Hog farmers facing $5 billion loss in light of COVID-19 pandemic

American hog farmers are facing the stark reality of the possibility of a $5 billion loss because of the COVID-19 pandemic. The closure of multiple packing plants across the United States has created a bottleneck of hogs ready for harvest and slow packing lines, or in some cases no where to go.

National Pork Producers Council President Howard A.V. Roth said April 14, COVID-19 has created a sudden and devastating impact on U.S. hog farmers.

“We are in crisis and need immediate government intervention to sustain a farm sector, essential to the nation’s food supply,” Roth said. “A long standing labor shortage is already limiting plant harvest capacity—has become dramatically worse in recent days as plants have suspended operations and deal with rising worker absentees.”

The backup of hogs on the farms has created a financial crisis as hog values plummet. Market ready hogs have nowhere to go, and analysis by Iowa State University economist Dermot Hayes and others project hog farmers will lose $37 per hog marketed or $5 billion collectively, for the rest of the year. This was on top of losses in January and February after trade retaliation caused significant losses for export dependent farmers the last two years.

“Industry analysis were expecting hog farmers, on average, to make $10 per hog,” Roth said. “We are now a farm sector in dire crisis. Farmers are already exiting the business, and the damage will worsen without immediate government intervention.”

Hayes said the two closed processing plants represent about 7% of the slaughter capacity. The remaining 93% of capacity still in operation was forced to deal with more pigs.

“We had more pigs coming out than the existing plants can handle so there are problems on the farm level already,” he said. “With the 93% of plants that are running that provides plenty of pork for U.S. consumers.”

Roth and NPPC are calling for a government purchase of more than $1 billion in pork. They’re seeking the U.S. Department of Agriculture to clear out the backed up meat supply and distributing it to food bank programs facing increased demand due to rising unemployment. These purchases would be pork products packaged for restaurants and other segments of the food service markets. Direct payments would go to producers without eligibility restrictions.

“We also hope to see China remove retaliatory tariffs on U.S. pork,” Roth said. “It’s no secret that China needs a reliable source of affordable pork. Removal of punitive, damaging tariffs would get us back on a level playing field with international competitors.”

Roth said, as a result of the current trade dispute pork producers in China are currently enjoying record hog values and pork prices.

“While, U.S. pork producers face a dire decision on our farms,” he said.

NPPC is also seeking a legislative fix to emergency loan programs that have left farmers behind.

“Approximately 10,000 family hog farms are in jeopardy because they do not have access to much needed capital offered by the Small Business Administration,” Roth said. “NPPC urges Congress to increase the cap of qualifying businesses to those that employ up to 1,500 and to make agriculture businesses eligible, with an economic injury disaster loan program.”

Roth and many U.S. hog farmers are committed to the “special responsibility we hold in this nation’s food system.”

“We take pride in supplying the world’s most popular, affordable and highest quality protein. We are resilient, and typically a self-sufficient bunch,” Roth said. “The COVID-19 has created unprecedented circumstances. We need swift government action to support our family’s farms and stabilize a sector that accounts for more than a half a million jobs in rural America that are at risk now.”

When asked as to whether pork producers are going to have to reduce production numbers of piglets or even resort to euthanizing piglets, Roth said immediate and significant government intervention is needed to help farmers.

“Sadly it’s true that euthanizing is a question that’s going to be come up on farms,” he said. “As a pork producer, we care about our animals. The last thing we would ever want to do is euthanize one. And we’re going to do everything in our power to make sure that we don’t do that, so that you can have pork on your plate tonight.”

Michael Formica, assistant vice president, domestic affairs and counsel at NPPC, said some appeals have been made to the Environmental Protection Agency to accommodate housing more pigs on these farms. Prior to COVID-19, NPPC began engaging with the Federal Emergency Management Agency and Department of Homeland Security as to who was critical in the crisis.

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“We took, almost from day one, an outreach to EPA to ensure that if we ever were in a situation like we’re facing now that producers would have an option to hold animals on their farm,” Formica said. “All of these farms are permitted for a certain number of animals.”

If farms reach their thresholds, prior regulations require new permits.

“We reached out to the EPA and requested a waiver of the thresholds during the time that we’re facing this emergency and thankfully, EPA granted that a couple of weeks ago,” Formica said. “That is a tool that’s available. A producer can hold these animals on their farm as additional animals come through the pipeline, provided they have the space. They can have more animals without running into legal risk.”

Consumers shouldn’t worry

NPPC CEO Neil Dierks said pork producers have faced challenging times because of trade and retaliation tariffs, and now that COVID-19 has pushed the direness of the situation even further, a couple of dynamics will come into play.

First, when stay at home orders came out and people began social distancing, many went to the grocery store and bought supplies to stock up. Retail demand for pork stayed pretty strong, Dierks said.

“The other side of it, of course, with the closing of restaurants and bars, eateries and other kinds of things, the food service side of our business, which accounts for about a quarter of all the pork in the United States, shut down,” he said.

Certain items like ribs and bellies weren’t going to the restaurants. There’s a “phenomenal use of bacon through our food service chain,” Dierks said. That’s part of the issue that led to full storage, as well as a drop in wholesale prices of the pork carcasses. That also leads directly through to the price received by the producer.

“That’s part of the financial constraint on this,” he said. “And is another additional issue that producers have been dealing with that further constrains them and raises this issue about the supply of hogs.”

Because of COVID-19, there’s been packing plants idled and Dierks said because the pork production business is constrained by time, it makes it even more challenging.

“When people make the decision to feed animals, it’s really for a market 10 months in advance,” Dierks said. “So we tried to run our operations and produce hogs for our packing and processing partners in a fashion that evens flow, and things in this order.”

The most recent Hogs and Pigs report from USDA showed an expansion, he said, and now that there’s suddenly a constraint in the ability to get pigs processed, it’s exacerbated the situation for producers.

“We’re actively encouraging our government to work in the federal, state and local levels to facilitate keeping even flow of processing occurring,” Dierks said. “Which means working hand in glove with public health officials, because companies want to work with their team members to make sure they’re healthy.”

And that means making sure actions are taken—taking temperatures of those going into plants, segregating workers and giving more space on the production line.

“The secondary constraint we’ve faced that makes this even more dire is the suspension of plant operations, which ultimately long term if it continues will have an impact on availability,” he said.

Dierks said, at this juncture the pork pipeline is full, and consumers shouldn’t have to worry.

“We have some pork in storage, so the consumer shouldn’t worry in the near term,” he said. “But it creates a terrible situation on the farm.”

Roth agreed.

“I just want people to know that keeping the processing plants open and keeping the backlog of pigs going is extremely important,” he said. “And that if we don’t keep that going there’ll be farmers that have to make those dire decisions on their farm going forward.”

For more information about NPPC and how hog farmers are dealing with COVID-19 visit www.nppc.org.

Kylene Scott can be reached at 620-227-1804 or [email protected].