Long-Term View Looks Bright for Iowa Producers

Abundant natural resources and a strong infrastructure will help the state's pork industry weather this economic downturn. Despite the prolonged depression in the U.S. hog market, growing hogs in Iowa has a rosy future if pork producers decide to ride it out, according to John Lawrence, Iowa State University Extension livestock economist. Don't get me wrong it's painful now, admits Lawrence in a speech

Despite the prolonged depression in the U.S. hog market, growing hogs in Iowa has a rosy future if pork producers decide to ride it out, according to John Lawrence, Iowa State University Extension livestock economist.

“Don't get me wrong — it's painful now,” admits Lawrence in a speech at the Swine Transition Options Seminar on Aug. 5 in Sheldon, IA. “You're going through a difficult stretch. But as you look forward, if you choose to raise pigs, Iowa has the assets and the infrastructure to do the job and give us major advantages over most of the world.”

Iowa Still King

All the talk in recent years in hog industry circles has been about how Iowa hog production has been on the decline — numbers are dropping and barns are sitting idle, Lawrence observes.

But the figures don't bear out the bleak scenario. In fact, in 2008, Iowa led the nation in slaughtering 32 million hogs, nearly a three-fold advantage over its closest competitor (North Carolina), and a tribute to its numerous packing plants.

Iowa led the nation with just over 1 million breeding sows in 2008, and also set a new record for market hog inventory last year — 18.7 million head, compared to the old record of about 16 million head, Lawrence explains.

In the last 10 years, Iowa has actually added 4.4 million hogs to its inventory, while nearly every other midwestern hog state, except for Minnesota (up 2 million head), has decreased its hog inventory. “Iowa is still the place to raise hogs when it is all said and done,” he stresses.

In these times of carbon footprint debates, Iowa and the Midwest provide a sustainable system in which to grow crops, raise hogs, process them, and return nutrients to the soil. A biofuels stream creates fuel and feed coproducts that go back into the system (Figure 1).

“If you think of sustainability in terms of cost minimization and using resources efficiently, we do a good job,” Lawrence says. “We're recycling nutrients. We have a low carbon footprint and we're a very sustainable system.”

Hog production mushroomed in places like Colorado, North Carolina, Texas and Utah in the early 1990s when transportation and fertilizer inputs were cheap. Now those places pay a hefty price to ship in grain. It costs 61 cents to ship a bushel of corn from Omaha to Amarillo, TX, and 86 cents to transport a bushel of corn from Chicago to Raleigh, NC (2006-2007 data).

In Iowa and midwestern states, hogs provide $3-4/head in crop nutrients in the form of manure. Manure is considered more of a liability in the fringe hog states.

Rising energy costs, higher feed costs, fertile soils and the hog production infrastructure provide a definite cost advantage to raising hogs in Iowa over most other places, Lawrence states.

“We raise the crop and feed it within two miles of where it is grown, process the hogs within an hour of where they are raised and send the pork chops overseas,” he continues.

Pork Export Problems Continue

In 2008, U.S. pork exports set a new record, shipping 20% of production. In effect, about one in five hogs were produced for export.

Without exports, U.S. pork demand remains stagnant. Per capita pork consumption has stayed at about 50 lb. for the last 50 years, growing at an annual rate of 0.9%, equal to the U.S. population growth, he observes.

“So it is great when we are growing exports, but this year we are all crying in our beer because exports have slowed significantly,” he says.

Through the first six months of the year, 2009 is still shaping up as the second-best year for U.S. pork exports — but it remains 9% below 2008 in terms of volume and value, according to the U.S. Meat Export Federation (USMEF). To date, the United States has exported more than two billion pounds of pork and pork variety meats, valued at nearly $2.2 billion.

In all, pork and pork variety meat sales declined 31% in June 2009 to 295 million pounds worth $320 million, compared to June 2008, the second-highest single month total in history.

“The H1N1 influenza virus has been an important factor for U.S. pork exports,” says Jon Caspers, USMEF chairman and a pork producer from Swaledale, IA. “We have had market access issues in two of our top six pork export markets (China and Russia), which makes it all the more important to maintain a strong presence in our other key markets.”

The United States is the world leader in pork exports at 34% of total global sales, Lawrence points out. China is subsidizing its pork industry, so that industry remains a challenge to exports currently. Russia has announced they want to be the pork superpower by 2012, possibly limiting U.S. pork export growth long term.

Canada and Brazil are seen as major competitors to the United States.

“I know there has been some discussion that we can't cut back U.S. pork production because it would harm our export market share,” Lawrence states.

But Canada and Brazil's hog sectors are suffering from financial losses, so that shouldn't factor into efforts to reduce U.S. hog production in order to return the industry to profitability.