Pork producers’ plea: more help needed
Pork producers warned in a July 21 phone-in press conference they are still facing an unprecedented crisis that requires immediate congressional action. Pork producers stand to lose $5 billion this year alone, and bankruptcies are looming for many if more help is not forthcoming.
The press event came as a relief bill, the “RELIEF for Producers Act,” is being considered in Congress. Co-sponsored by Sens. Jim Inhofe, R-OK, Richard Burr, R-NC, Joni Ernst, R-IA, Chuck Grassley, R-IA, and Thom Tillis, R-NC, the bill would “provide a much-needed lifeline to thousands of [hog] farmers who could otherwise go out of business, leading to consolidation and contraction of the U.S. pork industry,” National Pork Producers Council President Howard A.V. Roth said on the group’s website. The bill could be passed separately or be incorporated into a larger coronavirus relief bill.
The bill would compensate hog farmers for animals that have already had to be euthanized, and those that might have to be euthanized in the future. According to Steve Meyer, an economist with Kerns and Associates and an expert on the pork industry, between 300,000 to 400,000 animals were euthanized back in May. That was at the peak of the COVID-19 crisis, when restaurant shutdowns were almost total, pork processing plants were operating at only 60% of capacity and food chains were in disarray. Today, plants are back to 95% of capacity, but thanks to social distancing and other safety measures to keep plant workers safe, that extra 5% of capacity may not return.
NPPC leaders say that whatever happens, small, medium and large hog producers will be leaving the field. “The only question is, how many?” asked Nick Giordano, vice president and counsel, global government affairs for NPPC. “That will depend on two things: what happens with COVID, and what the government does.” He added, “We know we will not be made whole. We are only asking to be allowed to remain in business.”
Besides euthanizing hogs, the only other way producers could react was to adjust feed quality and type to slow the growth of their animals. Many quickly adjusted, with the result that about 2 million hogs were slowed down and “backed up” in the system by late June. Meyer said that according to the U.S. Department of Agriculture’s latest figures, about 14 million head of hogs are in the 180-pound range, the single largest category. “We should have slaughtered at least 1million of these pigs by now,” he said.
At some point, producers will have to decide what to do with excess pigs if their numbers exceed processing capacity. Unlike some farm products, hogs can’t be plowed under or stored indefinitely.
Some pork producers made high margins for several weeks in the spring when supply chains jammed up, but others had to close down when employees became infected. Processers’ margins are currently averaging about $40 a head, compared to last year’s margins of about $12 a head.
Meyer said, “This is the largest economic hit I’ve ever seen pork producers faced with in 30 years.” He said there haven’t been a large number of bankruptcies yet, but the current situation is unsustainable. The producer margin on hogs was $20 in February, and now it’s a loss of $10 per head. The USDA’s Food Box program helped, although it took a while for producers to retool their packaging and supply chain. So have other programs, but they are stopgaps.
Uncertainty over school re-openings is continuing across the country. “We’re in better shape now to handle supply,” said Meyer. “Demand is not a problem—except in food service, and that’s a COVID issue. The food service sector is the bugaboo.”
David Murray can be reached at [email protected].
