(AP) — Marty Malecek got a business degree intending to take over the Minnesota hog farm that his father started nearly 20 years ago. Instead, they are selling their 1,700 hogs and auctioning off land after it became clear that they could no longer cover their costs.
It was a combination of blows including rising feed costs, high energy costs and a drop in demand as the recession meant people were eating less meat. And then, Type A H1N1 influenza came along.
"We wanted to be a family farm and keep on producing hogs," said Malecek, 33. "We were holding out hope until two or three weeks ago."
The pain has been felt across the industry. While larger, more-diversified operations will likely survive, industry officials, producers and analysts say many small- and medium-sized pork producers could be forced out of business.
Dave Struthers, a producer near Collins, Iowa, has reduced his sow numbers 25 percent, from 1,000 early last year to 750, and laid off two employees — but he doesn't know if that will suffice.
"If we can't start making some money with what we've got, there comes a time where you say enough's enough and you don't know when that time will be," he said.
"It's almost laughable because it's so horrible," said Iowa producer Chuck Wirtz, who is an owner or shareholder in sow operations in Iowa, Illinois and Wisconsin. He presented a proposal at the World Pork Expo earlier this month that he hoped would stabilize the market. But he said the idea — a self-funded program by U.S. producers that would have needed to raise $60 million — is likely no use now.
Shane Ellis, a livestock economist at Iowa State University in Ames, said it could also be too late for many small operators to make the kind of production cuts they need to.
"Producers that aren't efficient will be hit first," Ellis said. "Those are the operators that we will see exit the market. Not the big operators."
The industry has lost an estimated $4 billion over the past 20 months, said Dave Warner, spokesman for the Washington-based National Pork Producers Council. Although a drop in exports has worsened matters, feed costs may be the biggest problem. "It doesn't take a rocket scientist to figure out the issue is grain costs," said Larry Pope, chief executive officer of Smithfield Foods Inc.
Producers were losing up to $45 a head in mid-2008, Warner said. That dropped to about $11 a head when the H1N1 flu outbreak hit in late April, and have since climbed to $20 a head. Those kind of numbers mean smaller farmers could face pressure to shut down.
Gerald Warren, a North Carolina pork producer, also raises beef and grows corn, cotton, sweet potatoes and tobacco.
"If we were strictly in the hog business we'd be in trouble," Warren said.
Source: Associated Press