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Canada – Dodging Bullets & Getting Bulletproof

23 May 2014
Genesus - The first power in genetics

CANADA - The hog business as anyone who has been in it for any length time knows is a hard game. A game often of inches where the nickels and dimes matter because there has too often not been much else, writes Bob Fraser – Sales & Service, Genesus Ontario.

Fortunately right now we’re experiencing a once in generation shot to margins that is a “rising tide that’s lifting all boats”.

A look at the OMAFRA Weekly Hog Market Facts compiled by John Bancroft, Market Strategies Programme Lead, Stratford OMAFRA john.bancroft@ontario.ca at the end of my commentary underscores this.

However even in good times you have to attempt to dodge bullets and Ontario producers have had two to contend with.

Ontario PED as of 19 May

There are now 58 diagnosed cases of PED reported with great debate raging as to whether everyone is reporting particularly finishers. 26 of the cases are sow units with the last sow unit (farrow to finish) reported April 30th. A listing of the diagnosed cases can be seen at www.ontario.ca/swine. So with no cases so far reported in May is Ontario out of the woods? Or are producers not reporting or too taken up with planting to be focused on proper diagnosis. Probably too early to tell but on the surface seems encouraging particularly in light of what continues with PEDv in the US.

The National Animal Health Laboratory Network reported that 191 tests for porcine epidemic diarrhea virus (PEDv) proved positive out of 801 conducted at 10 veterinary diagnostic labs in the week ended May 3, according to the American Association of Swine Veterinarians’ latest update.

The latest data bring the number of confirmed cases to 6,421 since the virus was discovered in the United States in May 2013.

The US sow herd is roughly five times the size of the Canadian herd. So even with that consideration for whatever reason Canada appears to be faring better on this bullet. However diligence is still well warranted although even producers who have experienced PEDv may have the best year in a long time. Still a far better year without it.

Quality Meat Packers Saga

This has been the second bullet to the Ontario industry and one perhaps even more difficult to dodge as many of the suppliers to this plant had been doing so in good faith for a great many years. When Quality Meat Packers filed a Notice of Intention to Make a Proposal ("NOI") pursuant to the provisions of the Bankruptcy and Insolvency Act ("BIA") on 3 April they owed hog producers about $8.7 million. On 5 May 30 days of creditor protection was up.

No plan was put forward or request for extension and requested the court to appoint a receiver. Seems Quality Meat Packers is done in Toronto and doesn’t sound promising in Mitchell. I’ve yet to talk to any producer who holds much prospect of producers ever seeing their money.

So that’s all over but the crying of which most producers are disinclined to do. They’ve moved on and there may be some ultimate positive things from that movement.

Conestoga (the producer owned packer in Ontario) was in the process before the events with Quality Meats of expanding from a single shift of 15,000 hogs per week to a second shift of approximately 28,000 per week.

They had been working their way into this since the New Year expecting perhaps as long as a year and half to fully ramp up. With the sudden turn of events with Quality they are rapidly closing in on the 28,000 head of their second shift, which was certainly way ahead of plan. It also seems that a significant number of the new supply have looked to become shareholders. So Conestoga increasingly becomes a player to watch also having just purchased a cold storage/distribution plant in Cambridge that will alleviate one more bottleneck. A door closes a door opens…

Further due to the redistribution of supply from Quality Sofina/Fearmans (the largest packer in Ontario) is now running at 5 days rather than four (that it had been doing for a number of years) and hoping to move from 8,000 to 9,000 head per day. The cloud on their horizon is they’re in negotiation with their union on a new contract. Apparently contract expired in February and the union has approved a strike mandate (sensing they now have a stronger hand). If talks stall the strike could happen in early June. So this industry isn’t completely out of the woods yet.

It appears that the bulk of the balance of the Quality supply has been taken up by Olymel out of Quebec moving from their average of approximately 15,000 per week from Ontario to in excess of 20,000 per week. Olymel continues to demonstrate a desire to be a player and an increasing one in the Ontario market place.

PEDv and the collapse of Quality Meat Packers further underscores my line from last commentary how for this industry the proverbial “light at the end of the tunnel” has proved too often be a train. However as the numbers below attest this light is real. The industry is experiencing margins that couldn’t even be dreamed of.

Take this opportunity to get bulletproof! Not all bullets unfortunately can be dodged but there are many things to make one more bulletproof. Pay down debt strengthen the balance sheet. Enhance your biosecurity and make it job one. Look to become more knowledgeable and versed in risk management in all its facets. Look to improve management, nutrition, health and genetics. It’s not all the same and as always the margin from average production and excellent production remains very significant.


To find out more about Genesus Genetics, please take the time to visit their website at www.genesus.com .



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