2025 Hog outlook: Recovery under threat due to potential trade barriers

If you squint hard at the year ahead and ignore outside influences – things look positive for the 2025 hog sector in Canada. Hog futures prices are strong, exports of market hogs and isoweans have been flowing to the U.S., and feed costs are lower than just a few years ago, all of which are leading to improved margins. However, domestic demand continues to soften, and the dual threat of tariffs and voluntary country of origin labelling (VCOOL) remain. With lots of writing about these already, we will dig into what margins could look like if tariffs are enacted and what the Canadian and global demand for pork looks like.

A weaker Canadian dollar and strong U.S. hog futures are contributing to the increased price forecast for the year ahead for producers across Canada, sitting above the 5-year average (Table 1). Any further depreciation of the Canadian dollar will provide a boost to hog prices received by farmers but may also raise costs of feed grains. We estimate that a 1% depreciation of the dollar increases hog farm cash receipts by about 0.6%. The baseline price forecast does not include the impact of tariffs.

Table 1: Hog prices remain elevated in July throughout the outlook period

If a 25% tariff is imposed by the U.S. on Canadian hogs, we project a decrease in hog prices by approximately 10% compared to the baseline forecast in the upcoming year (as shown in column 3 of Table 1). Despite this reduction, average prices would still be comparable to last year's levels and remain above the five-year average. However, producers who have recently increased their reliance on shipping live hogs to the U.S. market would face a more significant impact than those primarily engaged in the domestic slaughter market which is nearly at full capacity. Since 2017, hog slaughter at federal plants in Canada has only increased 1% while in Quebec and the Atlantic regions, slaughter rates have dropped by 16%.

Hog margins are benefiting from feed costs below the 5-year averages

Without tariffs in place, hog margins are looking positive for the year due to the strong prices and feed costs that are now below the 5-year averages, resulting in both Manitoba and Ontario farrow to finish operations showing their best margins in five years. However, if hog prices in Canada fall by 10% due to tariffs, margins retreat quickly back to near breakeven. Feed barley in Manitoba and corn in Ontario are projected to be up slightly from last year but are below five-year average (Table 2).

Table 2: Feed costs now tracking below five-year average

Canadian pork consumption plummeted in the first three quarters of 2024

While the words “demand” and “consumption” are often used interchangeably, they have different meanings. Demand indicates what the consumers prefer to buy, while consumption refers to what consumers actually buy. So, declining consumption does not necessarily equate to declining demand. Demand can be derived by controlling for price impacts including substitution and income effects, which is exactly what FCC demand indices attempt to do.

Pork demand has consistently been lower than consumption, indicating that consumers are buying it most likely as a cheaper alternative to beef and chicken and not necessarily because of a strong preference for pork (Figure 1). Both consumption and demand for pork were falling prior to Q3 2024, but the rate at which it declined quickened in the quarter as pork price inflation outpaced that of chicken, and it became even less palatable to consumers. The decline in pork consumption is particularly steep, with drops of 7% from Q2 and roughly 12% year over year.

Figure 1: Demand for pork in Canada is declining

Sources: Statistics Canada, AAFC, FCC Calculations

The decline in Canadian pork consumption presents a challenge for an industry striving to recover from several years of revenue and margin lows, particularly given the potential imposition of U.S. tariffs. The U.S. is Canada's most significant trade partner for live hogs and pork products. Could world demand for pork offset the apparent weakness in Canadian demand and the potential drop in our exports to the U.S.?

Global pork consumption is growing, albeit slowly

China, the world's largest pork market, has reached a plateau in consumption, which has only increased by 3% since 2018 (Figure 2). According to the USDA, Chinese pork imports are projected to increase by 8% this year, although this would still be the second lowest volume since 2015. China's modernized domestic hog herd has achieved near self-sufficiency, producing almost all the pork required by the country.

Figure 2: Global pork consumption is up slightly since 2018

Source: USDA PSD

Globally, pork consumption has risen by 2% during the same period. Other markets, however, have seen stronger growth. Mexico for example is up 33% during that time while South Korea is up 13%. Both countries growth in consumption is being driven partially by higher production domestically but also higher imports, including from Canada.

Canadian pork exports were up in 2024, but large exposure risk remains to the U.S.

The Canadian pork industry is reliant on exports as over 60% of our pork production is exported. Canadian pork processors export over 1 million tonnes of pork products globally on average and sold 2% more to international markets in 2024 compared to the 5-year average (Table 3). Japan, Mexico, and South Korea are three markets where Canada increased its sales during the year by double-digit percentages.

Table 3: Canadian pork exports were up in 2024 relative to 5-year average

One-quarter of Canada's pork exports are directed to the United States, which constitutes a significant portion and may be subject to tariffs in the upcoming year. To maintain similar export volumes to the U.S. in the event of a trade conflict, Canadian exporters may need to reduce their prices for the U.S. market. Alternatively, a depreciation of the Canadian dollar could make exports more competitive. Canada could also expand into other markets such as Mexico and South Korea, which also might impose tariffs on U.S. pork.

Bottom line

What was looking like a good year for hog producers, thanks to rising prices and lower feed costs, is now being threatened by changing U.S. trade policy. American tariffs, if enacted, are likely to lower hog prices, squeezing producers’ margins in the process. The upcoming vCOOL rules in the U.S. represent another challenge for Canadian exporters to overcome. So, exporters would do well to diversify globally and capitalize on strong world demand for pork, as they seek to offset the damage caused by American trade barriers.

Justin Shepherd

Senior Economist

Justin Shepherd is a Senior Economist at FCC. He joined the team in 2021, specializing in monitoring agricultural production and analyzing global supply and demand trends. In addition to his speaking engagements on agriculture and economics, Justin is a regular contributor to the FCC Economics blog.

He grew up on a mixed farm in Saskatchewan and remains active in the family operation. Justin holds a master of applied economics and management from Cornell University and a bachelor of agribusiness from the University of Saskatchewan.