The impact of COVID-19 has caused hog values to plummet, creating a financial disaster for pork producers nationwide who face a collective $5 billion loss for the remainder of the year. At a press briefing today, the National Pork Producers Council outlined the crisis as described by producers and the immediate relief they are requesting from the administration and Congress.
"We remain committed to supplying Americans with high-quality U.S. pork, but face a dire situation that threatens the livelihoods of thousands of farm families," says Howard "A.V." Roth, NPPC president and a pork producer from Wauzeka, Wis. "We are taking on water fast. Immediate action is imperative, or a lot of hog farms will go under."
The suspension of pork packing plant operations and rising employee absenteeism due to COVID-19 has exacerbated an existing harvest facility capacity challenge due to a labor shortage in rural America. With limited harvest capacity, a surplus of pigs exists, causing hog values to plunge. The loss of the food services market (i.e. restaurants) and the COVID-related slowdown in most export markets has crashed demand and overwhelmed the cold storage of meat.
Dermot Hayes, an economist with Iowa State University, and Steve Meyer, a pork industry economist with Kerns and Associates, estimate that hog farmers will lose nearly $37 per hog, or almost $5 billion collectively, for each hog marketed for the rest of the year. Prior to the COVID-19 crisis, and after two challenging years, hog farmers were generally expecting a profitable year, with industry analysts forecasting earnings of approximately $10 per hog on average for 2020.
"In speaking with packers, they have record large storage of pork right now," Hayes says. "This is the product that was destined for food service that has not sold so there are several weeks, possibly months of supply and the number of packing plants that have closed is small relative to the total number of plants so we are good going forward. The only concern would be if we lose multiple plants and there is data, and common sense will tell you what happens next if we don't have pork in shortage and plants in operation, but we are not there yet."
"The pork industry is based on a just-in-time inventory system," Roth says. "Hogs are backing up on farms with nowhere to go, leaving farmers with tragic choices to make. Dairy producers can dump milk. Fruit and vegetable growers can dump produce. But, hog farmers have nowhere to move their hogs."
NPPC, in consultation with hog farmers across the nation, identified several measures it has raised with federal policy makers, including:
- Over $1 billion in pork purchases by the USDA to clear out a backed-up meat supply, supplementing agency food bank programs facing increased demand due to rising unemployment. These purchases should accommodate pork products packaged for restaurants and other segments of the food services market.
- Equitable direct payments to producers participants without eligibility restrictions.
NPPC is also seeking a legislative fix to emergency loan programs that have left farmers behind. Approximately 10,000 family hog farms are in jeopardy because they do not have access to much-needed capital offered by the Small Business Administration. NPPC urges Congress to increase the cap on qualifying businesses to those that employ up to 1,500 and to make agricultural businesses eligible for the Economic Injury Disaster Loan program.
Finally, Roth says, NPPC would like to see China remove its retaliatory tariffs on U.S. pork.
"It's no secret that China needs a reliable source of affordable pork," Hayes says. "Removal of punitive tariffs would get us back on a level playing field with international competitors and according to Dr. Dermot Hayes — it would more than double exports to China from 10% of the total U.S. production today. Ironically, as a result of the current trade dispute, producers in China are currently enjoying record hog values and pork prices, while us U.S. pork producers face a dire decision on our farms."
The economic impact analysis by Hayes and Meyer was based on live hog futures between March 10 and April 10.