Battered by 18 months of financial losses, some U.S. pork producers are reaching the end of their credit and face the liklihood of exiting the business. At last week’s World Pork Expo held in Des Moines, Iowa, pork industry officials said that many prior months of red ink experienced by producers has been exacerbated by the recent H1N1 influenza situation.
“The 20 day period following April 24, producers lost money at the rate of $8 million per day,” says Don Butler, National Pork Producers Council president. Going forward, the scenario may not improve for months.
Butler sees the possibility of the average producer losing over $12 per head for the remainder of 2009. That translates into an average loss of $25.6 million per week for a total of $794 million for U.S. pork producers through the end of 2009.
What does that mean for an individual producer? “A producer with 1,500 sows and an annual production of 30,000 head would lose $318,646 over the next 12 months,” Butler estimated. When added to losses incurred over the past 18 months, the bleak outlook adds considerable pressure to many producers.
The inability to get credit will likely force some producers from the business. “Lenders are telling us that many producers around the country are nearing the end of their creditworthiness, have burned through their equity and are in dire straits,” says Butler.
Butler said some producers will likely exit the pork business. “The situation is not good and we’re going to lose producers from this industry over the next six months. It’s a very difficult situation for all of us.”
Animal production support staffs such as milling and feed production may also see job cuts. Economists have predicted fewer animals will be produced due to producers leaving the business. That translates into job losses throughout the pork chain as industry support functions will decrease in response to fewer producers. “For every million fewer animals produced, that’s 311 fewer jobs in animal production,” according to Neil Dierks, NPPC chief executive officer.