Alberta Pork’s Chair has received a priceless gift from a prominent economist.

Within his report to the 2017 Annual General Meeting in Calgary on Nov. 30, Frank Novak renewed his call for a pricing change based on the cut-out value rather than the US-based cash market.

Novak’s quest got a high-powered boost a few weeks later, during a presentation to the 47th-Annual Banff Pork Seminar on Jan. 11.

Economist Ron Plain, professor emeritus from the University of Missouri-Columbia, included a few words about pricing during his update on the current economic scene.

“It’s bacon demand that has been carrying the cut-out value in hogs and has been for a number of years,” Plain told delegates.

He expanded his observations during the open-mic session that followed, in answer to a question had Novak posed.

“All these hog formula contracts tied to hog prices suffer the same problem – they’re tied to something that’s becoming obsolete,” said Plain.

“From my perspective, the industry needs to move to pricing hogs on the cut-out value.”

Novak had stressed during the AGM that a pricing crisis looms over Western Canada’s pork industry.

Canada’s industry lags behind its major competitors, including Europe, said Novak, who holds a doctorate in agricultural economics from the University of Illinois.

“The money goes where the money is. If you’re not making money, nobody spends money. We need to find a way to make more money so we can actually invest in the industry,” he told producers gathered for the AGM.

Structural changes in the U.S., including vertical integration of the value chain, have taken most hogs off the cash market. Yet that market remains the pricing point for pigs sold in Canada, said Novak. Until that model is torn down and replaced, Canadian producers will continue to “eat the whole risk,” he said.

Producers and processors must adapt to an industry that is evolving toward greater integration and a business model based on a value chain, said Novak, Managing Director of Alberta Pig Company and Sunhaven Farms.

“I fear that we, as an industry, are sleep-walking our way into a pricing crisis with our stubborn reluctance to move away from a formula based on a disappearing U.S. cash market. We need to be able to reliably find a model to value Canadian pork so that we can build competitive Canadian value chains,” Novak wrote in his report to producers.

Executive Director Darcy Fitzgerald also commented on pricing and industry structure in his outline of Alberta’s Pork’s efforts to address the four priorities within it strategic plan: Put more boots on the ground to achieve outcomes set by producers through their elected board; achieve and maintain public trust; increase efforts to engage with government and build stronger relationships with industry partners.

Alberta’s hog farmers are producing an amazing product that is in dire need of a better plan, said Fitzgerald. The current model is not sustainable and will continue to produce the same results “until we reach complete failure,” Fitzgerald wrote in his report.

“We don’t lack room to improve or opportunity to market this amazing pork, but we do lack a plan and a will to make our industry sustainable and to grow it into the future.

“Producers and packers need to ride the highs and lows together and find opportunities to improve together,” he wrote.

While the marketing model needs work, Alberta Pork and its partners are grateful for the successes it has seen so far in its efforts to prevent PEDv and other deadly pathogens from entering the province.

Andrew Dickson, general manager of the Manitoba Pork Council, was invited to discuss the lessons learned since 2016, when PEDv was first confirmed within his province’s boundaries.

“The goal is to eradicate PED in Manitoba. We are going to get rid of this damned disease,” Dickson told Alberta producers after describing the impact on his province and the actions that were taken after the first infection was confirmed, the factors that had been at play at the time and the steps that have since been taken.

He focused his discussion on the role of a provincial council in responding to farmers and working with the Chief Veterinarian’s Office while emphasizing the importance of an effective traceability system.

The economic impact in Manitoba on the first eight premises affected had reached $1.9 million dollars in 2016 – largely in lost sales, but also within the barn. Dickson spoke with one producer who estimated his washing and disinfecting costs at $60 per sow, $5 per nursery space and $20 per feeder space.

Alongside the financial cost, there was been a huge toll on people, including veterinarians, barn staff, technicians, service staff and government support staff, said Dickson.

Dealing with disease protocols put an extra load on people who already had a full day of work in front of them and was especially hard on those who work directly with pigs, he said. Manitoba Pork provided two staff to help reduce the burden at the Chief Veterinary Office and also worked with people on the provincial stress line, who were getting calls from producers and barn staff who were having trouble coping.

“It’s not nice, euthanizing pigs when you have spent most of your day trying to keep them alive,” said Dickson.

Central to the objectives of getting the disease under control and then eradicating it from Manitoba’s system was to set up a disease management group of stakeholders who stay in touch through weekly conference calls. Veterinary groups were a critical component within the system because of the knowledge their members were able to share with each other and with the management group.

Disease management protocols were tightened up for handling of slaughter pigs in transport and at assembly yards, with several gaps closed where pathogens could have slipped through.

Dickson stressed that producers from sites where the disease had been found were warned not to ship to assembly yards without talking to their operators beforehand, to ensure that the appropriate arrangements could be made to prevent those pigs from infecting others.

One of the biggest headaches was the handling of manure, because Manitoba has many companies involved in the business. Those companies stopped servicing sites where PEDv had been detected. However, because of the high volume of manure from affected sites, two of the companies agreed to set up teams dedicated to handling contaminated or potentially contaminated manure.

Communication with producers has also played a central role maintaining vigilance on the farms and throughout the system, said Dickson.

Manitoba Pork set up and maintains a secured area within its website where producers who have signed up can gather extensive information that is not available to the public.

Staff from the CVO were available around the clock, every day of the week and, in concert with Manitoba Pork, the Manitoba Co-ordinated Disease Response system was set up to allow producers to share information about infectious disease, including PRRS as well as PEDv.

“You can’t send enough information out about this, as far as how you keep people motivated all the time about using top-level bio-security protocols all the time in their operations – one slip and you’re in deep trouble,” said Dickson.

“People get tired and they can only do so much. The key thing is not to reprimand them, because then they stop talking to you. They won’t tell you when something went wrong.”

Manitoba Pork also encourages people to talk to their veterinarians, whom he described as the farmer’s best friend in preventing and managing disease. He said he does not understand the pride some producers have taken in having not called a vet for a year or more.

“If it hadn’t been for all the preparation and training done from about 2011 and onwards, we would have been in deeper trouble than we are now. It raised the issue of bio-security in a lot of people’s heads. Concerns about (bio-security) are markedly different than they were six or seven years ago,” said Dickson.

Manitoba’s struggle with PEDv serves as a reminder that this disease and others pose a threat that is not about to disappear, said Novak.

“PED has shown us that, the way the world is situated now, health is going to be one of our biggest risks ever. (PEDv) has managed to stay out of Alberta so far, but I think this is just the first of a series of bugs that will find across our oceans . . . and we need to spend a lot more time and effort working on health and protecting our health,” he said.

Novak stressed the central role of a traceability system in responding to a health threat as well as the need for ongoing vigilance in maintaining bio-security across the system.

He also announced that he will step down from his position during board elections in spring and said he is actively encouraging new people to step up to the plate. Watch the next edition of Prairie Hog Country for our exclusive interview with Novak about his years at the helm. •

— By Brenda Kossowan