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Worst not over for hog farmers

TAGS: Markets Policy
NPPC seeks additional federal assistance as hog industry deals with lower slaughter capacity and backed-up hogs.

Steve Meyer said the pork industry is in the midst of the largest economic hit he has ever seen in his 30 years as a hog industry analyst, including the terrible slide in prices seen in 1998 and another in 2009. Meyer, an economist with Kerns & Associates, said during a briefing hosted by the National Pork Producers Council (NPPC) on Monday afternoon that the devasting impact of COVID-19 on the market and mass euthanasia of hogs is “not close to over.”

Based on the U.S. Department of Agriculture’s June 1 hog inventory numbers, an estimated 1.1 million hogs should have been harvested under normal growth conditions, but instead, producers changed pigs' diets to slow their growth. Another 500,000 hogs are expected to be added to that number by the end of August, reaching a backup of as many as 2.5 million hogs by the end of the year, Meyer said.

According to his analysis, based on lean hog futures prices on March 1 and July 10 and actual hog prices in the interim, potential 2020 revenues from hog sales have been reduced by roughly $4.7 billion. Other losses associated with euthanasia, disposal and donation of pigs with no market outlet and insufficient space to hold them mean that U.S. pork producers have lost nearly $5 billion in actual and potential profits for 2020. He said it appears that those losses will continue into 2021.

Although less information is known about euthanized piglets, Meyer estimated that as many as 1 million hogs were destroyed at light weights and likely were disposed of on the farm. Meyer said he estimates that 300,000-400,000 market-weight hogs were euthanized in May, when 30% of U.S. hog slaughter capacity shut down at least temporarily.

Meyer said slaughter capacity is at 95% now, but he does not anticipate that 5% idled capacity to come back on line on a consistent basis while processing facilities try to follow basic Centers for Disease Control & Prevention guidelines and social distancing recommendations.

Nick Giordano, NPPC vice president and counsel of global government affairs, said the plants are doing a good job of continuing to operate while managing work health and safety, but there’s no guarantee. “This is by far the biggest financial problem to face hog farmers. We’re going to lose a lot of hog farmers; the question is how many,” Giordano said in his plea for additional financial assistance for hog farmers.

Earlier this month, Sens. Jim Inhofe (R., Okla.), Richard Burr (R., N.C.), Joni Ernst (R., Iowa), Chuck Grassley (R., Iowa) and Thom Tillis (R., N.C.) introduced the RELIEF for Producers Act of 2020 to provide compensation for farmers who are forced to euthanize or donate animals that can’t be processed into the food supply as a result of COVID-19, among other provisions. NPPC strongly supports this legislation as well as additional federal assistance championed by House Agriculture Committee chairman Collin Peterson (D., Minn.) and urged Congress to quickly address this unprecedented crisis plaguing pork producers.

Giordano said he expects the Senate to introduce a bill this week to offer different industries another round of assistance from the coronavirus pandemic and that the bill should make its way to the President’s desk by early August. “We’re pretty confident that Congress is going to act on another package, knock on wood. We’re really hopeful more relief for our producers is included.”

He added, “We expect a bill this week, and Democratic leadership in the House already signaled members may need to be in during the beginning of August.”

Giordano said NPPC also supports additional direct payments for producers as well as efforts of a coalition of agricultural groups to increase the Commodity Credit Corp. spending limit to $50 billion.

“We’re eager to build on what was in the [Coronavirus Aid, Relief & Economic Security Act] package as far as direct payments,” he said, adding that he would like to see that without payment limitations because of the structure of modern agriculture. “We’re losing large, medium and small producers, and we need a lifeline.”

Meyer said his profit/loss model showed that many producers were looking at a profit of $20 per head at the start of the year but now face a loss of $10 per head -- and this comes off a two-year period of managing breakevens for many producers. “I have not heard of bankruptcies, but I know they’re coming,” he said.

NPPC president Howard “AV” Roth, a hog farmer from Wauzeka, Wis., added that the past four months have taken a significant financial and emotion toll on farmers. “We need help now,” he said, or else thousands of generational farm families could go out of business.

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