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U.S. duty hits hog farmers where it hurts

by Paul Beingessner
Canadian farmer, writer

(Sunday, Oct. 24, 2004 -- CropChoice guest commentary) -- On October 15, the United States government leveled yet another blow at Canadian agriculture. Prompted by a complaint by the National Pork Producers Council (NPPC), the Commerce Department put a 14 percent duty on Canadian hogs imported into the U.S. The importer would pay the duty, and this will effectively lower the price Canadian producers receive.

The basis of the complaint was dumping - the claim that Canadians are selling hogs to the U.S. below the cost of production, or below what they sell for in Canada. An earlier complaint by American hog producers had claimed hog farmers in Canada were unfairly subsidized. The U.S. Commerce Department threw that complaint out, saying that, yes, Canadian hog farmers were subsidized, but the subsidies were available to all farmers and were not illegal under trade rules.

The NPPC is pretty blunt in its assessment of the situation. It says its goal is to get Canadian hog farmers out of the business and to raise more hogs in the U.S. Right now, Canada exports about 7 million hogs a year to the U.S. This is about 7 percent of their total yearly kill.

Interestingly though, most of these pigs, about 5 million, are weanlings and feeder hogs. Obviously, not all American pig farmers support the NPPC complaint, since many farmers in the U.S. have built a business around raising Canadian pigs to slaughter weight. Iowa alone imported 2.7 million young pigs in 2003. This amounted to 10 percent of Iowa's production.

The American version of all this is pretty simple. According to the NPPC, the Canadian subsidies to pork production have caused the Canadian hog industry to expand at a time when the American industry was contracting due to low prices. The Canadian industry, it claims, was insulated from the market effects of low prices by government assistance.

There is indeed an amount of truth to that claim. When prices have fallen, the provincial and federal governments have devised a number of schemes to keep hog farmers in business. One of the most lucrative was AIDA. Of course, the truth is that almost all agriculture commodities are subsidized at some time of another. This year, crop insurance will be the main thing keeping some prairie farmers from going out of business. Crop insurance is, of course, partly subsidized.

But the rest of the truth is that American farmers are in exactly the same boat as Canadian ones. Their massive subsidies to agriculture are aimed at keeping them in business when the market fails to do so. And, as Canadian farmers have pointed out, one of the reasons Canadian feeder pigs pour into the U.S. is the very cheap corn and soybeans, courtesy of the vast American subsidies to that sector.

The Americans might claim that their hog sector is not so highly subsidized, but the fact is that all agriculture is intricately intertwined. Cheap feed grains make it marginally profitable to raise hogs. U.S. refusal to accept Canadian cattle has driven the price down to where Canadians are eating more beef and less pork, leaving more pigs to be exported. And so it goes...

The fact is, agriculture is a mess for the most part. We have too much product chasing too little market, and every new crop variety that increases production, every new technology that makes raising animals cheaper leads to greater production as prices drop, and farmers try to increase production to compensate. Meantime, 800 million people in the world go to bed hungry.

If you dropped in from another planet, you'd have to think Earth was populated with and run by lunatics.

(c) Paul Beingessner (306) 868-4734 phone 868-2009 fax beingessner@sasktel.net