The Rural Voice, 2002-12, Page 65PERTH Oitk
County Pork Producers NEWSLETTER
Jim Van Nes, President
519-393-6712
• The Rural Voice is provided to Perth
County Pork Producers by the PCPPA.
What if anti -growth protesters are doing us a favour?
Any opinions expressed herein may not
necessarily reflect the views of the
Perth County Pork Producers'
Association.
recently ran across the following
article written by David Kruse of
Commstock Investments in Royal,
Iowa, and thought it provided some
thoughts on the current situation in
pork productions.
"An injunction on a new hog
finishing complex in Dickinson
County; the Iowa Environmental
Protection Agency denying a building
permit for a 7,000 -sow complex in
Adair County: a $33 million judgement
against Iowa Select Farms in a Sac
County nuisance suit: the (Iowa) hog
industry had a great week. If the Iowa
Citizens for Community Improvement
and similar groups in other states can
just keep up the pressure. eventually
hog production will be curtailed to the
point raising hogs may become
profitable again.
"While I do not believe that many of
the actions taken to block producers
from sighting new units are justified.
the pork industry is locked into a state
of over -expansion that it seems to have
no control over. There are too many
hogs and the September hog report's
two per cent drop in the breeding herd
is not enough to sustain profitability.
The fact that there are so many new
building proposals being challenged or
rejected is evidence there is still
expansion occurring within the industry
even as others who've lost their equity.
quit. Iowa State University extension
economist John Lawrence forecasts that
it won't be until the third quarter of
2003 until hog prices average in the
low $40s, reaching break-even. Hog
production was only marginally
profitable for a brief period in the
summer of 2002, with losses far
exceeding profitability in terms of size
and duration for the year in total. While
the hog market has recovered from
extreme lows, it's a long road to reach
profitability.
"There is too much optimism that
liquidation seen in the September hog
report is enough. Hog producers have
consistently responded to smaller
margins by expanding production. The
theory is that to make the same amount
of money you have to raise more hogs.
Demand, however, is not elastic enough
to handle the increased supply
responding with larger market declines
to each incremental increase in supply.
"The hog industry is in a spiral of
supply/expansion/price gravity that has
already seen two periods of collapse,
one in 1998 and another this August.
Yet many are continuing to attempt to
expand as if somehow the price
response will change. The portion of
the industry still expanding is either
integrated, raising hogs and selling
pork. or operating under the horribly
mistaken assumption that there are still
enough producers willing and able to
quit to cut production to the point
profitability is attained. The reality is
that most producers who could quit did
so. Most remaining hog producers are
locked into continued production by
debt or contracts until their equity runs
out. When that happens their facilities
are sold for 50 cents on the dollar and a
new equity entity resumes production.
The expansion of feeder pigs from
Canada hasn't entirely ceased nor have
gains in herd productivity stopped.
"The pork industry as a whole
seems to be a great deal more paranoid
over impediments to its expansion than
it is over prospects for its profitability.
They see environmentalists and rural
activists as mortal enemies bedeviling
their expansion plans. The four plaintiff
couples suing Iowa Select in the
nuisance lawsuit garnering the $33
million judgement were all local
farmers. The same subsidies in
Freedom to Farm that pressured the
price of corn below the cost of
production benefitting Iowa Select,
provides income for corn farmers.
Grain farmers got their income from
the government and Iowa Select was
subsidized with cheap corn. That's why
grain farmers won't put up with the
smell of corporate hog lots as they
aren't their corn market anymore — the
government is.
"Mega -hog producers reason that if
they can't raise them in the U.S.,
someone else will raise them in Brazil.
If the cost of production is lower in
Brazil. the industry is eventually going
to gravitate to Brazil anyway. It will be
economics that determines where the
hogs are raised. If we lowered the
standard of living here to the point that
we could compete with Brazil. no one
living here now would like it. Pork
exports on average only add $I/head to
the value of U.S. hogs, not enough to
make much difference one way or the
other when cash hogs were selling for
$l5/head in August. Brazil is going to
expand hog production and become the
eventual pork export platform
regardless of whether or not producers
here receive a permit to build the next
sow complex.
"Many U.S. producers raising hogs
today are secretly pleased with rural
activists blocking new building permits
and celebrate court rulings that curtail
expansion of mega -producers like Iowa
Select. All the mega -producers have
done is destroy the historical
profitability of the hog industry so that
swine production agriculture is a low
margin. no margin. equity -eating
enterprise. The trend toward contract
hog production is just an intermittent
step in the producer's demise. There is
too much hog production capacity. We
don't need more. A moratorium on new
buildings would be of pragmatic benefit
to the pork industry if it restored
profitability. It should be obvious to all
but the most hard-headed that the
current mindset driving industry
development is the self-destructive
equivalent of financial suicide."0
- Submitted by Jim Van Nes
PERTH COUNTY PORK
PRODUCERS'
PORK PRODUCTS
• Smoked Pork Chops • Fresh Pork Chops
• Stuffed Loin Chops • Smoked Sausage
• Smoked Cheddar Sausage
• Bacon Burgers • Teriyaki Pork Steaks •
Vittorio's BBQ Sauce
AVAILABLE FROM:
Steve Hulshof (Kinkora) 348-8167
Martin van Bakel (Dublin) 345-2666
Walter Bosch (Monkton) 356-9000
Ted Keller (Mitchell) 348-9836
DECEMBER 2002 61