We were just reading a lengthy article in the Star Tribune about the Lean times for pork producers:
In this year of rising food prices and skyrocketing commodity costs, the profits raining on farms across the country have not fallen evenly.
Just ask a pig farmer.
Faced with runaway feed and energy costs, the pork industry has gone months without turning a profit. Analysts say it will be a year, possibly longer, before prices and costs break even.
The fallout will shutter some pig farms, shrink others and raise the cost of pork at supermarkets. It also has members of the Minnesota Congressional delegation asking the federal government to help shore up farmers' losses.
"Consumers are going to get drilled in this," said Brian Buhr, an agricultural economist at the University of Minnesota. "You can see it in eggs and milk. Meats are just a little bit behind. Eventually, consumers are going to pay more for food." . . .
. . .Most farmers today lose $40 to $50 per pig, according to Buhr. . . .
. . .Pig farmers had more than three years of profitable times before the recent troubles began, and that will help them weather what's ahead, said Mark Greenwood, a swine specialist for AgStar, a Mankato-based lender for the hog industry. Still, farmers today are losing an average of 4 to 5 percent of their equity each month. Six months from now, that could mean serious problems. . . .
As anyone who has driven through Martin County can tell you, the pork industry is big in Southern Minnesota. We didn't realize the First was #2 in the country in hog production. The importance of the industry for Southern Minnesota's economy led Congressman Walz to ask the USDA to purchase pork products for nutrition programs. (Click on the photo to read the letter).
A press release from the Walz congressional office shows that the request has been acted upon:
Congressman Walz said today that he is pleased that the Secretary of Agriculture has agreed to his request that USDA take action to help address the growing crisis in the pork industry.
On April 10, Congressman Walz sent a letter to Agriculture Secretary Schafer, urging him to make purchases of pork products for USDA's nutrition programs to help pork producers throughout the country who are experiencing serious economic difficulty due to high input costs and low cash hog prices.
"I am pleased that the Secretary has agreed to my request and will be purchasing up to $50 million in pork products for child nutrition and other domestic food assistance programs," Walz said. "These purchases will help to stabilize hog prices and mitigate the economic losses faced by our producers in southern Minnesota."
Minnesota's First Congressional District ranks second in the United States in pork production. More than 2,500 pork producers, who raise 9 million hogs each year, make their home in southern Minnesota. The industry employs approximately 22,500 Minnesotans and generates more than $7 billion in economic activity for Minnesota.
Earlier this month, wholesale pork prices hit the lowest level in four years. This comes at a time when producers are paying record high prices for energy, feed and trucking. By most estimates, producers are losing between $30 - 50 per head which could account for about a $3.5 billion loss for the United States pork industry this year.
Some very short-term relief for farmers has also come in the past two weeks as hog prices jumped, according to Pork, a trade magazine. Hog prices had dipped to under $50 per hundredweight near the end of March, but climbed to $73.70 on April 28--a return that's less than the cost of feeding a pig to market weight.
However, this blip isn't expected to last:
"April is a mixed bag in that summer price trends may start in April or they may not," says Shane Ellis, Iowa State University ag economist. Retail pork prices held above 2007 prices, even when hog prices were at their lowest, he notes, "so demand was strong enough to absorb some of the added supply."
Of course, this positive price spurt could delay the much needed sow-herd cuts. "It looks like everything is going to be fine. I don't think that's the case at all," says [Chris] Hurt. A 6 percent to 8 percent sow-herd reduction is still needed, he says. He adds that if corn were to reach, "say, $7 a bushel, producers would need to cut sow herds by 16 percent to 18 percent to keep prices ahead of costs.
[Steven] Meyer predicts that the price run up won't last. "I think there will be a slam on the brakes this week as packer margins fall out of bed," he says.
Livestock producers often can't take advantage of a short spike in livestock prices, given the nature of the contracting process and the fact that animals must be at or near their market weight. Nor can they ride out low prices when their herds are ready, since those pigs just keep eating that corn.
Update: The Star Tribune covers the news inU.S. steps in to help pork producers. The Mankato Free Press reports Emergency pork buys approved and the emergency pork buy gets picked up in ag sources such as Minnesota Ag Connection - Walz Joins Iowa Delegates in Urging Schafer to Address Pork Crisis and Nebraska Ag Connection - Fortenberry, Smith Join Iowa Delegates in Urging Scafer to Address Pork Crisis. The move has support from both sides of the partisan divide.
Photo: market hogs, rustled from the Minnesota Pork Board.
Hogs, can't live with them, can't live without them! When prices are high, packinghouse workers like myself see a reduction in hours. When hog prices are low, we work our tails off. The packing house companies seem to survive someway and get bigger and bigger.
CHC
Ollie Ox : You've got that right!
Posted by: CHC | May 01, 2008 at 08:47 PM