Farmers Face Record Low Hog Prices
Saturday, 9 January 1999
(AP)
WHEN DON Brady decided to call it quits as a hog farmer, he did not go
quietly. He had always enjoyed this life, he had always been a success. So
when low prices squeezed him out, he went public.
"Free hogs," declared the small ad he placed in his local newspaper.
"When the cost of a 10-pound ham is more than a farmer gets for his
whole hog, it's time to give them away."
And so he did.
Late last month, folks lined up in cars and trucks in 20-degree cold the
night before the giveaway, waiting to take him up on his
one-animal-per-family offer. He handed out 60 hogs in one day at his farm
in Neponset, in west-central Illinois.
"It was the last hurrah," says the 49-year-old Brady, who has tended hogs
since he was a fresh-faced teen in a 4-H Club. "This was a way to do
some good for needy families and to make a statement about what has
happened to the farmer."
What has happened is nothing short of a disaster.
Hog prices have plunged to record lows, forcing some farmers to quit and
pushing others deeper in debt, wondering if they will ever dig out. Some
have lost $2,000 a day, or two years' income in two months.
"It is catastrophic," says Chris Hurt, agricultural economist at Purdue
University. "It's Depression era. It is really without comparison."
Hog farmers lost about $2.6 billion in 1998, based on an average loss of
$27 per animal, says Ron Plain, a livestock specialist at the University of
Missouri.
And though prices have rebounded slightly in recent weeks, no one
expects a rapid reversal of fortune.
In fact, Plain predicts hog farmers could lose $1.5 billion more by
midsummer, when he expects they will break even.
The reason for the hog crisis is fairly simple: Too many animals, too few
slaughtering operations.
Oddly enough, prosperity is partly to blame.
Hog farming was booming in 1996 and 1997, so producers began raising
more animals. "When you make money, it's natural for people to want to
reinvest, and that's what happened," Plain says.
Some also blame the growth of huge corporate hog farms that have come
under increasing regulation by states because of air and water pollution
problems.
"There was a mad rush to find sites before there were further
environmental restrictions," Hurt says. Some states imposed moratoriums.
In 1998, hog production was up 10 percent over the last year, but packing
plant capacity fell by 8 percent. Three big older slaughterhouses closed in
the last two years.
"Packers found it didn't matter how low they bid for hogs, there still were
plenty of them lined up at the door each day," Plain says.
Hog prices fell from 55 cents a pound two years ago to as low as 8 cents a
pound in late 1998, he says.
Farmers who spent $100 to raise a hog sold their animals for $20 each.
And they had no choice. Unlike grain that can be stored until prices
rebound, hogs are perishable.
"You can't say, 'The market is terrible today,' " Plain says. "When they're
grown up and ready to go, they've got to go."
At the same time, the cost of pork at the grocery store barely changed in
the last year, prompting accusations of gouging.
Agriculture Secretary Dan Glickman has asked for a federal probe into
possible price-fixing, even as farmers and some economists have raised
questions about consumer costs. His own agency is conducting an internal
probe of the price spread between the farm, wholesale and retail level and
packers' pricing practices.
But Plain argues that making pork cheaper in the supermarket would not
have rescued farmers.
"One would expect that if you cut the price, demand would increase for
pork, and hog prices would go up," he says. "Normally, that's how it
works - unless you have inadequate capacity somewhere down the line.
And that's what we had.
"If you cut the price ... packers couldn't kill any more hogs than they were
killing," he adds.
But that's little solace for farmers, who have become increasingly
frustrated. One Iowa producer planned a pig hunt on his land to call
attention to the crisis, but canceled the event.
Concern also has spread to the nation's capital, where experts testified last
week at a congressional hearing that prices would soon stabilize. That
same day, nearly a dozen hog producers met with President Clinton to
describe their dire straits.
Across the Midwest, there are countless tales of financial ruin.
"I told my kids I've got a job, but I don't have a paycheck," says an
exasperated Ron Mohr, an Iowa hog farmer for 34 years who gave away
27 of his animals in November.
"I lost $25,000-$30,000 in operating income in four months," he says.
"There's no question we can't continue this way very long."
Plain, the Missouri economist, says a third to a half of the nation's 114,000
hog producers are likely to quit unless there's a major government bailout.
On Friday, Vice President Al Gore announced hog producers will get $50
million in direct payments from the government. The government also
announced late last year it would buy $50 million worth of pork for the
federal food assistance program.
State governments, too, are pitching in. In Illinois, for instance, farmers will
have access to low-interest loans, and state agencies last week were
ordered to buy more pork for state prisons and mental institutions.
Meanwhile, pork producers remain in a quandary.
"Farmers don't know what to do. It's out of their control," says James
Quackenbush, president of the Minnesota Pork Producers Association.
"They don't have any other way to go but to get out and most don't want
to do that. They've invested a lot of years and a lot of money in their
operations."
"In some cases, you can't quit," adds Quackenbush, a fourth-generation
farmer who raises hogs with two brothers in the west-central Minnesota.
"You have a mortgage on that building. You're losing money, but you keep
going in hopes that you can get better."
That's what Tim Donlon is banking on to save the only career he's had in
his 36 years.
"We ask ourselves every day, 'What if this doesn't turn around? What will
we do?' There isn't a right answer. I could wake up tomorrow and say,
'I've had it,' " says Donlon, who farms amid the rolling hills of northeast
Iowa, 10 miles from the Mississippi River.
In one year, the value of his sows dropped from $30,000 to $5,000.
That has left him juggling bills, delaying payments and worrying about
borrowing more money from the bank.
"Instead of making $40,000 ... I lost $40,000," Donlon says, frustration
creeping into his voice. "I worked as hard as I did any other year and I've
got nothing to show for it."
In recent weeks, the hog glut has diminished slightly; cold weather slows
the animals' growth.
But it's all too late for Don Brady.
He says his grain crop will offset some of his losses, but he will end up in
the red. He still has some hogs to sell, but after that, will be out of the
business.
"It was a tremendously tough decision," says Brady, who followed in his
father's footsteps and had planned for his son to continue the family
tradition. "I love the job. It's like some people grow up to be firemen or
lawyers. We grew up to be hog farmers."
But farming, he says, is a gamble and he's not bitter he lost.
"When it becomes spring, we'll all get spring fever," he says. "Then we'll
turn a new chapter and do something else."
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EDITOR'S NOTE - Sharon Cohen is the AP's Midwest regional reporter,
based in Chicago. |
