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Hog farmer woes to affect Minnesota economy

TAGS: Business
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Impact of COVID-19 could result in estimated loss of $660 million in economic activity for Minnesota.

According to a new study by University of Minnesota Extension researchers, current and ongoing disruptions in the pork supply chain, added to the current 15% unemployment rate, could result in an estimated loss of $660 million in economic activity in Minnesota.

Extension senior economic impact analyst Brigid Tuck, extension economist Joleen Hadrich and extension educator Megan Roberts found that a 15% drop in hog production would lead to an estimated loss of 2,100 jobs.

The average Minnesota hog farm generates $1.5 million in economic activity. Interruption of hog processing due to COVID-19 has hurt farmers’ ability to sell animals, thus leading to cuts in what they spend on local and regional services such as feed, land rent, trucking and veterinary services. It also has affected payments on operating loans at area banks.

Meanwhile, hog farmers were already losing money.

Widespread closures and partial closures of processing plants meant there was no market for approximately 45% of hogs that normally would have been processed during the last week of April. Resumption of processing and butchering alternatives will help offset some of the losses, but repercussions are expected to continue.

Minnesota has approximately 3,500 hog farms -- ranging from small family operations to large enterprises -- that produce more than one-tenth of all pork sold in the U.S. The state’s production also ranks second in overall pork exports, at $763 million. In 2019, Minnesota had $2.7 billion in annual hog sales. Farmers sold 22.3 million hogs, with the average farm spending $891,840 to raise the animals.

Losses mount

While hog farmers generate considerable economic activity for the state, they have made little profit, or even lost money, in recent years. On average, Minnesota farmers lost 32 cents per animal in 2019.

Furthermore, the 2020 outlook is challenging, at best, especially for independent farmers who own and raise their own livestock, the economists said. Between March and May, hog prices plunged 26%, from 50 cents/lb. before COVID-19 to 37 cents in early May, making it essential for independent farmers to develop additional options for selling their hogs.

The University of Minnesota Extension encouraged communities to look closely at the pork industry and its impact on local revenue and expenses. Better understanding the industry can help communities plan for getting through the crisis in both the short term and long term, the economists noted.

“Consumers can help stabilize the supply chain by making normal purchases of pork to last a family one to two weeks and be open to buying different cuts,” they said.

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