Steve Meyer, of Des Moines, Iowa, president at Paragon Economics, Inc. doesn’t call what is happening in the United States to packing plants because of decreased supplies of pigs because of PED virus, shutting down, but idling at capacity.
“They’re trying to idle a bit of capacity to match the supply of pigs that are coming in, but also to keep their labour force employed,” said Meyer. “Many of our packers have labour agreements that require 32 hours per week, at least on a short term notice kind of situation.”
He says what happened to last fall when Seaboard packers started hitting the time where they lost pigs during the summer, and this was during the November/December on slaughter, is they skipped their Saturday shifts and closed several week days, here and there.
Right now, he’s hearing the Smithfield plants on the east coast are rotating between their three large plants and shutting them down one day a week.
“We think that will be the operating mode when we get to the midwestern losses here in May and June for the packing plants there,” he said. “They have to try to keep people working enough to keep them employed because they don’t want to lose their whole labour force. I don’t think we will see any whole plants shut down, instead this kind of idling strategy as long as it works.”
Meyer admits some packers would be looking for pigs in Canada, but the new M-COOL went into effect last fall makes that more problematic than it was at one time.
“We don’t have a multi-country label any more so they must strictly segregate on everything so it is not an easy thing to overcome,” he said. Besides, I don’t think there are any extra pigs in Canada either. I think the Canadian packers are sucking those up pretty well. This is just a supply situation having to get through the best we can. Most producers and packers are still looking at this as a transient situation, thinking it won’t last forever.”

Handling of PED virus

When he talks to veterinarians in the U.S., we’re not coming up with a lot of real good solutions.
“We will have to see how long it lasts. Eventually, this could cost us a packing plant, very possible if it lasts two to three years and we don’t have a good solution to this thing,” he said.
When Meyer looks at how the Americans can’t get PED virus under control, while Canada is doing much better at containing it and keeping it from spreading, he’s not surprised.
“We showed you how not to do it, and that is an important learning thing and Canadians are smart people and they learn pretty well,” he said. “They learned from what we did.”
Secondly, there aren’t near the hog farms in Canada, while pretty dense in Ontario and Quebec, there is still a challenge there.
Thirdly, the timing for the Canadian industry is a whole lot better than for the industry in the U.S. It showed up in January and temperatures are warming up as you are coming to position where the disease might see a spread and that helps you a lot.
“You were able to observe us and one of the things that Canada did before it even hit was to make it a reportable disease,” he adds. “The U.S. never did that because this wasn’t a program disease and it was subject to kind of broad state regulations out there and asleep at the wheel on this one a non-trade impacting disease.”

High prices

When a packer in Manitoba says he has to learn selling pork at a higher price to maintain margins, Meyer says Americans are learning how to sell at a higher price. The cutout prices have gone up dramatically and by his calculations for gross packer margins, they’re still pretty good .
Right now the price is rising in part due to some end users stocking up that are looking at even shorter supplies and higher prices in the summer and hasten to stock the freezers.
“There is a question just how high can we take retail prices here to support these wholesale hog price,” he said. “Looks like extremely high prices and some will continue to buy, while others won’t some can pay and some won’t.
Why does it appear hog producers in Canada would get higher prices if they could sell in the U.S.A. and are Canadian packers taking advantage of a tough situation?
“I won’t pass complete judgement on them on that one,” said Meyer. “M-COOL has from its inception provided some advantage for Canadian packers because of the disadvantages of bringing hogs into the U.S. “Right now packers in the U.S. are kind of scrambling for pigs when that happens producers tend to get more for their animals, when that happens.” •
— By Harry Siemens