1) Creating a strategic investment program for producers to address the loss of the Chinese market and the impact of the ongoing US-China trade war.
The loss of the Chinese market and the impact of the ongoing US-China trade war has had a $265 million-dollar impact on Canadian pork producers. The Canadian Pork Council is calling for the next government to establish a strategic investment program for producers.
Canada’s pork sector operates in a global pork market. Approximately 70% of production is exported as either pork or live animals. Canada is a top 3 exporter of pork and top 10 importer. Given few border restrictions, the price that pork producers receive for their pigs is determined by the supply and demand conditions in the much larger American market.
This market reality means that Canadian producers have been impacted directly by the ongoing US-China trade war. Tariffs, followed by retaliatory tariffs, followed by trade policy pronouncements, followed by trade suspensions have created a market plagued by uncertainty and lower prices. Like the situation in 2018, market hog prices have started their normal seasonal slide much earlier in the year. The opportunity for producers to build up a buffer to help them through the period of lower returns has been lost.
The winners in this trade war are pork producers in Europe and Brazil. Producers in these countries are enjoying much stronger prices for their pigs as a result of increased Chinese demand and the absence of competition from pork from Canada and the United States in that market.
The United States government understands that the trade war, aimed at improving access to China, has had a significant negative impact on US pork producers. In response, two separate, multi-billion-support programs have been announced. These programs provide both general support to the pork sector and direct payments to individual producers.
Canadian producers, unable to capture the benefits of increased demand for pork or capitalize on federal funding support are left behind. Pork producers were counting on a period of profitability that would enable them to modernize or expand their operations. The most recent hog inventory report from Statistics Canada shows that, unlike their American competitors, Canadian producers are not expanding.
This situation was made even worse by the Government of Canada’s $4 billion support program for the supply-managed sectors. Producers in these sectors, buttressed by government funds, are now in an even stronger position to be able to bid up the price of land and/or other inputs. This directly impacts the ability of pork producers to compete.
American producers, benefitting from direct payments from government, will not have to curtail their expansion plans. European and Brazilian producers, supported by higher market prices, will expand. Canadian dairy producers will push up input prices. As a result, Canadian pork producers face the real risk of being forced from the sector.
This cannot continue. In the absence of a viable plan to reopen access to the Chinese pork market, Canadian producers require a program that provides individual producers with support that is equivalent to that provided to their US competitors.
Canadian hog producers ask that the next federal government establish a $265 million strategic investment program to address this competitive imbalance.