta, such an arrangement does not exist, but at the Alberta Pork 2020 AGM, producers voted to pass a resolution for the Alberta Pork board of directors to explore hog marketing options, including a system similar to the one in Quebec. This exploration process is underway, and meetings have begun taking place with representatives from the provincial government. In addition, at the national level through CPC, work is taking place to discover the value of Canadian hogs based on Canadian cut-out values. The Canadian hog pricing market lacks the transparency that exists in the U.S. system, and this must also be addressed for any solution to be truly workable and long-lasting.
Will Alberta Pork support production reduction as a means to force packers to change their pricing formulas?
Alberta Pork has no formal mandate or ability to enforce producers’ decisions as individuals or in groups. From a legal standpoint, Alberta Pork represents all registered pork producers in Alberta from small-, medium- and large-scale producers who are classified as independent, Hutterite colonies, producer groups, integrators, and hobby producers.
Alberta Pork will support producers wishing to make production reductions by bring awareness of the initiative to others, including other producers, packers, and the media. However, it is necessary to acknowledge this approach only works for some farms. Not all farms are able to adopt such a strategy, as doing so could cost them their business. While Alberta Pork supports all legal approaches to encourage pricing reform, the organization will not ask producers to damage their operations against their will for overarching strategic considerations. That choice rests with each individual producer to do what they feel is best for their farm and the industry.
In addition to the discussion above, over the past few years, Alberta Pork has published various articles on its own website, social media and through emails to thousands of stakeholders, along with using the Canadian Hog Journal as a platform to disseminate information, and by engaging in media relations efforts to broadcast our stories even more widely. Alberta Pork routinely approaches government officials and news media at all levels to deliver state-of-the-industry messaging.
Concerns have been raised that Alberta Pork has not spoken as strongly or as loudly as necessary to invoke change within the Canadian pork industry. To the contrary, Alberta Pork has taken a multi-prong approach in conveying the producer situation and need for change that is somewhat more accepting to those who can help drive change and those that will need to make the desired pricing changes. Effective collaboration is the goal behind finding pricing solutions that benefit the entire value chain. Anything short of shared value for any stakeholder is bound to fail.
The Alberta Pork board of directors firmly understands that Alberta Pork is a producer organization and focuses its efforts on the greatest benefits for producers.
Below are some published examples of Alberta Pork’s efforts, for reference.
Alberta Pork articles on the topic of hog pricing:
- Alberta farmers lost more than $5 per hog in 2019 (January 14, 2021)
- Olymel’s 2021 contract: how does it stack up (December 9, 2020)
- Producers vote to explore new hog-selling options (December 1, 2020)
- BRM still important despite barriers (October 21, 2020)
- Price negotiating power balance hurts producers (September 21, 2020)
- Low pig prices prompt production cutbacks (August 25, 2020)
- Price indexing: does it pay to producer better-quality pigs? (July 23, 2020)
- Hog price calculator now available (July 22, 2020)
- Sharing the value of western Canadian pigs: an update (July 17, 2020)
- Economic tools highlight a system in need of change (May 5, 2020)
- Production economist joins Alberta Pork (November 8, 2019)
Canadian Hog Journal articles on the topic of hog pricing:
- Quality assurance value still up for debate (January 4, 2021)
- Price negotiating power balance hurts producers (October 7, 2020)
- In pursuit of producer-packer shared value (October 7, 2020)
- Producer-packer tensions threaten viability (July 8, 2020)
- Producers should seek a better share of export prices (June 1, 2020)
- Buying into biosecurity can be a burden (May 12, 2020)
- Quality assurance brings value, but who pays? (January 27, 2020)
News media reports referencing Alberta Pork issues:
- Beleaguered pork producers consider move to single desk – Alberta Farmer Express (December 23, 2020)
- Desperate hog farmers explore all options – Western Producer (October 15, 2020)
- Pork is profitable, but pigs are a money-loser in Alberta – Alberta Farmer Express (July 6, 2020)
- Pork producers want a cut of packer profits – Real Agriculture (June 3, 2020)
- Some pork farms operating at a loss due to COVID-19 – Airdrie Today (May 30, 2020)
- Alberta pork industry sees market price drop amid COVID-19 – Global News (April 20, 2020)