Janet Honey Prepared for

Transcription

1 MANITOBA PIG AND PORK INDUSTRY 214 Janet Honey Prepared for Department of Agribusiness and Agricultural Economics University of Manitoba

2 CONTENTS MANITOBA PIG AND PORK INDUSTRY: Page Statistical History.2 Number of Pig Farms, Type and Location.3 Pig Inventory Pig Production Pig Sales and Farm Cash Receipts.6 Feed Use Carcass Grading Hog Slaughter and Pork Processing. 8 Pork Available for Consumption..1 Trade Prices and Profit Mandatory U.S. Country-of-Origin Labelling...14 PIG INDUSTRY STATISTICS...15 PIG AND PORK INDUSTRY FLOW CHART PIG INVENTORY AND EXPORT MAPS Data Sources: Agriculture and Agri-Food Canada Bank of Canada Canadian Food Inspection Agency Manitoba Agriculture, Food and Rural Development Manitoba Pork Council Statistics Canada United States Department of Agriculture Updated May 215 1

3 Manitoba Pig and Pork Industry Statistical History Pre-World War II: Manitoba farmers have been raising pigs since the province was first settled. Early statistics collected by the Dominion Bureau of Statistics show that Manitoba farmers had 17, pigs on farms in 1881, but increased their inventories to between 2, and 4, pigs in the 192s and 193s. The need for more pork and beef during World War II led pork production in the province to triple between 1938 and 1943, when the pig inventory rose to 668, head. Post-World War II: After the war, the number of pigs declined to the pre-war level and did not surpass the war time inventory until 197, when excess Prairie grain supplies lowered feed costs, encouraging Manitoba farmers to increase pig production once again. 197 to 199: More recent growth in the swine industry initially began in the late 197s after Manitoba lost its cattle feeding and slaughter industry to Alberta. The province expanded its hog industry, utilizing feed crops produced in the province as well as providing new jobs in pig production, pork processing and other value-added activities, such as construction and transportation. 199s to early 2s: A portion of the last pig industry expansion from 199 to 27 can be attributed to both the anticipation of the elimination and the end of the Crow s Nest Pass grain transportation subsidy in 1995 and depressed grain prices from 1985 to 26. In addition, part of the industry expansion which has taken place since the mid-199s was in response to an open market and new slaughter facilities in the province and part to increased demand for high-quality feeder pigs and weanlings in the U.S. Corn Belt, where some states imposed a moratorium on new sow barn construction. Improved pig-production efficiency in Manitoba as well as an expanding market for weanling pigs in the United States virtually eliminated the four-year production cycle in Manitoba. Historically, the cycle was due to farmers expanding pig inventories when prices rose only to contract production when hog prices fell. The swine industry grew significantly from the mid-199s to the early 2s, but growth started to slow after 23. The average annual rate of growth in production from 1995 to 24 was 12.6% compared to an average increase of 4.6% for the previous decade. Annual production growth fell from 12.8% in 23 to 1.4% in 26. Annual pig production reached a record 9.45 million head in 27, more than ten times the level thirty years earlier in ' '5 1 Datasource: MAFRI, author s estimates CHANGE IN PIG HERDS BY PROVINCE 1-YR INTERVALS 1976 to 26 and to to to to MANITOBA QUEBEC SASK. ALBERTA ONTARIO PROVINCE Data Source: Statistics Canada MANITOBA PIG PRODUCTION ANNUAL CHANGE IN MANITOBA SOW HERD BY QUARTER, '2 '4 '6 ' Data Source: Statistics Canada

4 Unprecedented adverse market conditions led to a total herd reduction of 33, pigs from July 1, 27 to July 1, 29. Although the total herd began to increase due to fewer weanling exports, sow numbers continued to decline in the next two years to 38,9 in July, 211. The sow herd then rose slowly to 314,6 head by July 1, 213, but fell marginally to 314,1 head on July 1, 214, which was 15% below the July 1, 27 record. After increasing to about 8.15 million head in 212, annual pig production declined to about 7.5 million head in 214, which was 29.3% of national pig production. Future: The positive impact of higher prices, a weaker Canadian dollar and lower feed costs on pig production profits in 214 could mean the Manitoba sow herd will increase in 215. However, limited American market access for Canadian pig exports is likely to remain. Number of Pig Farms, Type and Location Number of farms: According to Statistics Canada, the number of farms with pigs in Manitoba decreased from 14,2 in 1971 to 1,71 in July 21, falling each year to 565 in July 213. The number of farms declined again to 55 on July 1, 214 with an average of 5,355 pigs per farm. The number of pig producers/production companies registered in Manitoba in early 214 decreased to 267. These produced pigs on over 58 active sites (1 to 4 barns each). Over eight years, the number of Manitoba sites producing pigs has decreased by a third. NUMBER OF FARMS Datasource: Statistics Canada MANITOBA PIG FARMS BY HERD SIZE, < 5 head 5-2,5 head > 2,5 head NUMBER OF MANITOBA PIG FARMS E Pig farm type in 211: The Manitoba swine industry has a much higher percentage of farms which produce only weanling pigs (those under 2kg) than do other provinces. The latest available data from Statistics Canada s 211 Census of Agriculture shows that of the 59 Manitoba farms with pigs in May 211, 165 or 28.% had fewer than 6 pigs, 94 or 15.9% produced weanlings only, 142 or 24.1% were farrow to finish operations, 13 or 2.2% were nursery operations and 176 or 29.8% were finishing operations. Further analysis using Statistics Canada s 211 Census data showed that 48.6% of the Manitoba farms with pigs in 211 had no sows. These 287 units had an average of 2,9 pigs per farm and 21.% of the total number of pigs in Manitoba. There were 33 Manitoba pig farms, or 51.4% of the total number of operations, with sows and, of these, 19 or 36.% had fewer than 1 sows. These smallest farrowing units had only.4% of the total number of sows and total pigs in Manitoba. On the other end of the scale, there were 8 pig production units (compared to 75 in 21 and 111 in 26) with more than 1, sows per unit. These large units averaged about 3,66 sows per unit and, in total, comprised 79.1% of all sows and 58.4% of total pigs in the province. Another 46 units had 6-3 NUMBER OF PIGS PER FARM E Data source: Statistics Canada, author s estimate for Data source: Statistics Canada AVERAGE NUMBER OF PIGS PER FARM, BY PROVINCE, July 1, 26 July 1, 27 July 1, 28 July 1, 29 July 1, 21 July 1, 211 July 1, 212 July 1, 213 July 1,214 N.L. P.E.I. N.S. N.B. QU ON MB SK AB B.C.

5 999 sows, averaging 778 sows per unit, with a total of 11.5% of all sows and 11.6% of total pigs in the province. There were 53 units in the CANADIAN PIG FARMS BY TYPE sow category which had 8.1 % of all sows, 7.6% of all BY PROVINCE, pigs and averaged 474 sows per unit. The 15 pig farms Farms with nursing/weaner pigs 18 Farms with grower/finishing pigs with sows had.8% of all sows and 1.1% of all Farms with breeding stock 16 pigs According to Statistics Canada, 356 Manitoba pig farms had 3 animal units (AU) or less comprising 6.3% of Manitoba pig farms. Of all farms with sows, 156 or 51.5% had more than 3 AU in 211. Farm Location: The 211 Census showed that 31.9% of Manitoba s pig farms with 48.5% of all pigs were located in the Eastern Region (9 and 1 in graph), 33.6% of pig farms with 28.% of all pigs in the Central Region (7 and 8 in graph) 15.9% of farms with 9.5% of pigs in the Southwest Region (1,2 and 3 in graph), 6.8% of farms with 1.4% of pigs in the Northwest Region (4,5 and 6 in graph) and 11.9% of farms with 12.6% of pigs in the Interlake Region (11 and 12 in graph). 1 NFL NB NS PEI QU ON MB SK AB BC PROVINCE Datasource: Statistics Canada MANITOBA PIG FARMS BY TYPE AGRICULTURAL REGIONS, 211 Few pigs/unclassified Finishing operations Nursery operations Farrow-finish Farrow-weanling Datasource: Statistics Canada MANITOBA AGRICULTURALREGION PIG DENSITIES FOR SELECTED REGIONS Pig Densities: NO. OF PIGS PER HECTARE (arable land and improved pasture) The number of pigs per hectare of arable land and SASKATCHEWAN ALBERTA improved pasture (land which can be fertilized by pig MANITOBA (by wt.of pig prod.) MANITOBA Pig density (Y2) manure) in Manitoba varies from one Rural Municipality ONTARIO Arable land and improved pasture (Y1) IOWA to the next. Areas of greatest concentration are in the GERMANY QUEBEC south-east part of the province. JAPAN S. KOREA Overall, at about.5 pigs/ha in 214, Manitoba has N. CAROLINA BELGIUM/LUX. one of the lowest pig densities of all major pigproducing provinces, U.S. states or countries. NETHERLANDS TAIWAN THOUSAND HECTARES In 214, almost 37% of all pigs produced in Manitoba Data sources: various, author s estimates were exported at much less than half the slaughter weight. Very young pigs consume very little feedstuffs and produce very little manure during their time in Manitoba. Thus, significantly less manure is produced by these pigs in Manitoba so the size of pigs on farms should be taken into account when calculating pig density. The large proportion of pigs sold out-of-province weighing less than 7 kg means that Manitoba s pig density would be reduced by about onethird if pig weight is used to calculate the density rather than the total number of pigs on farms. Most other provinces and countries feed pigs to slaughter weight. Pig Inventory SOWS ON FARMS BY PROVINCE JULY 1, 29 and 214 (Percent of Canada, thousand head) Note: It is often incorrectly assumed that Manitoba s total annual pig production (about 7.5 million pigs in 214) is on Manitoba farms all at one time. This is obviously not the case as the number of pigs at any point in time consists of the breeding herd of sows and boars, which are on farm all year, as well as less than one-third of the SASK. 7.2% 91.7 ONTARIO 25.1% 32.3 QUEBEC 27.4% MANITOBA 25.6% ONTARIO 25.3% B.C % 15.3 ALBERTA 11.7% ATL. PROV. 1.7% 22.2 Data source: Statistics Canada SASK. 8.% 96.4 QUEBEC 26.7% MANITOBA 26.2% B.C..7% 8.7 ALBERTA 11.4% ATL. PROV. 1.7% 2.3 4

6 pigs destined for market each year, ranging from newborn to slaughter weight of over 121 kg. Sows produce, on average, 2.4 litters of pigs annually. The number of sows on Manitoba farms was a record 369,3 head on July 1, 27. Herd reduction due to financial difficulties led to sow numbers declining to 314,1 head on July 1, 214, but rising slightly to 314,2 head by January 1, 215. The total number of pigs on farms in mid-214 was 2,945, head, a rise of 3.% from a year earlier, but 2.% below the July 1, 27 record of 3,5, head. On July 1, 214, of the 2,627,6 pigs on Manitoba farms destined for market, 1,74,8 head or 4.9% were either new-born or weanling pigs weighing less than 23 kg. Almost half of these pigs weighed less than 7 kg. Many pigs weighing less than 7 kg are born and exported between quarterly surveys so are never counted. About 511,2 of the pigs (19.5%) on farms July 1, 214 weighed between 23 kg and 53 kg, of which about 1% were to be exported. There were 541,4 head (2.6%) in the 54 to 8 kg category and 5,2 head (19.%) in the 81+ kg category, all of which were fed to an average slaughter weight of over 121 kg. Facilities: After more than four years of adverse market conditions and financial challenges, many Manitoba pig producers went out of production and pig barns were closed from 28 to 212. The restrictions imposed by the provincial government on new and expanded pig barn construction meant that if a Manitoba producer wanted new barn space to feed weanling pigs or wanted to expand the sow herd, new barn location likely would have to be in another jurisdiction like Saskatchewan. Many Manitoba-produced weanlings are fed in barns in the United States, some owned by Manitoba operators. 3,4 3,2 3, 2,8 2,6 2,4 2,2 2, 1,8 1,6 1,4 1,2 1, PIGS ON MANITOBA FARMS BY QUARTER TOTAL PIGS SOWS The sow herd barely changed from January 1, 212 to January 1, '1 '2 '3 '4 '5 '6 '7 '8 ' Data Source: Statistics Canada 7, 6, 5, 4, 3, 2, 1, MANITOBA PIGS Weanling Exports (peak: 4,48 '7, 2,546 '14) Total Slaughter Hogs Prod. (peak: 5,349 '7, 4,733 '14) Total Pigs on Farms July 1 (peak: 3,5 '7, 2,945 '14) Sows on Farms July 1 (peak: 369 '7, 314 '14) '4 '5 '6 '7 '8 ' Data source: Statistics Canada, AAFC Pig Exports Manitoba Hog Slaughter in Canada Total Pig Production MANITOBA PIGS Sask./Alberta/Ont. Hogs Slaughtered in Manitoba Manitoba weanlings sent to other provinces The pig industry has a net worth of roughly six billion dollars invested in barns, land, equipment and livestock. Pig Production '1 '2 '3 '4 '5 '6 '7 '8 ' Data source: Statistics Canada, AAFC, author s estimates NUMBER OF PIGS PRODUCED BY PROVINCE 214 Manitoba is the largest pig-producing and pigexporting province in Canada with 29.3% of national pig production in 214. Manitoba sow numbers and pig production increased annually from199 to 27, but declined in 28 and again in 29 due to diminished (often negative) returns from producing pigs. Production (net sales plus annual 5 SASK. 6.9% ONTARIO 24.6% QUEBEC 27.3% Data source: Statistics Canada, AAFC, author s estimates MANITOBA 29.3% B.C..7% ALBERTA 11.% ATL. PROV..3%

7 change in inventory) dropped from 8.15 million pigs in 212 to almost 7.5 million pigs in 214. Of all pig sales in 214, 2.1 million head (under 7 kg) were exported to the United States and about.2 million head (under 7 kg) went to other provinces. In addition,.17 million pigs were exported at weights of 7-23 kg (less than one-fifth of a slaughter hog s weight), almost.37 million head were 23-5 kg and.37 million head were 5 kg and over, most going for slaughter. Over 4.36 million Manitoba hogs were slaughtered in Canada. Production Efficiency: Manitoba pig producers produce and sell more pigs per sow annually than any other province. The quality of Manitoba pigs is among the best in Canada. Manitoba sows are the most efficient producers of pork in Canada, producing an annual average of close to 2.3 tonnes per sow in 214 compared to the Canadian average of 2.1 tonnes of pork per sow. Data source: Statistics Canada, AAFC, author s estimates Value of Pig Production: The estimated value of Manitoba pigs produced was a record $1.225 billion in 214, up from almost $955 million in 213 and $928 million in 212. Future: Pig production is expected to remain relatively steady in 215 as the sow herd has hardly changed. With lower average pig prices, the value of pig production in 215 is expected to be below the record 214 level. Pig Sales and Farm Cash Receipts PRODUCTIVITY PER SOW: CANADA AND MANITOBA Canada Manitoba ''1'2'3'4'5'6'7'8' Year Marketing Options: Manitoba hog producers organized in 1965 to form the Manitoba Hog Marketing Commission, which had a monopoly on the sale of slaughter hogs in the province, becoming the Manitoba Hog Marketing Board in Since July 1, 1996, Manitoba pig producers have had the option to market hogs to be slaughtered in the province either through Manitoba Pork Marketing Co-op, brokers or directly to processing plants. In 29, the Board of Directors of Manitoba Pork Marketing Co-op and Saskatchewan s SPI Marketing Group established a new company h@ms (hog administrative marketing services) that will provide hog marketing services for both provinces. Starting January 1, 21, h@ms provides marketing, procurement, price settlement, intransit Insurance and risk management services for the parent companies. Pig Sales: Net Manitoba pig sales were almost 7.5 million head in 214, of which about 3.1million head or 42% were sold out of the province. 12, 1, 8, 6, 4, 2, MANITOBA PIG SALES BY TYPE MB-origin hog slaughter in Canada Pig exports 23 to under 5 kg to U.S. Pig exports under 7 kg to U.S. Slaughter hog exports to U.S. Pig exports 7 to under 23 kg to U.S. Weanlings to Que, Sask, Ont Data source: Statistics Canada, AAFC ANNUAL PIG SALES PER SOW BY PROVINCE MANITOBA SASK. ONTARIO QUEBEC ATL. PROV. ALBERTA B.C. Data source: Statistics Canada, author s estimates PROVINCE 6

8 Mandatory Country-of-Origin Labelling (mcool) in the United States (see p14) resulted in reduced demand for Manitoba weanlings and feeder pigs by American finishing operations as some major hog slaughter plants refused to kill Canadian-born pigs. Since peaking at 4.48 million head in 27, weanling pig exports fell each year until 211. Due to the Manitoba government restrictions on new barn construction or expansion in the province, some weanling pigs that would have been exported to the United States before mcool had to be finished elsewhere. In 214, roughly.2 million Manitoba weanlings were finished in other provinces, mainly in Saskatchewan. Manitoba pig producers and brokers exported over.37 million hogs, weighing over 5 kg, and almost 2.55 million weanling/feeder pigs directly to the United States in 214 as well as 31, hogs for slaughter in Alberta. In the early 199s, many more Manitoba pigs were shipped east than to the United States. Demand for local hogs by Manitoba pork processors has improved, but about one-seventh of hogs slaughtered in Manitoba come from Saskatchewan and Alberta. Over 4.36 million Manitoba hogs were killed in Canadian federal and provincial plants in 214, all but.3 million in Manitoba. This was up slightly from 213, but a rise of 17.8% from 27. Farm Cash Receipts from Pig Sales: The swine industry was the largest source of farm cash receipts of any Manitoba agricultural commodity sold from 1999 to 27, but record high crop prices raised cash receipts from sales of both canola and wheat above those of pigs in 28 and 29 and again in 213. Pig receipts were second only to canola from 21 to 212, but surpassed canola in 214 due to record high pig prices. According to Statistics Canada, pig sales contributed over 21% of Manitoba s farm cash receipts from the market (excluding direct program payments) in 214. The share is down from 31% in 25. PIG CASH RECEIPTS: MANITOBA AND AS A % OF CANADA, Pig cash receipts: Manitoba as a % of Canada (Y2) Manitoba pig cash receipts (Y1) '1 '3 '5 '7 ' Data source: Statistics Canada MANITOBA LIVESTOCK TYPE: PERCENT OF LIVESTOCK CASH RECEIPTS, 24 and Fewer pigs sold and low average net pig prices reduced farm cash receipts from the sale of pigs from $84.4 million in 27 to $77 million (author s estimate due to errors in data) in 28 and $718. million in 29. Rising pig prices increased pig cash receipts to $817.3 million in 21 and $925.8 million in 211, but receipts fell to $915.2 million in 212 when prices declined. Higher pig prices raised receipts to $94.1 million in 213 and record high prices the following year raised receipts to $1.25 billion in 214, a new record. Future: Even with fairly steady sales expected in 215, but lower prices, cash receipts are likely to remain over $9 million. PIGS 56.2% OTHER LIVESTOCK 7.2% Data source: Statistics Canada OTHER LIVESTOCK OTHER CROPS FRUIT FUR SHEEP/LAMBS HAY (exports) HATCHERIES DRY PEAS RYE CANARY SEED TURKEYS FORAGE/GRASS SEED SUNFLOWERS HONEY VEGETABLES FLAXSEED FLOR, NURSERY, SOD DRY BEANS BARLEY EGGS MEAT CHICKEN OATS CORN POTATOES DAIRY SOYBEANS CATTLE WHEAT CANOLA PIGS Data source: Statistics Canada CATTLE 16.% POULTRY 9.7% DAIRY 1.8% PIGS 48.5% MANITOBA FARM CASH RECEIPTS BY COMMODITY, 213 and 214 CATTLE 28.1% POULTRY 9.6% DAIRY 1.3% OTHER LIVESTOCK 3.5% Pigs were the most valuable commodity from 1999 to 27 and in MILLION DOLLARS 7

9 Feed Use Although Manitoba pigs are usually fed barley-based rations, the industry provides an important market for Manitoba-grown feed wheat, corn, canola meal, soybean meal and dry peas. The pig industry uses almost two million tonnes of feed annually, of which 1% to 2% is imported from the U.S. depending on relative feed grain and soy meal prices. Very rough estimates show that over.5 million tonnes of wheat,.7 million tonnes of barley, almost.1 million tonnes of canola meal,.2 million tonnes of corn,.2 million tonnes of dry peas, over.2 million tonnes of soy meal and a small amount of oats were used in pig rations. The ingredients used in rations vary from year to year depending on the availability and price of crop components. If all the pigs produced in Manitoba were fed to slaughter weight instead of being exported as weanlings/feeder pigs, then the feed consumed annually would rise by 4%. Feed costs in 214 were roughly $555 million, down 2% from 213. Carcass Grading The trend towards the production of leaner, higher quality hogs in Canada was mainly due to a carcass classification and settlement system introduced in 1968 with mandatory national standards for weight and leanness. It was implemented on location at each packing plant. The average carcass was given an index of 1 and the grade index was linked to hog price. In 1986, Canada became one of the first countries to implement a hog carcass classification system employing electronic grading probe technology which values carcasses on the basis of objective measurements of both fat and muscle content. The electronic probe resulted in improved accuracy of grading and reduced variability of hog carcass. More recently, there has been a reduction in the number of yield and weight classes in the national index grid, while focusing on leanness and core weight hogs of 75 to 9 kg. This provides incentives to producers to market hogs that fall in that core area, in line with consumer's demand for leaner pork. Canada s hog carcass index system was designed to reduce variability in pork quality and to provide to producers a consistent, quantitative signal regarding characteristics preferred in the changing marketplace. Although totally objective, it is influenced by domestic market needs and export customers' demands. As the variety of customer needs has increased, variations of the national grid within provinces and for slaughter plants have been introduced. (Source: Canadian Pork Council) In 1996, hog carcass grading was privatized when Agriculture and Agri-Food Canada decided to relinquish its grading program. In 1997, the four large federally inspected processors in Manitoba and Manitoba Pork Council founded Manitoba Hog Grading Inc. (MHGI) as a grading service. MHGI s board of directors has equal representation from Manitoba producers and processors. Its mission is to provide a carcass grading service that is accurate, consistent, effective and cost efficient and to deliver this service for hog producers and pork processors in Manitoba. In 2, grading staff became plant employees. (Source: Manitoba Pork Council) Hog Slaughter and Pork Processing Agri-food Processing: Manitoba's food and beverage processing industry includes the slaughtering and/or processing of red meat and poultry, vegetable oils, cereal products, feed, seed, dairy products, fruit and vegetables and beverages. It is one of the most important manufacturing industries in the 8

10 province, producing over $3.2 billion of goods, or 2% of the total manufacturing output in the province in 214. Red meat slaughter and processing, Manitoba s largest food processing sector, produced about $1.4 billion of meat and meat products in 214. This was about 44% of the value of total food processing in the province. The sector employs about 4,5 people. Raw inputs, mostly hogs with very small numbers of cattle and sheep, accounted for most of the meat processing industry's estimated total cost of materials and supplies. 6, 5,5 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 MANITOBA HOG SLAUGHTER Manitoba-origin hog slaughter in Canada Total fed. and prov. inspected hog slaughter in Manitoba Almost 86% of the hogs slaughtered in the province in Data source: AAFC 214 originated in Manitoba. Due to the closure of Maple Leaf Pork s hog slaughter and pork processing plant in Saskatoon in 27, most of Saskatchewan s finished hogs are now killed in Manitoba and Alberta. Almost all of the Manitoba red meat sector's output consists of pork, most of which was sold to other provinces, Japan, United States, China/Hong Kong, Mexico, Russia and 24 other countries in 214. Meat Processing Plants: Technological changes in animal slaughter and meat production have contributed to the rationalization of the meat packing industry over the years. A hog slaughter plant was built in Neepawa in 1986 by Springhill Farms, Ltd. Canada Packers closed its Winnipeg slaughter plant in early 1987, which reduced Manitoba's cattle, hog and sheep slaughter capacity significantly. Further reduction in cattle and hog slaughter capacity occurred in March 199 when East West Packers was forced to close. Burns Meats (purchased by Maple Leaf Foods (MLF)) closed its Brandon cattle slaughter plant in November 199 and shut down its Winnipeg cattle kill line at the Winnipeg (Lagimodiere) plant in late This plant, converted to a ham-processing plant by MLF, expanded between 27 and 29 to consolidate the company s Western Canadian ham-boning operations employing 85 people. It expanded again in 213, adding a bacon processing operation, the largest in Canada, employing about 35 people. J.M. Schneider Inc. significantly increased their pork processing capacity in 1997 with a new world-class plant in Winnipeg. Rapidly rising pig production in the province led to the construction of Maple Leaf Foods world-class hog slaughter plant in Brandon, which opened in September In March 21, MLF purchased the J.M. Schneider hog slaughter and pork processing plants in Winnipeg (which at the time were owned by the American company, Smithfield Foods). The MLF hog slaughter plant in Winnipeg was closed in October 27 and the 11-year old MLF pork plant ceased processing pork in fall 28. MLF closed a very small processing plant in Winnipeg on December 31, 214 The largest plant, MLF Brandon, has a full two-shift capacity to slaughter over 4.5 million hogs and employment of 2,325 people. The plant s second shift was completed in fall 28. In early February 28, HyLife Ltd. (was Hytek), the largest pig-production company in Canada with an annual output of about 1.4 million pigs from its farms in Canada and the United States, finalized its purchase of the Springhill Farms slaughter plant in Neepawa. The plant had a total work force of 55 by 21 and, with expansion to a capacity of 1.4 million head in 212, plant jobs increased to almost 9. About 6% of the pork produced by the plant is sold offshore ''1'2'3'4'5'6'7'8'

11 In addition to the two major and one minor federally-inspected hog slaughter plants in operation in 214, there were also a number of smaller provincially-inspected abattoirs and various further meat processing plants for products such as specialty meats, bacon, hams, etc. Hog Slaughter: Manitoba processes almost one-quarter of the hogs slaughtered in Canada, the second most after Quebec. Inspected plants in Manitoba killed 4.27 million hogs in 26, including.85 million head from Saskatchewan and Alberta. Slaughter increased steadily to a record 5.57 million head in 212, but declined to 5.5 million head in 214. Manitoba plants had 24.8% of the national kill in 214, up from 16.7% in 1999, but below 26.4% in 212. Manitoba s two largest plants were operating at below 85% of capacity in 214 compared to 9+% for most American plants of their size. The slaughter in Canadian plants of hogs originating in Manitoba rose by.5% in 214 to 4.36 million head, while the number of hogs brought into the Manitoba plants from Alberta and Saskatchewan fell from 1.29 million head in 212 to 1.1 million in 213 and.72 million head in 214. B.C. AB SK MB ON QUE ATL. PROV. PROVINCE Data source:aafc Future: Manitoba plants will still need slaughter hogs from Saskatchewan in 215 (about one-quarter of which could be Manitoba-produced weanlings fed in Saskatchewan) as there will not be sufficient hogs available from Manitoba finishing barns. Manitoba pig operations do not yet have the capacity to finish the 6 million hogs required annually by local slaughter plants Data source: AAFC CHANGE IN HOG SLAUGHTER BY PROVINCE 25 TO 214 MB BC QU ATL. PR. ON AB SK PROVINCE INSPECTED HOG SLAUGHTER BY PROVINCE, Carcass Weights and Pork Production: The average carcass weight of hogs slaughtered in the province rose from 93.2 kg in 29 to 96.6 kg in 212. In 213 and 214, the average carcass weight was a record 97. kg (equivalent to 121 kg or 267 lb of live hog). An estimated 49 million kg of pork and pork products (carcass weight) were produced in the province in 214, down by 2% from the record 538 million kg in 212. Pork Available for Consumption Canadians consumed slightly over 23 kg (carcass weight) of pork or close to 17 kg (boneless weight) per person per year in 25, 26, 28 and 29, but consumption was 25 kg (carcass weight) or over 18 kg (boneless weight) in 27 and about 21 to 22 kg (carcass weight) or 15 to 16 kg (boneless weight) from 21 to 214. Pork available for consumption is less than either beef or chicken, where it was 18 kg and 2 kg (boneless weight) respectively in MANITOBA HOG CARCASS WEIGHTS ' '1 '2 '3 '4 '5 '6 '7 '8 ' Data Source: AAFC MEAT CONSUMPTION IN CANADA BEEF MUTTON AND LAMB TURKEY CHICKEN VEAL PORK OFFAL ' '2 '4 '6 '8 1 Datasource: Statistics Canada 1

12 Trade As Manitobans consumed less than 5% of the total pork (retail weight) produced by slaughter plants in the province in 214 and about 3-4% of the estimated total Manitoba-origin pork equivalent of about 615 million kg (retail weight) (including exported pigs converted to finished pork retail weight) sold in 214, most of the pigs and pork produced in Manitoba had to be sold to other provinces or countries. Pigs: Manitoba is the largest pig-exporting province in Canada with close to 59% of national pig exports in 214. Due mainly to the impact of mandatory Country-of-Origin Labelling (mcool), introduced in the United States on September 3, 28, Canadian pig exports declined from 9.36 million head in 28 to 5.68 million head in 212 and 4.96 million head in 214, almost half of the record 1.3 million head in 27. Manitoba producers shipped almost 2.92 million breeding animals, finished hogs and weanling/feeder pigs to other countries in 214, 2% more than in 213, but fewer than half the number exported in 27. A stronger Canadian dollar relative to the American dollar and falling pig prices in 26 and 27 meant that although more Manitoba pigs were exported in those years, their value fell to about $375 million and $46 million respectively, compared to $418 million in 25. Lower pig prices and reduced pig exports in 28 and 29 resulted in a further drop in export value to $28 million and $193 million respectively. Conversely, higher prices raised the value to $226 million in 211and again in 214 to $287 million, which was 43% above the 213 level. MANITOBA PIGS*/PORK: DESTINATION AND PERCENTAGE OF TOTAL PIG* SALES, 28, 214 MANITOBA 3.% MANITOBA PIG AND PORK EXPORTS TO OTHER COUNTRIES, Live Pigs Pork and Pork Products '1 '2 '3 '4 '5 '6 '7 '8 ' Datasource: Statistics Canada, AAFC R UNITED STATES 56.7% OTHER PROVINCES 23.9% PIG (UNDER 5KG) EXPORTS TO U.S. CANADA AND MANITOBA, Manitoba Canada JAPAN 7.% RUSSIA.8% S. KOREA 1.9% CHINA.4% MEXICO 2.8% MANITOBA 3.2% OTHER COUNTRIES 3.6% OTHER PROVINCES 18.7% 214 UNITED STATES 45.3% JAPAN 12.3% RUSSIA 3.5% S. KOREA 1.7% CHINA 5.3% MEXICO 7.1% OTHER COUNTRIES 2.9% * Manitoba-origin, pork and all pigs exported live converted to retail weight equivalent Weanling pig exports went up significantly over the years from 144,165 head in 199 to 4.48 million head in 27, but declined from 4.38 million head in 28 to 3.4 million head by 21. Improved demand for hogs led to exports rising to 3.21 million head in 212, but fewer pigs produced meant total weanlings shipped to American feeding operations fell to 2.51 million head in 213. The number rose slightly to 2.55 million head in 214. Over 79% of the weanling/feeder pig exports in 214 weighed less than 7 kg, 6.5% weighed 7-23 kg and 14.5% were in the 23-5 kg range. From 28 on, some American feeding operations were discouraged from feeding Canadian weanling pigs because many major U.S. slaughter plants refused to kill Canadian-born hogs due to mcool. Only eight American plants accepted Canadian-born hogs Data source: Statistics Canada, AAFC 3 Under 7 kg 7 to under 23 kg PIG (UNDER 5KG) EXPORTS TO U.S. BY WEIGHT, MANITOBA, to under 5 kg Datasource: Statistics Canada, AAFC 11

13 Hogs, 5 kg or more (mostly for slaughter including cull sows and boars, but excluding breeding stock) rose by 6.5% to 361,7 head in 214. These hogs were exported to 19 states in 214 with 95% going to plants in Wisconsin, Iowa, Nebraska, North Dakota and Minnesota. Shipments of pigs under 5 kg (weanlings/feeder pigs) went to feeding operations in 16 states with 98% going to Iowa (68%), Minnesota, South Dakota and Nebraska in 214. In addition, over 9,5 breeding stock were exported to ten countries in 214. Pork: Up until 23, Manitoba was the second-largest porkexporting province after Quebec (not including pork shipped to plants in other provinces and subsequently exported). However, from 23 to 26, Manitoba dropped to fourth-largest pork exporter after Quebec, Ontario and Alberta, rising to the third-largest pork exporter after Quebec and Ontario from 27 to 211 and back to second-largest after Quebec in 212. Manitoba was directly responsible for 23.7% of Canada s pork exports (by value) in 214, up from 23.3% in 213. In 214, Manitoba pork and pork product exports of million kg, shipped to 29 countries, were 3.5% below the record of million kg in 213. However, a new record value of pork exports of $88.3 million was set in 214, 18.3% above the previous record value of $744.3 million in 213. Over 41% of pork exports were frozen cuts, while almost 41% were fresh chilled cuts. Others French Polynesia Georgia Cuba North Korea Albania Kazakhstan Lithuania Trinidad Panama Uruguay Chile South Africa Costa Rica Mauritius Jamaica Singapore Colombia Macedonia New Zealand Angola Australia Hong Kong Russia Philippines Taiwan Mexico China, P. Rep. South Korea United States Japan MILLION DOLLARS (CANADIAN) Datasource: Statistics Canada, AAFC MANITOBA PORK EXPORTS BY COUNTRY VALUE, 28, 21, 213, 214 AVERAGE PRICE* OF MANITOBA PORK BY IMPORTING COUNTRY, 21, *Value FOB port of exit, including domestic freight charges to port (low C$ vs US$) In recent years, Manitoba processors decreased pork exports to the United States and increased exports to other countries, but the situation changed in 211. Exports to the United States were down by 79% (by value) in 29 and by 3% in 21, when less than 2% of total Manitoba pork exports went to the United States. However, in 211, and 214, exports to the U.S. rose to 15%, 25%, 25% and 26% of the total pork export value respectively. Japan is Manitoba s largest and most lucrative pork market by far. More than 43% of Manitoba pork exports (by value) and 29% (by weight) went to Japan in 214 with more than 9% (by value) going to Mexico, over 8% to Russia and almost 7% to China/Hong Kong. The average price of pork exported to Japan is much higher than for any other country. It appears that about one-quarter of the pork (by retail weight) produced by Manitoba plants in 214 was shipped to other provinces, such as Ontario. Prices and Profit World pork demand, demand for pigs and pork in the United States and the Canada-U.S. exchange rate are JAPAN U.S. MEXICO AUSTRAL. RUSSIA N.Z. S.KOREA PH'PINES CHINA/HK TAIWAN Datasource: Stataistics Canada, Agriculture and Agri-Food Canada IMPORTING COUNTRY Data source: AAFC MANITOBA AND U.S. HOG PRICE DIFFERENCE 2 TO MANITOBA FARM PRODUCT PRICE INDEX CROPS AND LIVESTOCK BY MONTH, '5 '6 '7 '8 Data source: Statistics Canada Total Crops Livestock/Products Pigs '

14 major factors in pig price determination in Manitoba. The United States is still Manitoba s largest market for pigs and is a major competitor in foreign pork markets. A lower-valued Canadian dollar relative to the U.S. dollar raises the value of Manitoba pig and pork exports to the United States as well as making Manitoba pork more competitive with American pork in the United States, Canada and foreign markets, but increases the costs of imported farm inputs from the United States. Slaughter hogs: Over the years, the introduction of new and different pricing grids by Canadian hog processors has meant there is no longer a defined standard or "Index 1" hog across Canada, even though some provinces continue to use this term when quoting a base price. The various formulae used by Canadian processors to pay producers for their hogs are based on U.S. prices and the exchange rate. No prices are based on only Canadian variables. In order to compare prices with previous years, the Index 1 hog price is used in the graphs. The 1.5% decrease in American pork production as well as improved demand contributed to an 18.7% rise in U.S. hog prices in 214. A Canadian dollar value averaging 9.5% below the American dollar helped raise average Manitoba hog prices in 214 to 23.4% above the 213 level. The average Manitoba slaughter hog price in 214 was close to $219/1kg, a new record, compared to $178/1kg in MANITOBA INDEX 1 HOG PRICE BY MONTH ' 2 ' 4 '6 ' Datasource: MAFRI: Manitoba Markets y =.46x The price trend line shows almost no change over 3 years - production efficiency offset lower prices in constant dollars MONTH Weanling pigs: The initial reaction to mcool by many American feeding operations was to stop purchasing Manitoba weanling and feeder pigs in 28. But other feeders continue to buy high-quality Manitoba pigs and some Manitobaowned pigs are being finished in the United States. Average export prices for weanling pigs (under 7 kg) in 214 were up by 44.4% from the previous year, prices for pigs (7-23 kg) rose by 54.5% and prices for heavier pigs (23-5 kg) increased by 67.5% from 213. Margins: Falling feed costs from mid-213 and higher hog prices meant margins from pig production improved significantly in late 213 and 214. Net cash farm income for pig producers rose from $346, in 211 to $51,8 in 213 and is estimated to have been even higher in Average Spot Price 1 Average Contract Price 5 U.S. National Direct Delivered MONTH Datasource: MAFRI: Manitoba Markets CYCLICAL CHANGES IN THE HOG-BARLEY RATIO MANITOBA, E, ALBERTA MONTHLY AVERAGE PRICES OF 5 KG PIGS MANITOBA, Over 65% of total farrow-finish operation input costs in 213 was feed. Although often used, the hog-barley ratio is not a true indicator of profitability as producers use feeds other than barley, such as corn. The hog-barley ratio shows a downward trend since MANITOBA ALBERTA In 213, according to Statistics Canada, about 3% of pig farms had zero or negative net operating income (33% in 212), while 35% had over $1, net income (45% in 212) ''1'2'3'4'5'6'7'8' Data source: AAFC for Alberta, author s estimates for Manitoba The average net operating income per pig farm was over $165, in 213, down from $256, in 212, but likely to be significantly higher in

15 Mandatory U.S. Country-of-Origin Labelling: (introduced September 3, 28, taking full effect on March 16, 29) Beef (including veal), pork, lamb, chicken or goat must bear a COOL label if it is sold at retail, is a muscle cut or is a ground product. COOL allows for four separate labels: - one for an all-u.s. product, - a second for a product of the U.S. and other countries (can be used for Manitoba weanlings fed in the U.S.), - a third for pigs from another country shipped directly to a U.S. processor (can be used for Manitoba slaughter hogs), and - a fourth label for a product of other countries (such as Manitoba-produced pork). Pigs, used for pork which is significantly processed or sold to the food service trade or exported are exempt from COOL. The COOL rules force U.S. processors to segregate pigs from Canada, Mexico and the United States at their facilities, which adds to costs. Because of this, some major pork processors such as Smithfield Foods have decided not to kill Canadian-born hogs. Tyson Foods, with about 18% of United States pork production, does slaughter Canadian-born hogs. In mid- 29, Canada filed a complaint with the World Trade Organisation (WTO), as did Mexico soon afterwards. The two countries argued that mandatory COOL was an illegal, nontariff trade barrier which gave U.S. products unfair advantage over products from Canada and Mexico. In late May 211, a WTO panel issued a preliminary ruling, charging that mandatory COOL violates WTO trade standards. The WTO panel also ruled that COOL requirements do not meet the U.S. stated objective that the labelling law informs and helps U.S. consumers make purchasing decisions regarding the origin of meat, produce and other products covered by COOL. On December 21, 211, the United States requested that the 6-day time period given for the U.S. government to appeal the ruling be extended to March 23, 212. The U.S. government announced on March 23, 212 that the WTO ruling would be appealed. In response to the appeal by the U.S. government, the WTO decision on June 29, 212 agreed with findings in favour of the Canadian livestock industry, farm families and North American economies that COOL is discriminatory. On August 21, 212, the U.S. informed the Dispute Settlement Body (DSB) that it intended to implement the DSB rulings in a manner that respects its WTO obligations and that a reasonable period of time is needed to do so. On December 4, 212, the Arbitrator said he had determined that a reasonable period of time for the U.S. to implement the recommendations and rulings of the DSB is 1 months from the date of adoption of the Panel and Appellate Body reports, that is until May 23, 213. At that time the U.S. came out with even more complicated labelling rules, which Canada challenged. The American Meat Institute also challenged the COOL rule. On March 28, 214, the court denied a preliminary injunction against enforcing COOL and found that the meatpacking industry s efforts were unlikely to succeed on the merits of its claims. On October 2, 214, WTO again sided with Canada and Mexico. Following an appeal, in mid- May 215, the WTO upheld its earlier ruling. The two countries can impose retaliatory tariffs on American products if COOL is not revised or repealed. And the six-year saga continues. 14

16 PIG INDUSTRY STATISTICS R 214 P PIG FARMS (inc. non-commercial): 1, (farms, 51+% of income from hogs): Average no. of pigs per farm on July 1 2,695 2,989 3,48 4,433 4,863 4,922 5,62 5,355 PIGS ON FARMS ON JULY 1: Sows and bred gilts ( ) % of Canada Boars ( ) Market pigs ( ) 2,63.6 2, , ,49.4 2, , , ,627.6 Total pigs ( ) 3,5. 2,84. 2,675. 2,815. 2,845. 2,835. 2,86. 2,945. % of Canada PIG PRODUCTION ('): 9,45 9,15 8,85 8, 8,5 8,15 7,4 7,5 % of Canada Annual production change %: VALUE OF PIG PROD. ($ million): ,225 PIG CASH RECEIPTS* ($ million): E ,25 % of Canada *(minus levies,sl. error) NET MARKET INCOME/FARM ($ ) N/A NET WORTH ($ ): 2, , , , ,27.6 N/A 5,995.4 N/A PIG PRICES: Average All-in hog ($/1kg): Average Index 1 hog ($/1kg): Average pig: under 7 kg ($/pig): Average pig: 7 up to 23 kg ($/pig): Average pig: 23 up to 5 kg ($/pig): HOG SLAUGHTER: Inspected slaughter in Manitoba (') 4, ,86.8 5, , ,368. 5, , ,51.2 % of Canada Mb-origin slaughter in Canada (') 3, , , , , , , ,362.1 % of Canada Average warm carcass weight (kg): PORK PROD: (million kg carcass) EXPORTS: Total Pigs <5kg - ( ) 4, , , ,42.4 3, , , , ($ million) Pigs <7kg - ( ) 2, , ,32.3 2,63.3 2, ,115. 1, , ($ million) Pigs 7 to <23kg - ( ) ($ million) Pigs 23 to <5kg - ( ) 1, , ($ million) Hogs 5+kg - ( ) 1, , ($ million) Pork/products** - (million kg) ($ million) ** includes all pig fat and sausage casings IMPORTS: Pigs - ($ million) Pork and products - ($ million) CANADIAN CONSUMPTION: Pork (carcass wt. kg/person)

17 PIG AND PORK INDUSTRY FLOW CHART, 214 SUPPLIER JOBS: 1,5 INDIRECT JOBS: 3, SWINE GENETIC COMPANIES LABOUR (person-yrs): PAID: 2, FAMILY/OTHER: 5 ANNUAL OPERATING/ CAPITAL COSTS: ($ million) TOTAL: 96 FEED: 555 OTHER OP: 19 FIXED: 125 LABOUR: 9 MANURE VALUE: $4-5 MILLION IMPORTS (value): BREEDING: $165, INTERPROV. IN: N/A INTERPROVINCIAL OUT: (head) SK/ON/AB:.2 MILLION 55 PRODUCERS PIG INVENTORY ON JULY 1: 314,1 SOWS AND GILTS 3,3 BOARS 2,627,6 MARKET HOGS 2,945, TOTAL PIGS TOTAL PIG PRODUCTION 7.5 MILLION HEAD $1.225 BILLION COMMERCIAL PIG SALES: 7.48 MILLION HEAD $1.223 BILLION BROKERS EST. FEED INPUT: (million tonnes) BARLEY:.7 CORN:.2 WHEAT:.5 CANOLA MEAL:.1 SOYMEAL:.2 DRY PEAS:.2 OATS.2 INVENTORY CHANGE: 15, HEAD LOCAL/FARM KILL: 2, HEAD SK export via MB. M PIG EXPORTS: (head) < 7 KG: 2.1 MILLION 7-23 KG:.17 MILLION 23-5 KG:.37 MILLION > 5 KG:.37 MILLION TOTAL: 2.92 MILLION TOT. VALUE: $286.7 M INTERPROVINCIAL IN (head).72 MILLION PORK/PROD. IMPORTS: 17 MILLION KG $89 MILLION MANITOBA FRESH & PROCESSED MARKET: 15% FED/PROV INSPECTED SLAUGHTER IN MANITOBA: 5.5 MILLION HOGS (MB-ORIGIN 4.36 MILLION) 49 MILLION KG (DR.WT.) 38 MILLION KG (RETAIL.) FRESH & PROCESSED PORK (RETAIL WEIGHT) 135 MILLION KG PORK EXPORTS: 262 MILLION KG $88 MILLION LABOUR (person-yrs): IN PLANT: 4,5 INDIRECT: 2,6 OTHER PROVINCES FRESH & PROCESSED MARKET: 85% Data source: AAFC, MAFRD, Manitoba Bureau of Statistics, Manitoba Pork Council, Statistics Canada, author s estimates 16

18 MANITOBA PIG EXPORTS TO UNITED STATES, 214 (thousand head) Total Pigs: 2,97.9* W A.7 MT 1.2 ND 6. SD 89.6 MN WI 24.2 MI 5.7 NE 5.9 IA 1,843.6 IL 14.9 IN OH 4.4 PA.1 CA 5.2 C 1.2 KS 3. MO KY.4 TN 3.4 OK.7 TX 15.5 Datasource: USDof C, Statistics Canada, AAFC No breeding stock to U.S., sales of <2 pigs to UT,VA and AR excluded SOWS ON FARMS BY PROVINCE, July 1, 214 (Thousand head) Total Sow s : 1,195.3 Atlantic Prov inces 19.7 B.C. 8.7 Alberta Manitoba Sask Ontario 32.7 Quebec Datasource: Statistics Canada