Profitability, Packing Plants & Uncertainty: Pork Industry Post Crisis

( National Pork Board and the Pork Checkoff )

The waves continue to lap up against the shoreline, says Neil Dierks, CEO of the National Pork Producers Council (NPPC). COVID-19 has caused unprecedented disruption to the pork industry that continues to impact pig farmers across the U.S.

“It’s like going to a farm pond and throwing a cinderblock out into the middle of it,” Dierks says. “There are literally all these ripples hitting the shore and we're continuing to deal with them day by day. Producers say they can’t even plan three weeks in advance, let alone three months in advance because it's minute-by-minute, hour-by-hour decision making taking place.”

When will profitability return?
The list of things keeping pork producers up at night right now is long. For Bill Even, CEO of the National Pork Board, profitability is No. 1 on his mind.

“The pork industry has suffered some of the worst crisis financially that it has in decades. This current COVID crisis is even worse than what we had in 1998 – at least the packing plants were operating,” Even says. “What we've gone through here in the past couple of months has really hurt that financial well-being and the net worth of producers across the U.S.”

Predicting when profitability will return is a very difficult question, Even says. Input costs are stable and at reasonable levels. But profitability will depend on how quickly the pork processing plants get back to normal. 

“As we enter into June, we're running at about 18% or so idle. But that's a vast improvement from where we were – nearly 45% of our capacity was idle in the early part of May,” Even says. “We're headed in the right direction. However, we can never get those production days back again.”

From Dierks’ perspective, producers need stability more than anything right now.

“We're going to have millions of individual decisions made by tens of thousands of producers as they go forward with this. And it ranges everywhere from the care of the animals to the marketing of the animals to the financial status of their operation,” Dierks says. “If the government can support our industry and give some support financially, it will allow some stability as we move forward.”

NPPC’s efforts to get the livestock elements of the HEROES Act approved by the Senate are all about stabilization of the pork industry, Dierks says. 

“We're trying to do whatever we can do to assist producers in the industry to get the most people to the other side of this thing as we can,” he says. “Producers are really facing a challenge. The industry is facing a challenge. But that's what our drive is and it's evolved over time. At first it was about getting capacity back up and running, now it's keeping as much intact as we can.”

Profitability will return. However, how rapidly it comes is anybody's guess, Dierks says, adding food service businesses coming back will be positive for the industry as states begin to open up from shelter-in-place orders. Additionally, he’s hopeful a COVID-19 vaccine will help business related to the food industry by putting workers’ minds at ease.

Packing plant uncertainty
Uncertainty remains a big threat to the pork industry, Dierks says. This uncertainty manifests itself in many ways from packing plant capacity to what will happen next fall with COVID-19 in the general population as things open up. 

“As we all know, this is not a decide today and it happens tomorrow business. It takes a minimum of 10 months from the time that an animal's conceived until the time that pig is harvested. And unfortunately, anything past the near future is very cloudy,” Dierks says.

Will plants be able to return to 100% capacity soon? He says it’s going to be very difficult – not because the plants aren’t motivated to do so, but because it has become more challenging than ever to pull that off. 

“The use of PPE, social distancing and other kinds of barriers have had an impact on throughput,” Dierks says. “It’s not that people don't want to get to 100%, but how can you physically configure to get to 100%?”

The passage of the Defense Production Act has helped, Even adds, because it prioritized food workers in the food industry and the meat industry for personal protective equipment. It ensured after hospitals and first responders, the food industry is next. 

The challenge remains working through the backlog of pigs that have not been able to be processed, Dierks says. 

“At this juncture, I’m expecting in the next few weeks we'll be able to handle at least the market-ready pigs on a weekly basis. But I do not foresee any rapid ability to get into that backlog of pigs,” Dierks says.

However, he quickly notes the ingenuity of pork producers changing rations and slowing growth, and in some cases, even stopping the growth of animals.

“The issue is we're a just-in-time business. The evolution of our industry, which is the most competitive in the world, has been one that relied on stability and consistency. We've got pigs backed up and even if we had 130% capacity, it would take us a while to get them processed,” Dierks says.

As producers find themselves in the very difficult situation of needing to potentially euthanize some animals, Dierks says with the scale of this need, government support for producers is more important than ever. 

Don’t be afraid to accept help
Take advantage of the Coronavirus Food Assistance Program (CFAP) program and other sources of support made available to pork producers, Dierks advises. NPPC is focused on getting relief to producers – whether it’s for euthanasia, compensation, disposal or direct payments without payment limitations.

Undoubtedly, one of his biggest concerns is producers are struggling emotionally, too.

“I think it's important we all recognize there's a lot of stress out there,” Dierks says. “It's important you get some decompression time. If somebody feels really down, get some help. Somehow we will get through this.”

Dierks recalls a story from one of his friends who was struggling during the midst of the farm crisis. He was basically at the bottom of the barrel financially and was meeting with his accountant. 

“Things were really bleak,” the producer told Dierks. “My accountant took out a legal pad and wrote something down and then handed it to me. The note said, ‘It will get better.’”

To this day, that producer has kept that note as a reminder of that time in his life. 

“We will make it through this,” Dierks says. “It's important that we aren’t afraid to ask for help if we need it. This is something the industry did not bring on itself, producers did not bring on themselves.”

This isn’t the first time the pork industry has gone through tough times, and it won’t be the last. Fortunately, farmers are resilient people, Even says.

Leadership over politics
“When we stick together and work on fixing the problem, rather than trying to point fingers and assign blame, the industry can advance and move forward,” Even says.

This willingness to work together will help the pork industry recover quicker than most, he adds. 

“I've noticed that leadership and competence are being prized over politics and bureaucracy during this time of uncertainty,” Even says. “We see so much of the vindictiveness, whether it's on the radio, on social media or on TV, that doesn't solve the problem. As my dad used to say, ‘That dog won't hunt.’”

Both the Pork Checkoff and NPPC leaders say they are committed to helping producers find the answers they need to survive these times. To do this, it’s takes a lot of teamwork.

“If you want to go fast, you go alone; but if you want to go far, you have to go together,” Even says. 

The work that the Pork Checkoff and NPPC have been doing with the American Association of Swine Veterinarians, state vets, state pork associations, USDA, North American Meat Institute and the U.S. Meat Export Federation underline how serious this situation is for the industry, Even adds. 

“There's no time for petty politics or turf. Everybody's leaning in and working as a team,” he says. “Someday, we're going to look back and grade ourselves on how well we performed as a team helping support the producers out there because at the end of the day, that's who we're working for.”
 

We know that nothing can replace World Pork Expo, but we will be uniting together June 1-6 for PORK Week across all of our Farm Journal platforms to elevate the important role the pork industry plays in feeding the world. Share your stories and post photos on social media using #PORKWeek to help us honor the pork industry. From “AgDay TV” to “AgriTalk” to “U.S. Farm Report” to PorkBusiness.com and everything in between, tune in and join us as we acknowledge the most noble profession there is: feeding people.

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