Swine Industry Update

Livestock Update, February 1999

Cindy Wood, Animal and Poultry Sciences, Virginia Tech

The Chinese have a curse: May you live in interesting times. The past few months have been interesting in the swine industry. The theory of supply and demand is alive and well: hog prices have plummeted as an oversupply of market hogs flooded the markets. A decrease in packer capacity during 1997 and 1998 exacerbated the situation, with four packing plants closing their doors, and Smithfield's Bladen County plant forced to cut a shift because of environmental concerns. Prices reached historic lows just in time for Christmas, falling into single digits. Projections are that 1998 losses will top $2.6 billion on a record 101 million hogs sold, or 19 billion lb. In December, barrow and gilt slaughter weights were also the heaviest since World War II. Meantime, demand for pork was strong, and retail prices didn't change much during the fall. Exports also remained strong, despite the Asian and Russian economic crises. 1998 was a record year for exports, about 1.23 billion lb, or 18% above the 1997 record. Ironically, it was also a record year for hog imports: more than four million head. As a result, in November, the farm to retail spread was a record $1.99/lb. Time magazine even ran an article about the discrepancy, several weeks after featuring Seaboard as one of its corporate welfare examples. Overall, farmers received just $.22 for every consumer dollar spent on pork.

Given the changes in industry structure, with fewer, larger, more vertically integrated enterprises, there was considerable concern about how well this situation would follow the traditional hog cycle. The December hogs and pigs report indicated that the cycle is alive and well, however: December-February farrowings were predicted to be down 1% from last year, with a 7% decrease in anticipated farrowings for March-May. According to Ron Plain, University of Missouri, this will be the smallest spring farrowing since 1986 if predictions hold true. As he points out, however, increased productivity means that it will not be the smallest spring pig crop this decade. The December report also indicated that the inventory of all hogs and pigs was up 2% from December 1997, but 2% below September 1998. Breeding inventory was down 4% from 1997, and down 3% from September 1998. Market hog inventory was up 2% from last year, but down 2% from the last quarter. Unfortunately, the September-November pig crop was up 2% from 1997, and 11% from 1996, which means plenty of pigs in the chain through the spring. There were 114,380 farms with hogs in 1998, down 6% from 1997 and 20% below 1996. The industry structure continues to change: farms with 2,000 or more head accounted for 6% of the farms but 64% of the inventory. The largest category reported by USDA (more than 5,000 head) constituted 1,915 farms accounting for 45% of inventory. Contracts owned by these companies accounted for 23% of the U. S. hog inventory. Five states had breeding herd increases of more than 3,000 animals last year, and they were all west of Kansas City. This continues the trend of trying to locating new farms as far away from people and other pigs as possible, but brings problems of its own. As Ron Plains points out, isolated locations tend to be undesirable locations for people, far from packers and consumers. These locations also tend to be isolated because they lack characteristics like plentiful water, moderate climate, etc. It is no coincidence that many of these localities now have ballot initiatives about farming in general, and hog farming in particular.

There are a number of initiatives designed to help producers through this time. USDA Secretary Dan Glickman outlined several in late December that include guaranteed operating loans, acceleration of the pseudorabies eradication program, additional purchases of pork and pork products, a moratorium of USDA loans for new hog buildings, investigation of contracts and any other non-competitive pricing practices in the market place, and support for the voluntary live hog price floor implemented by Hatfield and Farmland. NPPC's home page (www.nppc.org) is a good source of information about current status of projects they are involved in, and a number of the large hog states have launched extension programs to reach local farmers. Purdue University aired a broadcast on December 17 titled "Crisis in the Pork Industry" that did a nice job laying out some of the factors involved in the crash, gave some production tips, and also addressed some of the consequences to producers, their families, and communities. The last segment, especially, is applicable in any crisis situation that involves a significant sector of agriculture. A copy of the broadcast is available from Extension Program Development (Bill Murphy's office).

PORK QUALITY ASSURANCE UPDATE

More and more packers are instituting requirements that hogs they buy come from PQA-III certified farms. Hatfield has a July 1, 1999 implementation date, for example, and has been sponsoring PQA workshops in Pennsylvania. Allen Harper and I have helped Extension agents conduct several workshops in the past year for Virginia producers, and are willing to help with more this year. If possible, multi-county meetings work best. We can also help ANR specialists who would like to be able to conduct on-site meetings with individual producers to become better acquainted with the PQA program, and can do some on-site visits ourselves. Please let us know how we can help.

Visit Virginia Cooperative Extension