Published: June 19, 2008 12:20 pm            

Industry in crisis; pork producers meet to find solutions

Originally published in the June 13, 2008, print edition.

In April more than 300 pork producers and pork industry supporters converged on the Holiday Inn in Mankato to share concerns, ideas and optimism over the current pork market.

With speakers from all over the Midwest and Canada, the meeting provided insight from producers, industry analysts and experts in the pork field.

Pork falling, food prices rising

Ron Friesen, vice president of Eastman Seeds in Manitoba, has seen firsthand how the pork industry has changed.

In Manitoba in 1970 there were 7,000 producers producing 1 million hogs, today there are 800 producers producing 10 million hogs.

Friesen expects there will be more changes in the pork industry during the next three years than there has been in the last 30.

He pointed out the irony of falling pork prices in the midst of food prices going up. “We are talking about euthanizing pigs; we are an industry in crisis.”

Contending with a stronger global market now more than ever, Friesen said the United States and Canada cannot compete with countries like Brazil. Brazil is producing five crops every two years and “producing grain like we have never seen before,” he said.

Friesen believes that Canada has found some solutions to the poor prices producers are facing for their hogs. One solution involves dropping the market weight of pigs in a short period of time. Also, Canada is willing pay its producers $220 per sow to euthanize their own pigs and remove them from the market. He would like to see 2 million to 4 million pigs euthanized in Canada.

“This problem cannot be solved by the government,” Friesen said. He said the problem was created by producers and needs to be fixed by producers.

Energy policy

According to Friesen, one of the causes of the lower food supply is the use of ethanol. He believes that using food as fuel is just exacerbating the problem.

From Canada to southwestern Minnesota, ethanol was definitely a hot topic at this meeting. Bob Taubert of Pipestone owns his own feed mill and raises 11,000 sows. He spoke about the negative impact ethanol has had on the farming industry, pork production in particular.

“Consensus is growing that we may have a failed policy when it comes to ethanol,” Taubert said. He believes this is not just a hog problem, but rather one that covers all livestock. The U.S. Department of Agriculture planting report is projecting there will be 7.6 million fewer acres of corn planted this year compared to last year. Less corn means less feed with more cost for that feed. That translates into a $50 loss per hog.

“The livestock industry is at a competitive disadvantage,” Taubert said. He said some producers will not survive, making the agricultural industry consolidate even more.

“For every 40,000 bushels used in a farrow-to-finish operation you get one job (at the farm). In ethanol there is one job for every million bushels,” he said.

“The government should let the free market decide whether corn should be used for feed or fuel,” Taubert said.

‘Everybody is in trouble’

From the production side of the issue to the commodity side, everyone is concerned about the pork industry’s struggle. That includes Gary Lynch of Waucoma, Iowa, president of the Lynch Cos., a commodity, pork processing and pork marketing business. “Our industry, everybody is in trouble,” Lynch said.

According to Lynch, the problem involves the processing of too many pigs. While “the market is better than in ’99,” he said, “we need to still liquidate what we got.”

Like Friesen, he believes getting hog weights down will take some pressure off the market.

Lynch highlighted some positives in the industry, such as pork exports being up 55 percent and the fact that there are fewer hogs coming from Canada than there were in 2007.

He also pointed out that it is not just the pork industry hurting; poultry companies are cutting chicken supply.

Turning the market around

The following are Lynch’s recommendations for turning the pork market around:
• Take five to 10 pounds off butcher weight; and
• Have the government and school lunch program purchase pork.

He encourages pork producers to voice their concerns to all representatives at the federal and state levels.

Lynch’s daughter Erin Golly, vice president of PCI Advisory Services, highlighted some good news. “The June 2009 futures contract came in at $89 today (April 15)” she said.

Golly called this the first profitable hedge opportunity. While this is a positive sign, she believes the livestock industry will be reduced by 5 to 10 percent in the next few years.

Greg Strobel, a producer from St. Clair, said that “what has worked in the past will not work in the future.” He said making small changes on producers’ farms will add up to some cost savings — things like decreasing food particle size and using a wet-dry feeder help the bottom line.

“For every 50 cents corn goes up it costs another $4.70 to raise a pig,” he said, suggesting that producers follow feed budgets aggressively to ensure accurate compliance. He also advised that producers be selective on pigs they feed out.

According to Strobel, keeping accurate records and knowing the costs for feed, housing of the pigs, additional death loss and cull loss will help producers be more efficient and perhaps save money at the same time.

Along with the speakers, producers in the audience asked many questions and raised many concerns about how to get through the next year with hog prices as they are now. The panel encouraged producers to stick it out, and decide what they can to do to increase production efficiencies as they weather the poor markets.

        

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