Post on 13-Dec-2015
COOL: Potential Economic COOL: Potential Economic Implications For the Canadian Implications For the Canadian
and US Pork Industriesand US Pork Industries
Larry Martin
Presentation OutlinePresentation Outline
COOL Project I: Impacts in Canada– Manitoba Pork Research
COOL Project II: Impacts in the US– Prairie Producers, Ontario, and CPC Research– Authored by GMC and Virginia Tech
Most Important PointMost Important Point
The US represents 35-40% of the market for Cdn hogs/pork
COOL objective is to reduce or eliminate imports
US Imports of Canadian Pork
100,000
150,000
200,000
250,000
300,000
350,000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Met
ric
Ton
nes
U S H o g I m p o r t s
0
1 , 0 0 0
2 , 0 0 0
3 , 0 0 0
4 , 0 0 0
5 , 0 0 0
6 , 0 0 0
9 2 9 3 9 4 9 5 9 6 9 7 9 8 9 9 0 0 0 1
"000
's o
f H
ead
U S H o g I m p o r t : S l a u g h t e r v s . F e e d e r / W e a n e r
0
5 0 0
1 , 0 0 0
1 , 5 0 0
2 , 0 0 0
2 , 5 0 0
3 , 0 0 0
3 , 5 0 0
9 2 9 3 9 4 9 5 9 6 9 7 9 8 9 9 0 0 0 1
"00
0's
of
He
ad < 5 0 K g s
> 5 0 K g s
BackgroundBackground
It will cost more for US packers to handle Cdn hogs– Trace back to farm of birth– Logistics after slaughter– Many are not going to take Cdn hogs– Undecided
Cdn pork is likely okay– Not a given
US $/Head
Procuring Canadian Hogs or
Pork
Not Procuring Canadian Hogs or
Pork
Difference in Costs for
Canadian or Not
Producer 1 1 0
Packer 5-10 2 3-8
Retailer 2 2 0
Total 8-13 5 3-8
COL Cost Current ThinkingCOL Cost Current Thinking
If Cdn hogs cost more to If Cdn hogs cost more to handle, they will not be handle, they will not be
purchased, or they will be purchased, or they will be discounted by the extra costs.discounted by the extra costs.
How Do We Get At Impacts?How Do We Get At Impacts?
Assume they don’t get exportedAve Manitoba farm sizeNo price effect
COL Implications: NegativeCOL Implications: Negative
At risk:– 450 farms– $350 million farm income– Six feed mills– Market for 250,000 acres
Or $750 million and up to 3,000 farmsManitoba is directly vulnerable
COL ImplicationsCOL ImplicationsNeutral/Positive:
– US system is not rigorous or systems not costly.– US packers figure out how to handle Cdn hogs
without difficulty.– Business as usual.
COL ImplicationsCOL ImplicationsPositive:
– US burdened with costs– Cdn pork is successful
Cda needs finishing and packing capacityValue added, jobs, exports….
Capacity ExpansionCapacity Expansion
Finishing space (1 million)Packing (58,000/week)Capacity expansion has precedent
PremisePremise
COOL’s purpose is to impede tradeCOOL may achieve that purposeWhat will be the results if the US is short 6
million head?
Why do weaners/feeders go Why do weaners/feeders go South?South?
Sound economic reasonsHigh qualityStructural evolution in hog beltThey have strong demand and we have
supply
W/F Importers W/F Importers
Variety of methodsFinal user is independent farmer/finisher
– Mostly in Iowa– Average producer
What if 3.7 million are not What if 3.7 million are not available?available?
Jeopardize the livelihoods of 1,000+ farmers
Farm income of $450mEconomic spin-offs (value added)
The hogs will eventually be The hogs will eventually be produced in the US, by….produced in the US, by….
Few integrators replace many farmersIncreased health and disease risk
Why do Market Hogs Go Why do Market Hogs Go South?South?
Sound economic reasons– Price– Capacity (here and there)
What will happen if 6M hogs What will happen if 6M hogs don’t go southdon’t go south
Eliminate US packing capacity– 3-4 plants
Increased Cdn pork imports– 1 plant
Lost jobs and $4b in economic activityIncreased manure production
– 2.1 million tons once lost production is replaced
What about price impact?What about price impact?
US production will increaseCdn production will decrease, but not by as
much as US increasesNet increase of 4 million head post-COOL
– 6mil cdn hogs produced in us– Cda reduce production 2 mil
Hog prices will be 30% lower than they would have been without COOL.