The prospect of cheaper feed grain costs is unlikely to lead to hog herd expansion in Western Canada, as tight margins and a moratorium on new hog barns in Manitoba should limit the interest in growing the sector.
Expectations for a large U.S. corn crop have led to ideas that the resulting decline in feed costs would encourage an expansion in the U.S. hog herd, according to some analysts.
However, "we haven’t experienced the same sustained level of profitability that our American counterparts have," said Tyler Fulton, director of risk management with H@ms Marketing Services in Winnipeg.
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As the harvest in southern Alberta presses on, a broker said that is one of the factors pulling feed prices lower in the region. Darcy Haley, vice-president of Ag Value Brokers in Lethbridge, added that lower cattle numbers in feedlots, plentiful amounts of grass for cattle to graze and a lacklustre export market also weighed on feed prices.
As a result, Canada would see a much more muted reaction to any expansion ideas, and likely hold steady overall. "It will take a little bit more to fill the optimism fuel tank, so to speak," he said.
The prospect of lower feed costs in the fall was making the outlook for the hog sector look a little better, but he added that any opportunities for expansion in Western Canada are pretty limited right now.
Fulton said the seasonal rally that would typically be seen at this time of year was not materializing, leaving the market relatively flat over the past month and a half. At this time in a typical year, the hog sector would see a 10 per cent rally.
Slower export sales, and concerns over domestic demand as consumers are not buying as much pork as they have in recent years, were accounting for the lack of a seasonal rise in pork and hog prices, said Fulton.
A larger-than-expected increase in the U.S. hog slaughter was also weighing on values from the supply side, he said.
Overall, Fulton said the western Canadian hog sector was still performing reasonably well, but it was not living up to the higher expectations seen a year ago when China was buying more pork.
