1. COOL: Potential Economic Implications For the Canadian and US Pork Industries Larry Martin

2. Presentation Outline COOL Project I: Impacts in Canada – Manitoba Pork Research COOL Project II: Impacts in the US – Prairie Producers, Ontario, and CPC Research – Authored by GMC and Virginia Tech

3. COOL I: Impacts in Canada

4. Most Important Point The US represents 35-40% of the market for Cdn hogs/pork COOL objective is to reduce or eliminate imports

7. Background It will cost more for US packers to handle Cdn hogs – Trace back to farm of birth – Logistics after slaughter – Many are not going to take Cdn hogs – Undecided Cdn pork is likely okay – Not a given

8. US $/Head Procuring Canadian Hogs or Pork Not Procuring Canadian Hogs or Pork Difference in Costs for Canadian or Not Producer 110 Packer5-1023-8 Retailer 2 2 0 Total 8-1353-8 COL Cost Current Thinking

9. If Cdn hogs cost more to handle, they will not be purchased, or they will be discounted by the extra costs.

10. How Do We Get At Impacts? Assume they don’t get exported Ave Manitoba farm size No price effect

11. COL Implications: Negative At risk: – 450 farms – $350 million farm income – Six feed mills – Market for 250,000 acres Or $750 million and up to 3,000 farms Manitoba is directly vulnerable

12. COL Implications Neutral/Positive: – US system is not rigorous or systems not costly. – US packers figure out how to handle Cdn hogs without difficulty. – Business as usual.

13. COL Implications Positive: – US burdened with costs – Cdn pork is successful Cda needs finishing and packing capacity Value added, jobs, exports….

14. Capacity Expansion Finishing space (1 million) Packing (58,000/week) Capacity expansion has precedent

15. COOL II: US Impacts

16. Premise COOL’s purpose is to impede trade COOL may achieve that purpose What will be the results if the US is short 6 million head?

17. 1 st : Weaner/Feeder Imports

18. Why do weaners/feeders go South? Sound economic reasons High quality Structural evolution in hog belt They have strong demand and we have supply

19. W/F Importers Variety of methods Final user is independent farmer/finisher – Mostly in Iowa – Average producer

20. What if 3.7 million are not available? Jeopardize the livelihoods of 1,000+ farmers Farm income of $450m Economic spin-offs (value added)

21. The hogs will eventually be produced in the US, by…. Few integrators replace many farmers Increased health and disease risk

22. 2 nd : Market Hog/Packer Impacts

23. Why do Market Hogs Go South? Sound economic reasons – Price – Capacity (here and there)

24. What will happen if 6M hogs don’t go south Eliminate US packing capacity – 3-4 plants Increased Cdn pork imports – 1 plant Lost jobs and $4b in economic activity Increased manure production – 2.1 million tons once lost production is replaced

25. What about price impact? US production will increase Cdn production will decrease, but not by as much as US increases Net increase of 4 million head post-COOL – 6mil cdn hogs produced in us – Cda reduce production 2 mil Hog prices will be 30% lower than they would have been without COOL.

26. Summary US Impact Lower prices Fewer farmers Bigger integrator share Lost jobs, plants and economic activity Security risk