Pork industry insight

by Joel Crews
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At a lunch meeting sponsored by Meat&Poultry this past month, Rod Brenneman, Seaboard Foods president and chief executive officer, addressed meat-industry suppliers based in the Kansas City area. Brenneman, who has served as chairman of the American Meat Institute for the past 11 months, discussed the progress made on his initiatives as a leader with the trade group followed by some sobering remarks about the challenges facing the pork industry.

Throughout his tenure as chairman, Brenneman said there have been challenges facing the meat industry, some of them as a result of the Obama administration’s position on issues such as reforming the nation’s ethanol policy and corn production mandates. As a supporter of alternative fuel initiatives, Obama’s support of policies that may raise the current required ethanol-to-gasoline blend to 15 percent nationwide, could lead to another food vs. fuel crisis, which led to widespread financial fallout throughout the meat and poultry industry over the past 18 months.

Since last November’s presidential election, Brenneman said, "It’s almost been a continual assault on our industry in Washington."

Brenneman also addressed some of the challenges to the meat industry, including the worldwide economic downturn, the H1N1 outbreak, the over-supply of meat on the market and re-establishing trade with export markets.

Contributing to the excess supply of pork in the market is the improved production of hogs over the past year. "Productivity is back," said Brenneman, thanks, in part, to the development of effective vaccines and improved feed. "Unfortunately during a time when we’re dealing with some of the worst prices, we also have an over-abundance of supply," he added.

"We need to right-size the industry," as is evidenced by companies like Smithfield and Tyson cutting swine herds by 5 percent or more, he said. "I personally think we need to see a 10-percent liquidation," said Brenneman, to bolster live prices to the point (about $45) that producers are no longer losing money. And even at a 10 percent decrease, "that’s not getting to wild profitability for producers; that’s just getting to what I think is a good, sustainable level for the long term."

Increasing international trade, including pork exports to China, was made more challenging by this year’s H1N1 outbreak, which has served as a convenient reason for some countries to keep their borders closed. "H1N1 served as an excuse, albeit an invalid excuse, for some," he said. Meanwhile, trade negotiators can ill afford to be hamstrung by protectionist trade policies with export partners, he added.

In an effort to prevent the introduction of H1N1 into swine herds, companies like Seaboard have taken steps to minimize risks at their production facilities.

"In terms of visitors, it’s virtually a lockdown at our company," Brenneman said.

Despite the vigilance, however, the likelihood of H1N1 spreading to a U.S. pig herd is likely to occur, if it hasn’t already. If that happens, it is imperative that the industry and the media don’t panic. "It’s typical flu. It’s what we deal with every year in the swine industry, and you treat it. You don’t take sick animals to market and you have to remember it isn’t a food-safety issue at all and you can’t catch this by eating meat," said Brenneman. What the industry can not afford to dois for any packer to announce it is not buying hogs from a suspected farm. "Then, there goes our whole story about this not being a food-safety issue," he added.

Good news, too

Among the positive developments, Brenneman pointed out the industry’s continued promotion of E-verify, an electronic employment eligibility tool, has been a successful campaign that promises to benefit the industry. In July, AMI formally announced its support to make E-verify mandatory for employers in the U.S., he pointed out.

Also during Brenneman’s tenure, AMI has made positive strides in developing grass-root support among members to make their voices heard in Washington. Using online tools to notify constituents of upcoming votes and providing them with industry-supporting correspondence that can be sent electronically to lawmakers has proven to be very effective. Brenneman said the number of AMI members contacting their representatives has increased by 54 percent over the past year. "And we’ve almost tripled the number of advocacy messages that have been sent," he added.

Educating and promotion of sustainability has been another initiative Brenneman has pushed over the past year as AMI chairman and for many years as the head of Seaboard Foods. It’s an issue that isn’t going away, he said.

The 2009 AMI Worldwide Food Expo (Oct. 28-31, in Chicago) will include a three-day series of presentations focused on sustainability as a business strategy, a program that is sponsored by Meat&Poultry. "We have had customers who came in and sustainability is all they wanted to talk about," Brenneman concluded.

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