No one would ever have crossed the ocean if he could have gotten off the ship in a storm.”
I stumbled across this quote from John F. Kettering as we were compiling this year's “State of the Industry” report. It fits, I think. Recent months in the hog business haven't exactly been smooth sailing. And, getting off the ship isn't always an option.
Over a year of below breakeven hog prices have been a huge drain.
Clouds may be forming over the renegotiation of packer contracts. Although they offer the security of shackle space, some have saddled producers with huge liabilities. Still, some hard-learned lessons can be applied to a new round of contract negotiations.
Then there's the retail gorilla — Wal-Mart — who entered the food industry a half-decade ago and now claims nearly 20% of the retail market. The monstrous retailer's tight margins have put added pressure on packers and processors. Those tight margins certainly influence hog market bids and packer contracts.
The industry's also in a tough spot as the future of the mandatory pork checkoff hangs in appellate court limbo. Long-range planning is difficult, at best, as pork producer groups wait for a verdict.
And, who hasn't been touched by the plague of PRRS? One source even made the uncomfortable observation that if we solved PRRS today, the current sow herd would produce 119 million hogs! “I'm not sure we can afford to solve PRRS right now,” he said.
I'm sure he was kidding. But, it did make the point that there's plenty of pork in the world marketplace.
And, of course, there's the farce of country-of-origin labeling (COOL).
COOL Craziness Continues
Clearly, the challenges facing the U.S. pork industry are not contained within its borders. Should COOL become mandatory, the five million or so pigs that normally flow from Canada to the Midwest for finishing and/or processing will be added to the Canadians' annual pork supply. Much of that pork will be targeted for export to the U.S. and other ports.
U.S. barns, built to finish Canadian pigs, aren't likely to sit empty either. The U.S. sow herd will expand to fill the five-million-pig gap.
The colossal insanity of COOL has everyone from the producer to the packer to the neighborhood grocer in a quandary about what it will cost and who will pay.
Gary Machan, vice president of hog procurement at Tyson Fresh Meats Inc. (formerly IBP) pegged it best during a USDA-sponsored listening session when he called COOL “the law of unintended consequences.” Besides the monumental costs and recordkeeping nightmares, Machan says the consumers-right-to-know argument is flawed because over half of the red meat sales occur in restaurants, which is not covered by the mandatory labeling requirement.
And, as one of our freelancers wrote: “Canadian producers remain puzzled about why U.S. politicians seem so intent on implementing regulations that are expected to be damaging to their own producers and packers.”
He went on to say, “Coffee shop discussion in Canada likens COOL to the Canadian gun registry. Even though this unpopular program has now cost taxpayers a billion dollars more than originally estimated, politicians are unwilling to admit that mistakes were made.”
Where Hogs Are Welcome
A few years back, there was a lot of talk about hogs being raised “where they are welcome.” That often meant the wide-open spaces of Oklahoma and Texas. Now, it also could mean Canada's western provinces. Check out the hog density table on page 30.
Here's the bottom line — we are part of a North American pork industry. What happens in the U.S. impacts Canada and vice versa.
And make no mistake, producers in Mexico and South America, particularly Brazil, are not sitting idly by.
And don't forget China. Some see this far away land as a good export prospect. In the short term, it may be. But, a recent press release may tell a different story. The city of Shanghai announced a joint venture to build a new meat processing plant with an annual capacity to slaughter three million pigs. The new plant is one of two slaughterhouses the city is helping to underwrite to replace dozens of small- to medium-sized facilities.
China is on a fast track to modernize and develop new trade opportunities. Yes, they currently only export about 1% of their 400-million-head annual production. But you can be sure that a country that raises nearly 25% of the world's pork has its eye on the global pork market.
Another quote, this one from the Syracuse Herald, sums it up nicely: “Part of the problem today is that we have a surplus of simple answers and a shortage of simple problems.”
The challenges facing the North American pork industry may not be simple, but history has proven producers will rise to the occasion.