Canada's Hog Industry Changing Tactics

June 20, 2001

USDA says Canadian hogs continue to flow into the United States and are on pace to exceed last year's record. However, the slaughter/feeder mix has changed. Feeder hogs now account for about 60% of Canada's hog exports to the United States as the U.S. industry restructured and pricing mechanisms supported Canadian feeder hog exports.

The trend of increasing Canadian feeder hog exports to the U.S. is expected to continue for the near term, the report said. Canadian slaughter hog exports to the U.S. declined abruptly in 1998 and has since stabilized as Canada started to hold more slaughter-weight hogs, and with increased production became the top pork exporting country in the world.

For the first quarter of 2001, U.S. hog imports soared to 1.23 million head, up more than 25% from the same period last year. In 2000, Canada exported 4.36 million hogs to the U.S., about 17% of Canada's total pig crop. Canadian feeder pigs has been entering the U.S. at an accelerated pace since 1998 and eventually exceeded slaughter hog exports in 1999. This trend is continuing in 2001 at a 60% feeder to 40% slaughter hog rate.

The report says the shift to feeder hogs can be explained by rising demand for feeder pigs from U.S. finishing operations in the Midwest, low U.S. feed prices, a favorable exchange rate for Canadian producers, and a retention of slaughter hogs to support the Canadian pork export expansion. In addition, the United States has the slaughter capacity to accept additional input from an increasingly integrated North American market.

Canadian hogs, especially feeder hogs, will likely continue to flow southward across the border for the near-term as producers take advantage of cheaper U.S. feed costs. A significant number of pigs are sent to the U.S. in accordance with delivery contracts between Canadian producers and U.S. feeders. The Iowa, Kansas, Missouri, Nebraska corridor now dominates the feeding region of Canadian pigs.

This rapid market integration evolved as the U.S. industry restructured its Midwest facilities by expanding feeding operations at the expense of farrowing-to-finish operations. At the same time, a relative abundance of Canadian feeders over Canadian finishing capacity allowed the integration.