Hit by a “perfect storm”, the Quebec hog industry is reducing its production capacity by 1.1 million hogs, or one-seventh of its current productivity, to stay afloat in the face of strong headwinds. “Difficult months are ahead,” warns the president of the Éleveurs de porcs du Québec, David Duval, who adds that “producers have a choice to make”: cling to the ship or abandon it.
This is an unprecedented decline in the history of the Quebec pork industry. Never has this industry, which has made Quebec one of the largest exporters on the planet, had its production capacity reduced so much.
This reduction is confirmed in the new hog marketing agreement presented Tuesday in Quebec. The document “is definitely in the image of a sector in crisis”, as David Duval himself admits, “where everyone must make concessions”.
The agreement establishes a new pricing mechanism “which has the effect of sharing the risks and the benefits” between pork producers and their buyers. The basic price will now correspond to 85% of the reconstituted value of a pig carcass to move towards 88% by 2025.
“That represents 4.5% less than the market price,” explains the president of the Éleveurs de porcs du Québec, a loss of $12.50 per head compared to the average price over the last decade.
In return, part of the profits generated by Olymel from Quebec pigs will go back into the coffers of breeders here. Under the agreement, all of the buyers agree to pay an additional price equal to that paid by Olymel.
This proposal will provide the “predictability” that has become necessary, according to Yanick Gervais, CEO of Olymel, to “reestablish a robust investment plan” and ensure the competitiveness of the Quebec pork industry.
“Leave or Stay”
Quebec is a heavyweight on the world pork market, but increased international competition, the vagaries of the Chinese market where 46% of Quebec exports end up, the pandemic, the labor shortage and the war that raging in Ukraine has inflicted blows on the industry from which it is struggling to recover.
In this context, Olymel, which processes 80% of pork in Quebec, announced in February the closure of two of its factories and its intention to process one million fewer animals. Last Friday, the ax fell on a fifth Olymel facility in a few months, this time in Vallée-Jonction, sacrificing 994 workers at the stake of a restructuring plan that had become imperative, according to Yanick Gervais, due to the vagaries of the international market.
“We wanted to remove risk from our model and we wanted to remove a little bit of dependence on the export market,” he said.
This reduction in production represents a blow that producers have not had the leisure to dodge. “It’s a choice they had to make and we have to live with it,” says David Duval, president of Les Éleveurs de porcs. The Vallée-Jonction plant will close three days before Christmas, granting a reprieve of a few months to slaughter 624,000 pigs among the 1,105,000 animals the industry wants to dispose of.
The management of these pigs by Olymel will cost breeders approximately $20 per head. “It’s an amount to slaughter hogs,” explains Mr. Duval, [afin d’] prevent producers from sticking with it. »
Still to ease the shock of the drop in production in Quebec, the processing giant agrees to stop sourcing from the neighboring province, a problem that has been the source of major disputes between Olymel and breeders in the past. “It’s the end of Ontario pigs entering Quebec,” rejoices the representative of the latter. The precedent we are creating today will not be lost. »
Despite these gains, many breeders will have to lower their flag. “Producers have a choice to make: leave or stay,” says their president. Those who prefer to throw in the towel will be entitled to compensation under a voluntary withdrawal program, the outlines of which remain to be defined.
“A lot of suffering ahead of us”
The Minister of Agriculture, André Lamontagne, welcomed an agreement which, according to him, opens a new era of collaboration between pork producers and their buyers. The last negotiated agreement dates back to 2008, an exception in often tense relations where the rule wanted rather that the two camps find themselves in arbitration to reach a compromise.
The new agreement, according to the Minister, “has the potential to lay the foundations to ensure the sustainability of our sector in Quebec and, subsequently, its prosperity”.
Others add a few caveats to the picture. “It’s a bit like coming to tell you that I’m going to amputate both of your legs, before changing my mind and telling you that I’ll only have the right foot to be cut off, illustrates Maurice Doyon, professor in the Department of Economics agri-food and consumer sciences from Université Laval. You are relieved, but you still lost your right foot. »
According to this observer of the Quebec agricultural world, the years to come are going to be difficult. “What is the future? Vallée-Jonction is going to close, that village is going to lose 1,000 jobs, that pork production is going to drop by 1.1 million head. It will hurt very, very badly. These farms, they are in villages, they generate economic activity. There is, he concludes, much suffering ahead of us. »