Since its creation in the 1970s, ASRA, a collective insurance which pays compensation when the average selling price of a product is lower than the stabilized income, has enabled many producers to maintain their activity and make the sector persistent.
The program is established on the basis of the production cost of a typical farm, obtained by surveying businesses every five years.
However, this no longer seems suitable for current farms, we can read in theProspective study of the pork industry in Quebec, published on May 14. This was carried out by the firm Raymond Chabot Grant Thornton at the request of the Minister of Agriculture, André Lamontagne.
In 2023, ASRA’s total compensation to pig farmers was $381 million. Compared to 2022, the increase in compensation per pig jumped by 61%.
At the same time, contributions paid by breeders, who contribute 1/3 to the financing of ASRA, have seen a considerable increase. They increased from 46 million in 2022 to 75 million in 2023, due to the compensation offered in 2022.
The remaining two-thirds are paid by Quebec taxpayers.
An increasingly concentrated market
Over the years, pig farms have grown in Quebec. Independent producers today produce only 39% of Quebec pork compared to 61% for large companies.
In 2012, the proportion of pigs produced by large companies was 43%.
According to the authors of the study, ASRA contributed to the vertical integration of the pork industry and reduced competitiveness. “This may have favored a form of impoverishment of small agricultural producers and an enrichment of large companies or companies working for an integrator,” they underline.
Pork processing has also become increasingly concentrated in Quebec. In 2023, Olymel had 70% of the total slaughtering capacity in Quebec, while its market share was 50% in 2004.
Currently, there are only six organizations working in slaughtering which share market share.
Less revenue generated
This phenomenon is not specific to Quebec, specifies the study. “Concentration in the pork industry is a phenomenon observed on a global scale.”
However, in 2022, Quebec hog producers generated $26 in total operating income for every dollar of net program payments obtained. In comparison, this amount was $46 for Ontario and $52 for Manitoba.
“Compared to other Canadian provinces, Quebec is more heavily dependent on state support to ensure the financial sustainability of pig farming. More specifically, Quebec has the lowest operating profit in the country,” write the authors.
Export dependence
The Raymond Chabot Grant Thornton firm also highlights the “strong dependence” of Quebec farmers on pork exports. Around 70% of Quebec production is exported.
The authors recommend increasing food autonomy by increasing local consumption. This would reduce pork imports into Canada and therefore exports.
They also suggest diversifying the export markets for Quebec production to reduce. Quebec exports 35% of its production to the United States.
What future?
The results of the report do not surprise the president of the Éleveurs de porcs du Québec, Louis-Philippe Roy. Moreover, since this fall, the organization has already started thinking about the safety net. This will be spread over two years in order to make the best decisions for producers.
The president of Eleveurs porcs du Québec, Louis-Philippe Roy (Jocelyn Riendeau/Le Soleil)
“The last two years have been difficult since producers have agreed to help processors like Olymel. The ASRA came to compensate for the discounts granted by producers to processors,” he mentioned to Sunduring a meeting Thursday morning in Quebec.
Mr. Roy hopes that the next marketing agreement will allow better sharing of profits with processors.
“We understand what happened in the transformation, but we hope for a return. We hope that our help will allow processors to pay us the right price for the pork we produce.”
— Jean-Philippe Roy, president of the Quebec Pork Breeders
“We will always need the safety net due to certain variations that are impossible to control, but for us the important thing is to have efficient farms to depend as little as possible on ASRA. For this, it is necessary to support them in moving forward with investments. At the moment, producers are subject to the terms of ASRA,” he continued.
Some solutions
Here are some possible solutions noted by the authors of the study after discussions with stakeholders in the sector:
- Grant a fixed fee per pig which could be the equivalent of an amount aimed at covering regulatory and environmental requirements specific to Quebec.
- Take into account territorial particularities, such as higher costs in certain regions of Quebec, to grant financial assistance.
- Compensate breeders for regulatory requirements specific to Quebec.
