The H1N1 Influenza A virus has caused even more financial pain for the industry for the month of May. Hog producers today are receiving prices in the range of $110-$115 a head with cost of production at $140 per head. It is estimated that the average producer has lost an additional 5% of their equity in the last 60 days. The average owner equity today would be below 40% and this downward trend cannot be sustained forever. I spoke to a group this past month and they brought to my attention their concerns about the industry and how it has the potential to become much more integrated. I challenged this group and encouraged them to think out–of-the-box and come up with a solution.
Recently, a program has been formed, called the Producer Retirement Program and the Program representatives will be at the World Pork Expo next week. Their location will be in the Varied Industries Building at booth number 737. They are attempting to come up with a proactive way for producers, who have decided to retire all/part of their herd, to receive more than slaughter prices for their sows. I would encourage those of you who will be at WPX to stop by and get more details from them if you have interest. Below are some facts concerning this organization:
Producer Retirement Program
The Producer Retirement Program (PRP) is a non-profit Iowa corporation whose voting members will be producers that own sows in the United States.
The formation and operation of the PRP is in the public interest. Sow producers today who elect to sell all or part of their herd cannot, for disease management reasons, sell sows to other sow producers; as a result, there is an impediment to producers selling all or part of their herd. Producers are, therefore, forced to either remain in business or take slaughter prices for their herd; in either event, the business operates inefficiently.
The PRP will be an inclusive endeavor, inviting all U.S. sow producers to participate. Voting will be one member, one vote, so no single member or group of members will be able to dominate the organization.
Producers participating in the PRP will pay $20 per sow into the PRP. The PRP will use the membership payments, together with a loan against payments to be made, to create a fund that will be used to help compensate producers for sows that they elect to send to slaughter.
The PRP is not intended to raise prices – there will be no agreement among producers as to the premium to be obtained by any given producer. Producers who elect to retire all or a portion of their herd will submit bids to the PRP, and seek a premium for unrealized reproductive value over the slaughter price for the sows. The premiums paid to producers who voluntarily elect to retire all or part of their herd will not be determined through any agreement among producers. Instead, the premium that any given producer obtains will be determined through individual bids and administered by independent management firms – Insight Enterprise Consulting (general management and policy services) and Value Added Science & Technologies (administrative and recordkeeping services).
The PRP will only retire sows owned by members of the PRP whose owners have elected to participate in the program. The PRP places no restrictions on the land underlying the sow operation, except that producers receiving funds under the program must designate a particular facility to be retired and not use that facility for sow production within a two-year period.
There is no requirement that any producer participate in the organization. As for producers who elect to participate, there is no requirement that they retire all or any part of their herd at any time, nor is there any restriction on their expanding their operations. For those producers who participate and who retire part of their herd, they can continue in business with the balance of their herd.
Congress, the U.S. Department of Agriculture, and State Agriculture agencies will be informed of the program – there is no intent to shield the organization's activities from public knowledge.
For more information about the PRP, please visit our website at: www.producerretirementprogram.org. We look forward to seeing you at the World Pork Expo in Des Moines this week."