“The big driver of losses for this business is the run-up in costs of production.”
– STEVE MEYER
U. S. hog producers, who have been losing money since late 2007, have asked the U. S. Agriculture Department for $250 million in assistance, of which $150 million would buy pork for federal food programs.
Producers also asked for $100 million for swine disease surveillance, H1N1 vaccines and industry support.
Meanwhile, the USDA has said it does not have money now to buy pork.
The call for help is because hog producers, on average, have lost $21 on each hog since 2007 and losses could increase this fall, the National Pork Producers Council said during a conference call Aug. 17.
The hog industry’s problems have been due to high feed costs, the global recession that hurt meat sales here and overseas and the H1N1 flu, or swine flu.
The flu scared consumers away from pork and prompted export bans on U. S. pork even though the disease is not spread by hogs or pork.
“We are starting to see producers go out of business. We are facing the loss of tens of thousands of jobs, and ultimately higher food prices in this country,” Don Butler, NPPC president, told reporters in the conference call.
“The outlook for the fall is even bleaker, with losses projected to be somewhere in the neighbourhood of $54 a head (hog),” said Butler.
The NPPC said it has asked the USDA to immediately buy $50 million worth of pork for federal food programs, buy another $50 million worth later using money from tariffs on imported goods. The use of the tariff money would require congressional approval.
A third $50-million pork purchase was sought in fiscal 2010, which begins Oct. 1.
The $100 million sought for swine research and vaccines would come from a $1-billion appropriation to combat H1N1 flu.
USDA said last week it does not have the money to make a pork purchase.
“We have limited funding remaining because of restrictions imposed in the 2008 Farm Bill,” Justin DeJong, USDA’s deputy press secretary, said last week.
“Due to economic conditions, the value of requests for commodity purchases far exceeds the amount of remaining funding but we will continue to monitor market developments and make decisions accordingly,” he said.
In recent months, the USDA has purchased meat, dairy and other products to help industries hit by slowing demand and oversupply.
The high cost of corn, an important feed, has hurt hog producers. Corn prices sped past $7 per bushel in 2008 and early 2009 as speculators and ethanol makers joined livestock producers and food makers in buying the grain. Corn has since dropped to less than $4, but that is still high by historical standards.
“The big driver of losses for this business is the run-up in costs of production,” Steve Meyer, livestock economist at Paragon Economics, said during the call.
“The result of that will be liquidation and reduced output in the long run, which will drive up pork costs for consumers,” he said.
In addition to the $250 million in financial assistance, the NPPC urged Washington to conduct research on what economic impact expanded production of corn-based ethanol would have on the livestock industry.
Livestock producers are worried a federal government proposal to expand ethanol use to 15 per cent in auto fuels from the current 10 per cent will increase production and again drive up the price of corn.
The NPPC also wants Washington to work to open export markets that were closed to U. S. pork because of the H1N1 flu.