Good morning. Thank you for giving Manitoba Pork Council the opportunity to share some views on the challenges presented by African swine fever to the pork sector in Manitoba. You’ll have already heard from industry experts, including the Canadian Pork Council, on the national perspective, so I will provide some more local comments.
Manitoba Pork Council was created in legislation and regulation over 20 years ago to represent the interests of pork producers and to deliver programs and services of benefit to build the sector. Our 600-plus producers have over $2 billion invested in buildings and equipment—based on replacement cost—produce over eight million pigs annually, create employment for about 13,000 Manitobans, sell over three million weanlings into Iowa and Minnesota, and export about $1 billion in meat products globally. We ship about $500 million of pork to Japan alone. At any moment in time, we have about 3.4 million pigs on farm.
In terms of the impact of ASF, to put it bluntly, if we get a case of ASF in Manitoba, our industry could potentially be worthless overnight. We depend almost entirely on exporting pork to Japan, the United States, Mexico and China. If these markets deny entry of our products, we have no other markets of similar size to switch product destination.
A nightmare scenario is that all shipments will cease overnight. Our processing plants can only operate for a couple of weeks before they run out of cold storage capacity. The plants would have to stop taking delivery of live animals. They currently process about 100,000 per week of market hogs; some come from Saskatchewan. Our farms are currently operating with two to three days of feed on hand. Feed companies will start to demand payment in cash or cheque before delivery. Financial institutions will be unwilling to extend further operating funds as their security will now be worthless. Our U.S. contracts for weanling supply will be terminated at the border. Over 75,000 weanling pigs per week will no longer have a home as there is no spare finishing barn capacity in Canada. Within a week, our barns will no longer have the capacity to hold an expanding inventory as sows continue to farrow each day and our market hogs continue to grow in size and weight.
Our producers will have to start to drastically reduce the current inventory within seven to 10 days of the first case, involving at least 200,000 to 400,000 animals per week. With no foreseeable cash flow, producers will start staff layoffs for the 2,500 employees on farm, and the processing and service sectors will have to consider their staffing levels depending on their financial reserves.
I'll now address steps to deal with disaster and recovery.
Manitoba Pork Council believes the industry can recover to full production and economic activity within a reasonable period of time if certain key steps are followed. One is prevention. We need to create a mentality and system with our neighbours to the south of a “fortress North America” approach to disease management, to prevent diseases like ASF from getting onto our farms. On-farm biosecurity must be a real focus by all parts of the industry, not just the producer. In Manitoba, we have worked hard at this since 2012 with some innovative programs and regulations. More needs to be done to harden our on-farm biosecurity. Some financial incentives to encourage more investment would be appreciated.
Two is preparation. We need an agreement with Japan and South Korea that would allow a smaller primary control zone within a matter of a couple of weeks. Cash is king in the pork business. Cash is critical on hog farms and far more important than in most other farm enterprises. If pork shipments cannot restart for two to three months and we must start an orderly herd reduction program in Manitoba, producers will need access to cash by day three. Rough estimates, based on costs of production for 2019, show that we would need $40 million to $50 million per month to buy feed and $10 million to $15 million per month to pay wages. This is excluding any cash for other costs such as energy, transportation, borrowing costs and so on. It is fundamental to business recovery that we preserve the sow herd. This alone would require $10 million per month.
Funds will also need to be in place in order to proceed with a planned and orderly humane herd reduction. We are looking at a combination of centralized euthanasia sites and some on-farm herd reductions. This will be a very difficult program to administer and staff, let alone deal with the actual cash costs of implementation. As an aside, we don't want to see the scenario where producers want to be declared infected because the CFIA compensation is the only financial assistance out there.
Three is response. ASF is a relatively slow-moving disease, which should allow our production systems to isolate and eradicate any outbreak without it spreading as it has done in China. Europe has the disease and has been able to contain and control the disease.
Still regarding response, CFIA will play a key role in the control and eradication of the disease on the infected farm. The big one is that the provincial government will be the lead partner in dealing with the animal welfare issues on the vast bulk of the farms outside the CFIA eradication area. Manitoba Pork Council is working closely with officials to try to develop an emergency disease management plan for the worst-case scenario and then other options, depending on the extent of the market collapse. It is essential that government and industry work closely together and not in silos.
Four, regarding recovery, the ability of the pork sector in Manitoba to recover will depend on the following: (a) exports to Japan, the United States and China is reopened in two to three months; (b) the basic sow herd in Manitoba of 350,000 sows is retained and breeding is restarted; and (c) the workforce is retained through an agreement with the national employment insurance program. If these can be set in place, the pork sector in Manitoba could be in full production within 12 months.
Producers will have suffered significant financial losses that are not covered by the existing business risk management programs. New programs to encourage reinvestment will be needed to stabilize cash flows and loan guarantees to rebuild stock until they can get returns from the sale of animals. Export markets should be very attractive in terms of market prices, as the drop in total world production caused by the losses in China will have a knock-on effect. World pork demand and consumption will not have changed much because of the lack of spare production capacity in chicken and beef to fill this void.
Five, our key asks are to invest in some programs to create a “fortress North America” and harden our on-farm biosecurity. Create in advance the programs that will address the immediate financial crisis and the animal welfare challenges, protect the basic sow herd numbers to keep the critical mass of numbers to rebuild the industry, and then assist the industry to recover as an important sector of the economy. Finally, it is critical to get trade flowing normally within six to eight weeks.
Thank you for letting me sharing these.