Pork Groups Urge USDA to Aid Growers with Sow Buy-Out Program

Ames, Iowa (RuralWire, August 19, 2009)— Three pork producer marketing groups are underscoring the depth of the pork industry crisis, and requesting a sow buy-out program to invigorate the U.S. pork industry.

Producers Livestock Marketing Association, National Farmers Organization and Allied Producers Cooperative, who represent producers across the country, are asking USDA to evaluate the pork market impact of a $200 million federally-funded sow buy-out program to reduce pork supplies. Pork producers lose more than $30 per animal today, and are projected to lose nearly $54 per head this fall.

The marketers also support:
NPPC’s Aug. 17 request to assist America’s pork producers, including 3 separate $50 million pork purchases, and usage of $100 million of H1N1 program funds
USDA Secretary Tom Vilsack's tack in telling Farm Service Agency lenders that they need to help pork producers work through their financial difficulties
U.S. Trade Representative efforts to reopen China's market to U.S. pork

“U.S. pork producers have been increasing production in recent years as they responded to growing export demand, said Producers Livestock President Rick Keith. “But this year they've been financially clobbered when H1N1, wrongly labeled swine flu, appeared in Mexico and fear of North American pork hammered those exports…no one can get the flu eating pork,” Keith said.

Since July 16, the Chicago Mercantile Exchange (CME) August hog futures contract has lost about $17 or 35 percent. June pork exports were down nearly 34 percent from year-ago levels. Producers have lost money the past 22 months, and the industry has racked up losses of $4.5 billion over the period.

Some ag economists estimate a U.S. sow number reduction of between 10 and 12 percent is required for the industry to return to profitability, and they calculate it will require a reduction of at least 400,000 sows to make any significant improvement at all.

The sow buy-out plan targets about 500,000 sows—by using government funds at $400 per animal for a total of $200 million. Producers would provide cash receipts verifying that those sows had been sold for slaughter, and sign a document testifying to their sow herd count—and promise not to add sows back for a minimum of three years. Random checks by FSA or Ag Extension to verify participating producers are honoring their commitment would be required.

“The industry is grappling with downsizing supply right now, and some consideration toward government assistance in reducing the sow herd is warranted,” said National Farmers President Paul Olson.

“Pork producers have been simply devastated by higher input costs, and are losing equity at alarming rates,” said John Kramer, an Allied Producers Cooperative board member. “In the final analysis, we need to reduce U.S. herd numbers by 10 percent.”

The three groups emphasize consideration toward government assistance in reducing the sow herd should be seriously contemplated. “If the federal government can bail out companies that have been badly managed, why can't it assist an industry that is well run, but got unfairly hurt by circumstances outside of its control,” asked Olson.

“There are pork producers going out of business today who did nothing to bring this on themselves.”