This Is Not A Happy Time For Pork Producers

NPPC president predicts more hog producers will go out of business this year because of low prices and continued high input costs.

Published on: Jun 4, 2009

Strong export demand for U.S. pork provided significant support for hog prices in 2008. Especially demand from big buyers like Russia and China. But both of those countries have now embargoed imports of U.S. pork in reaction to the recent H1N1 scare.

 

Cindy Smith, administrator of the USDA Animal and Plant Health Inspection Service, spoke about this issue at the World Pork Expo in Des Moines on June 3. She says such embargoes "are more about politics and protection of domestic markets than science."

 

Smith says she had "difficult discussions" with Russian and Chinese ag officials last week at an international agriculture meeting in Paris. She told the World Pork Expo audience this week that she was unable to report progress on getting those nation's bans lifted.

 

16 foreign countries are still banning U.S. pork

 

Don Butler, a North Carolina hog farmer who is president of the National Pork Producers Council, in remarks to open the 21st annual World Pork Expo, noted that "This is not a happy time for pork producers."  Since September of 2007 hog producers have been losing about $20 a head, he says.

 

The H1N1 flu scare this spring, which unfortunately was called swine-flu by the media, is also aggravating the situation. It caused consumer pork demand and hog prices to drop. "We have been able to get the message to consumers that U.S. pork is safe to eat, and U.S. pork demand has come back up since the flu scare hit this spring," he notes. But exports of U.S. pork are still hurting, as there are still 16 foreign countries that are continuing to have bans or restrictions on their import of U.S. pork.

 

Butler agrees with presentations made by University of Missouri economist Glenn Grimes and Iowa State University economist Bob Wisner that the U.S. hog industry needs to cut back on production. Grimes says the U.S. sow herd needs to be reduced 5% to 10%.

 

More producers will go out of business in 2009

 

Butler predicts that an unspecified number of producers will go out of business this year because of low prices and continued high input costs.  "Just as things were starting to look up a little with hog prices this spring, we had the H1N1 flu virus scare, which became a media frenzy worldwide. Consumer demand for pork suffered, and that has hurt hog prices," says Butler.

 

He says that after a dip in consumer demand for pork, U.S. demand has "about returned to the pre-H1N1 levels." But hog producers are still fighting a losing economic battle. Since last September, says Butler, hog producers have lost an average of $23.11 per head.

 

The main culprit has been rising production costs, particularly for feed, he says. The average price for hogs has gained slightly in the past three years, from $63.87 per hundredweight in 2006 to $67.18 per hundredweight last year.

 

But costs have risen faster, from $52.57 per hundredweight in 2006 to $76.18 per hundredweight last year, primarily due to record high corn and soybean prices. Iowa hogs consume about one-third of Iowa's corn and soybean crops.