The message is simple. Hog farmers need help now.
Two million hogs remain backed up on farms today according to an analysis by Steve Meyer, an economist with Kerns & Associates. U.S. hog farmers face massive losses due to multiple COVID-19 crisis-related factors, which have turned profit potential for 2020 from robust to disastrous, he said during a press conference on Monday.
“The value of U.S. pigs produced this year has taken a dramatic hit since the advent of COVID back in February and it’s not likely coming back at all,” Meyer said.
This is a very serious situation for the nation’s hog producers, he emphasized. It may seem like things are getting better, but they aren’t.
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 revenue from hog sales has 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 pork producers have lost nearly $5 billion in actual and potential profits for 2020.
It’s Not Close to Over
Based on the June Hogs & Pigs Report, Meyer said the U.S. pork industry should have slaughtered about 1.1 million more pigs from June 1 to last week than it has. However, there is not enough slaughter capacity to handle the backlog.
“Capacity in U.S. plants has come back dramatically since early May,” Meyer said. “At one time, our plants were sitting 40% idle. They’ve made tremendous progress but are still hovering around 5% idle capacity.”
Meyer said he’s not sure that number will drop now with social distancing guidelines. Plants need to spread people out, especially during shift changes. The result is that plants can’t push as many pigs through as they once did.
“We think that loss is more or less permanent,” Meyer added.
The chilling part? He said it’s not close to over.
He expects the backlog of pigs waiting to be harvested to grow from 1.1 million pigs up to 1.6 million by the end of August and 2.5 million by the end of the year. He said that backlog won’t change much in September but will grow again later this fall based on USDA’s inventory of pigs on June 1 and the available slaughter capacity expected between now and the end of the year.
Producers will have to hold pigs for a long period of time or euthanize pigs that are coming behind them in order to have enough space to meet all of the animal welfare needs that producers hold in such high regard, Meyer explained.
“I've been around the pork industry in virtually all my life,” Meyer said. “I’m not terribly young anymore. But in the 30 years that I've been involved as an analyst, this is by far the largest economic hit that I've ever seen this industry take. We had a terrible hit in 1998. We had another one in 2009. But nothing compares to this.”
Although Meyer has not heard much about bankruptcy so far, he knows it’s coming based on his knowledge of production and the economic losses producers are facing.
The Question is How Many
Nick Giordano, National Pork Producers Council vice president of global government affairs, said he appreciates what Congress and USDA have done to help producers.
“No question, it's helping," Giordano said. "But this is, by far, the worst economic crisis ever. We know we're going to lose producers – small, medium and large. The question is how many.”
NPPC’s mission is to keep as many hog farmers viable as possible.
Hog farmers were finally anticipating a profitable year going into 2020, only to have COVID-19 turn the industry on its head, Meyer said. They are now looking at losses of $37 per hog – relative to what they expected for 2020 before the COVID-19 crisis began.
“As the Senate begins work on the next COVID relief package, we urge lawmakers to provide a critical lifeline to hog farmers across the nation to minimize what has already been significant damage to our producers,” said NPPC President Howard “AV” Roth, a hog farmer from Wauzeka, Wis.
RELIEF for Producers Act of 2020
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 earlier this month, providing 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 said it strongly supports this legislation, as well as additional federal assistance championed by Rep. Collin Peterson (D-Minn.).
“The consequences of inaction are too great and would upset a healthy, dynamic and highly competitive pork production system that has served our farmers, the rural economy and consumers so well,” Roth said. “It’s imperative that Congress act now, or else thousands of farmers could go out of business, leading to consolidation and contraction of the U.S. pork industry.”
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