Quebec offering pork producers money to exit industry in bid to restore market balance

Some pork producers in Quebec are being offered money to close up shop as part of a provincewide strategy to cut annual production by one million hogs.

The temporary measure is set to be approved by Quebec’s agricultural and food markets board in the coming days or weeks. It will cost around $80-million, an expense that will be borne by both producers and Quebec taxpayers. But despite the hefty price tag, advocates say the move is necessary to align the supply of pork with the province’s declining processing capacity, and prevent the price of the meat from falling further than it already has.

“We are in a crisis,” said Louis-Philippe Roy, president of Les Éleveurs de porcs du Québec, the union that sells all pork produced in the province. “We’re really trying to find a new solution to be in a better place in one year, two years, three years.”

In April, Canada’s largest pork processor, Olymel, announced that it was closing its plant in Vallée-Jonction, Que., which will result in the elimination of almost 1,000 jobs when the facility folds in December. It will be the fifth plant shutdown for the company in recent years.

Olymel laid the blame with its $400-million in losses over the past two years. The shutdowns are part of a strategy to cut the company’s production from 140,000 hogs a week to 80,000.

But the crisis didn’t start with Olymel.

Quebec is Canada’s largest producer and processor of pork, responsible for 31 per cent of the country’s output. Across Canada, the sector exports 70 per cent of what it produces. Canada’s major pork export markets are in Asia.

The pandemic, labour shortages and – crucially – booming growth in China’s pork industry have combined to make a difficult business environment for Quebec producers. Pork prices have dropped 15 per cent in the past year. Simultaneously, production costs and interest rates have climbed.

“This is a tough time,” Mr. Roy said. “And the crisis isn’t finished yet.”

The first stage of the production-cut program is voluntary. Those that agree to participate must leave the industry for a minimum of five years. Two-thirds of the cost will be covered by Farm Income Stabilization Insurance, a taxpayer-funded provincial program that, when market prices are low, covers the costs of production. One-third will be paid by Les Éleveurs de porcs du Québec.

This will mean that every producer who remains in the sector must pay $2.86 to the union for every hog they sell, to cover producers’ share of the expense, according to reporting by La Presse. The pool of cash will be used to pay producers who leave.

“We understand we need the taxpayer helping us‚ but at the same time we bring lots of money, too,” Mr. Roy said.

When asked to comment on the cost of the program to taxpayers, Quebec Agricultural Minister André Lamontagne’s office said in a statement that the government supports the industry because of its contributions to food sovereignty, global food production and the provincial economy.

There is no guarantee that enough pork producers will volunteer to join the program. If too few of them retire, then Les Éleveurs de porcs du Québec will mandate that all producers cut production by a set percentage.

In an industry where margins are already slim and scale is the difference between profit and loss, this has some producers concerned.

“This is not going to increase efficiency if every producer has to bring productivity down,” said Vincent Breton, whose business, called DuBreton, operates four processing plants, including one in the United States, as well as two feed mills and several farms in Eastern Canada.

Because DuBreton is a direct-to-market organic producer and processor, it is not eligible for the production-cut program, but does have to pay into it. Mr. Breton sees the program as a symptom of a system that is too regulated.

“Because of the collective system, it affects everybody,” he said. “If Starbucks closes the store, usually the small café down the street isn’t paying for Starbucks to close the store.”

Nevertheless, change is necessary, said Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University.

“If you have too many players, you have to think about restructuring,” he said. He noted that there are 2,400 producers in the province.

According to Mr. Charlebois, Canadian pork producers need to transition away from international markets and think more about the domestic market. He predicted that demand from China will dry up.

He said more government assistance will be needed in this transition, and that the help should be on par with assistance offered to other industries.

“Ottawa is willing to write a bunch of cheques to support supply managed sectors like dairy, but not a free-market one like pork,” he added.