As the hog industry’s financial crisis deepens, a number of leaders announced steps that are being taken to address the issue in a teleconference call with journalists June 23.
Defining the crisis, National Pork Producers Council Chief Executive Officer Neil Dierks says the industry has endured 22 consecutive months of losses dating back to September 2007.
At that time, producers enjoyed a high level of equity in their hog operations. But there has been a significant erosion of producers’ equity as the hog crisis has lengthened. By the end of March 2009, that equity had plummeted to an average of 40%, and Dierks says agricultural lenders reported that by the end of May equity levels had further deteriorated to 32-35%.
The crisis stems from continuing improvements in production efficiency at a time of reduced product demand. The H1N1 flu outbreak virus hurt consumer demand, and coupled with increased hog productivity and reduced pork exports, resulted in essentially 7.5% more pork on the U.S. market today than what would have been anticipated without the flu issue, says Chris Novak, chief executive officer of the National Pork Board.
Even though pork producers reportedly cut about 3% of their sows so far this year, productivity gains have approached 2.5%, nearly wiping out any gains, Dierks says. “Producers say they are really focused on productivity.”