Three pork producer marketing groups are requesting that the U.S. Department of Agriculture (USDA) institute a sow buy-out program to prop up the ailing pork industry.
Producers Livestock Marketing Association, National Farmers Union and Allied Producers Cooperative are calling on USDA to evaluate the pork market impact of a $200-million, federally funded sow buy-out program to reduce pork supplies. The groups say pork producers are losing more than $30/hog today and are projected to lose nearly $54/head this fall.
The marketing groups also expressed support for:
“U.S. pork producers have been increasing production in recent years as they responded to growing export demand,” says Producers Livestock President Rick Keith. “But this year they’ve been financially clobbered when H1N1, wrongly labeled swine flu, appeared in Mexico and fear of North American pork hammered those exports…no one can get the flu eating pork,” he adds.
The Chicago Mercantile Exchange August hog futures contract has dropped about $17 or 35% since July 16. June pork exports were down nearly 34% from the same month a year ago. Producers have lost money for 22 consecutive months, accumulating losses of $4.5 billion.
Agricultural economists estimate the U.S. sow herd needs to be reduced by 10-12% to return the pork industry to profitability, and a reduction of at least 400,000 sows will be required to produce any significant impact.
The groups’ sow buy-out plan targets a reduction of 500,000 sows, using government funds at $400/sow for a total of $200 million. Producers would provide cash receipts verifying that those sows had been sold for slaughter, sign a document testifying to their sow herd count, and promise not to bring more sows into the herd for at least three years.
Random checks by the Farm Service Agency or the Extension Service would be required to verify that participating producers are honoring their commitment.
“The industry is grappling with downsizing supply right now, and some consideration toward government assistance in reducing the sow herd is warranted,” says National Farmers Organization President Paul Olson.
“Pork producers have been simply devastated by higher input costs, and are losing equity at alarming rates,” notes John Kramer, an Allied Producers Cooperative board member. “In the final analysis, we need to reduce U.S. herd numbers by 10%.”