WASHINGTON — While testifying on Oct. 22 to the House Committee on Agriculture Subcommittee on Livestock, Dairy, and Poultry, Rod Brenneman, American Meat Institute chairman and president and chief executive officer of Shawnee Mission, Kan.-based Seaboard Foods, said "There are many challenges facing the economic viability of the pork sector including higher input costs for feed and energy, an over-abundance of supply in the domestic market, weakening demand and international trade barriers."
Prices paid for feed had doubled from 2006 to 2008, largely due to higher corn and soybean meal prices, Mr. Brenneman told the committee. "While there are various reasons for the increase in feed prices, certainly one of them has been the determined government policies to promote the use of corn for ethanol. This effort, while seeking a desirable goal which is to lower the U.S. reliance on fossil fuels, has had an unfortunate, unintended consequence to the U.S. meat industry and ultimately to consumers," he added.
From a supply side, the productivity of U.S. hog producers has continued to increase and the long-term trend is approximately 1.5% per year, Mr. Brenneman explained. He said the U.S. pork industry was producing too much pork to match up with the demand that has been weakened, and that eventually, "we will need to ‘right size’ the industry by either a further reduction in supply, an increase in demand, or more likely, some of both."
Mr. Brenneman noted on the demand side there were several reasons for the current state of depressed prices. "Economic factors facing both domestic and foreign consumers in a recessionary period can be pointed to as one reason for low hog and pork prices and lower export demand," he said." You can imagine the impact on prices when you combine an over-supply of pork with decreased demand and closed market access around the world," he added.
Another reason for the drop in hog and pork prices was the outbreak of the novel H1N1 influenza, Mr. Brenneman told the committee. "Fueled by confusion between a public-health and an animal-health issue, swine prices dropped and consumers questioned the safety of the pork products they were eating; however, novel H1N1 is not a flu that was caused or spread by pig production nor is this virus transmitted to humans by consuming pork," he said.
Those fears led to U.S. pork being banned by 17 countries, including Russia and the fastest-growing market for pork exports, China.
In conclusion, Mr. Brenneman told the committee the Secretary of Agriculture should immediately make available Section 32 funds for additional purchases of pork for various federal food programs with a maximum emphasis on purchasing meat from sows with the objective to reduce breeding stock to reduce hog numbers. Second, the U.S. Trade Representative should work to open export markets to U.S. pork, particularly China, which continues to impose non-science-based restrictions on U.S. pork after the outbreak of novel H1N1.