The Iowa Pork Producers Association (IPPA) has formed a study committee to deal with the financial crisis affecting the state’s pork industry.
Producers were buffeted by high feed costs in 2008, and now that feed prices have moderated in 2009, hog prices have fallen.
That means producers can’t rely on one commodity or the other to bail them out of the current price doldrums, says IPPA President John Vossberg.
“We’re hearing there are fewer buildings that are full of hogs and some are sitting empty, and usually when you hear that, the futures market will start to look more positive. But that is definitely not the case now,” laments the 54-year-old producer leader from Janesville, IA.
Vossberg says he visited with several producers at the Iowa Pork Congress who told him that they are still feeding $5 corn. But their local cooperatives have helped blunt the impact by blending up to 25% of feed rations with $3 corn that they’ve acquired more recently.
Still, many producers have asked Vossberg and IPPA Executive Director Rich Degner how low they should let equity go, and what steps they should implement to try and survive this downturn.
With no bail out on the horizon for hog farmers, Vossberg is anxious that the study committee investigate producers’ rights with their lenders regarding availability of credit to weather double-digit months of red ink.
“For most of our producers, the February-April time frame is critical, because it is when they go in to renew their loans, and this year they may need some answers as to how they are going to survive,” he says.
IPPA’s Degner says this downturn is different from the past. During the 1980s agricultural crisis, IPPA formed the Iowa Pork College, an educational program to help producers with their financial management skills and develop a five-year business plan.
When hog prices plummeted in 1998-1999, a study committee was organized that resulted in development of a marketing cooperative for producers.
This time, the issue relates to the general economic crisis, and how federal regulators have started to apply pressure to rural banks, resulting in uncertainty for agricultural credit, according to Degner.
He says the study committee plans to set up a series of meetings with Iowa bankers, mediators and others to outline the issue.Once appropriate information has been gathered, the next step will be to develop a recommendation for the IPPA Board of Directors.