Not yet

by MEAT&POULTRY Staff
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Despite some glimmers on the far horizon – U.S. pork consumption is up compared with chicken and beef, feedgrain prices have dropped just a bit, exports to Japan and Mexico are up, and the oversized national hog herd appears to be finally shrinking, if only slightly – the long, dark tunnel of losses that the hog and pork industries have found themselves in since October 2007 appears to have no end in sight.

Dave Warner, spokesman for the National Pork Producers Council, told MEATPOULTRY.com that "there may be some profits late next year" for producers, but there’s no guarantee. "Already, we’re in a historically long period of losses," he said. "Since October of ’07, pork producers have lost money in 23 out of 25 months. The industry has lost two-thirds of the equity it built up during the 44 months of profitability that ended at the end of September ’07."

It’s been one thing after another, Warner said. Skyrocketing feedgrain prices, driven by ethanol production and policy, brought losses to hog (and cattle) producers in late 2007 going into ’08, then the global recession that arrived in September ’08 took the wind out of what had been a vigorous export market for U.S. pork, followed by the disaster of H1N1, which has further impacted pork sales abroad while making consumers at home wary of pork in fear of "swine flu."

He said that in the first half of ’08, booming exports hid some losses or at least soothed the nerves of hog producers and pork exporters, but the collapse of key export markets – pork exports to China and Hong Kong, the U.S. number-three pork market, are down 50 percent, and the Russian market, number five in volume for American pork, is down 35 percent – has removed any lingering confidence. "The export situation has really hurt hog futures and cash hog prices," he said. "The futures prices issued Nov. 4 are still much lower through 2010 than they had been." At the same time, there is a bit of good news in the facts that exports to Japan, the largest export market for U.S. pork ("by far," according to Warner), are up six percent, and shipments to Mexico, the number-two market, are up 17 percent.

Through September of this year, consumer demand for pork in the U.S. is up four percent while chicken is down 2.9 percent and beef is down 2.3 percent, according to U.S.D.A. numbers, but consumer worries about H1N1, driven by news that the virus has been found in U.S. hogs are preventing any predictions for a pork recovery anytime soon.

The result, said Warner, is an industry of producers without savings or equity. "You’ve got a lot of guys whose lenders just won’t give them any more money," he told MEATPOULTRY.com. "They’ve got nothing to put up. After H1N1, guys don’t have a choice. They’re being forced out because they have no more equity."

There is a small silver lining, however. With fewer hog producers raising fewer hogs, the over-supply problem that’s plagued the industry for two years may finally, and slowly, begin shrinking. The recent bankruptcies of Big Sky Farms in Canada and Coharie Farms in North Carolina, two huge hog operations (Coharie ranked number 22 on the list of the U.S.’s largest hog producers; Big Sky is the largest hog producer in Saskatchewan), should help. But Warner said he’s a bit wary of the Canadian industry, which is in even more dire financial straits than the U.S. pork industry. "I’ve not seen an influx of Canadian feeder pigs into the U.S.," he said, "but the loan guarantees the Canadian government has given to hog producers up there is going to prop up supply, not reduce it."

That’s different than the pork buys NPPC has asked U.S.D.A., to make. "We’re asking the department to take pork off the market. Secretary Vilsack has certainly been a champion for us, but we’d like to ask U.S.D.A. to make additional purchases." The department’s recently announced $50 million purchase of pork, the third and largest federal pork purchase this year, is the equivalent of just one day’s industry production, according to Iowa State University economist John Lawrence.

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