Whether it's at the state, national or international levels, pork producers and their associations are scrambling to find solutions and relief for the financially stressed U.S. pork industry. The questions that simply no one can yet answer are will any of the actions work, will they be enough and what will the fall out look like?
At a conference call on Tuesday, representatives from the Minnesota Pork Producers Association, National Pork Producers Council and the National Pork Board, all tried to offer perspective as to the current state of affairs facing the industry and what they're doing to try to ease the financial pain. "U.S. pork producers have faced 22 months of losses," said Neil Dierks, NPPC's chief executive officer. "In March, producers had 40 percent equity left in their operations, as of May that was 32 percent to 35 percent."
It's an old song by now, but still an important one that the Type A H1N1 influenza virus outbreak in the human population and the virus' inappropriate "swine flu" label has severely damaged pork producers' market and any chance of a summer price recovery.
Said David Preisler, MPPA's executive director, "we've been working on getting our state legislators up to speed" about the conditions facing Minnesota's farmers and rural communities. MPPA also has a meeting scheduled for the first week in July with lenders who hold agricultural accounts. On hand will be an attorney to offer an opportunity for consultation and to seek solutions for lenders and producers alike.
Specific to addressing on-going H1N1-related challenges, Preilser points out that MPPA is working with University of Minnesota swine researcher, veterinarians within the state, as well as neighboring states to develop an plan to address a multitude of issues should the Type A H1N1 influenza virus find its way into the swine herd. So far, no U.S. hogs have been diagnosed with the virus. "That's a testimony to the producers and their commitment to biosecurity measures," said Chris Novak, NPB chief executive officer. "Pork is safe to eat." NPB has a number of advertising and retail promotional efforts planned from now through the fall months to promote domestic pork sales.
Of course, international trade is still requiring significant attention. Dierks explained that NPPC is working actively in Washington, D.C. to get international trade back on track, and he emphasized that the "U.S. Meat Export Federation, the White House and the U.S. Trade Representatives Office has been very active on this issue." Early in the H1N1 debacle, 27 countries officially or unofficially banned U.S. pork; today that is down to 10, with South Korea banning U.S. live-hog imports. Most significantly, Russia's and China's bans remain in place. "H1N1 may have been the trigger point (for the bans), but other issues linger," said Dierks.
NPPC is working on USDA to purchase another $50 million worth of pork for its feeding programs, such as food pantries, which have seen a 30 percent demand increase this year. This is above and beyond the $25 million purchase request made and accepted in March, which is now working its way through the pipeline.
Also, there is a funding request on it's way to President Obama to address various H1N1-related issues, including money for pork market support, herd surveillance efforts and vaccine and testing development for the swine sector.
While hog prices have held at "reasonable levels", "input costs have eroded producers' ability to reach a profit," noted Dierks. In 2006, hog prices averaged $63 per hundredweight on a carcass basis; the cost of production was about $52 per hundredweight. In 2008, hog prices on a carcass basis averaged $67 per hundredweight; production costs skyrocketed to $76 per hundredweight.
USDA's June Hogs & Pigs Report comes out this Friday, and it's expected to show sow liquidation, with even more to come this summer. Agricultural economists Glenn Grimes and Steve Meyer said an 8 percent to 10 percent reduction in market hog output from 2008's record 116 million hogs is needed. Worth noting is that producers have focused on and made such tremendous productivity gains that while the March pig crop report showed a 3 percent cut in the sow herd, productivity increased 2.5 percent.
As this goes on, it will cut deeper into the industry," said Dierks. "There is uniform pain going on, from diversified farms to operations that have specialized in pork production."
He added that the impact will be far-reaching. Dierks cited an Iowa State University economic analysis that shows for every 1 million market hogs that the industry cuts, more than 300 full-time production jobs are lost and 681 processing jobs go away. "That does not include any input suppliers," he noted.