June 19, 2009
A new marketing agreement signed by hog producers in Canada’s province of Quebec and seven of the province’s eight major pork processing companies may finally turn around the fortunes of Canada’s beleaguered pork industry, at least as far as pork from Quebec is concerned.
The four-year agreement, signed in May and scheduled to take effect in September, assigns a hog producer to an individual packer, establishing the foundation for a long-term relationship. The plan replaces the old virtual bidding system that had been in place for 20 years. The new agreement’s pricing mechanism will be based on the U.S. negotiated price for the day.
"This is a very large transition, a big change in philosophy," Bernard Verret, general manager of the Fédération des Producteurs de Porcs du Québec, told MEATPOULTRY.com.
Jean-Guy Vincent, president of the organization, said that under the new agreement, packers can specify the type of hogs they want, including fat and lean content. "We want to respond to the market," he said. "We think this new partnership between the processor and the producer brings a new vision to pork in Quebec."
Verret added: "It brings better coordinated marketing. In the old agreement, the packers and producers were not really connected. This is an attempt to improve the value of pork, a better way to extract value out of pork."
Both executives emphasized that the agreement was not imposed on Quebec’s pork industry by the provincial government in Quebec City nor by the Canadian federal government in Ottawa. "This is our own recognition that we had to change the basic relationship" between packer and producer, said Berret.
Quebec produces about one-third of Canada’s hogs and pork, with Ontario producing another third and the western provinces collectively also producing a third. Together, the industry has suffered two terrible years, with prices paid to producers far below the cost of production. Reasons include record input costs (feed and energy), a high Canadian dollar relative to the U.S. dollar, and aggressive pork exports by the U.S., which took market share from Canadian pork abroad.
Both Verret and Vincent emphasize that the new agreement applies to producers and packers in Quebec only, but they agree that other regions of Canada will be watching for the success or failure of the new agreement. "The new agreement is about a new relationship," said Vincent. "Other provinces may decide they need a new kind of relationship too."