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April 23, 2008
The Honorable Edward Schafer
Secretary of Agriculture
Room 200-A Jamie Whitten Building
U.S. Department of Agriculture
1400 Independence Avenue, SE
Washington, D.C. 20250
Dear Secretary Schafer,
On behalf of the U.S. pork industry, I am asking that you
take immediate action to address the dire economic crisis in
which pork producers now find themselves. Our specific
suggested actions are listed below. The situation producers
are confronting is not a traditional “hog cycle” event –
i.e., the industry overproducing for the marketplace and
having to contract supply to balance demand. The marketplace
has offered and is offering prices that historically would
be considered by producers to be breakeven or slightly
profitable. But given the extraordinary explosion in the
price of input costs – primarily corn and soybean meal for
feed – producers are suffering current and projected
financial losses that exceed those experienced in the market
crisis of 1998-1999.
Over the past seven months, pork producers have lost more
than $2.1 billion. They now are losing $30-$50 on each hog
marketed. Lenders are estimating that some producers could
lose up to half or more of the equity in their operations by
year-end. The losses not only are draining equity –
currently 4-5 percent a month – but the speed at which the
losses are being incurred is creating significant liquidity
issues.
The U.S. pork industry most likely will come out of this
crisis, but there will be a cost to rural America and the
U.S. economy. Economists have estimated that producers will
need to reduce production by at least 10 percent – meaning a
reduction of 600,000 sows – to restore profitability to the
industry. But that cutback will have several secondary
consequences, including less efficient packing plants at
risk of closing; less manure for crop fertilizer and
correspondingly the need for more man-made, foreign-produced
fertilizer; a hike in pork retail prices because of a
smaller supply; and lost pork industry jobs. Other
industries that benefit from pork production, such as Main
Street businesses, feed mills and trucking companies, also
likely would see job losses. Additionally, we undoubtedly
will see agricultural credit problems as some producers
default on loans.
Our challenge is to act aggressively to moderate the effects
of the current crisis and thus avoid an even greater
contraction of the industry, which would lead to even
greater negative consequences and food supply issues.
The National Pork Producers Council respectfully requests
that USDA take the following action:
1. Use Section 32 funds for a two-phase pork purchase
program.
▪ Phase 1 – Purchase pork products
derived exclusively from reproductive animals (i.e.,
sows), with product being used for emergency food programs,
food pantries, senior/elderly
programs, hunger programs or other non-commercial channels.
The pork industry is asking that USDA purchase about 50.5
million pounds of ground
whole pork sausage at a cost of $50 million, or 99 cents a
pound. This will reduce the
herd by 163,579 animals. This action is designed to
encourage existing sow harvest sows
capacity. Due to sow seasonal market conditions, some
firms that harvest and market
products from currently have underutilized processing
capacity. There are producers sows
attempting to reduce and even liquidate their sow herds,
which has led to the inability to
move the into the channels of commerce even though market
prices are also low. The
opportunity exists for purchases of high-quality product,
which can be provided to citizens
of lesser means, at a tremendous value to the government.
▪ Phase 2 – Make preparations for and
authorize a separate $50 million Section 32 bonus
purchase of pork products as this situation unfolds. We also
suggest utilizing existing barter
programs with the Department to supplement and expedite
purchases.
2. Use the utmost flexibility in interpreting and
implementing USDA emergency programs and
loan guarantees to help producers purchase feed during the
economic crisis. Of particular
concern is the ability to care for animals in operations
where credit issues dictate potential
restructuring or closure.
3. Support and defend U.S. pork exports through
all of the Department’s resources, including
the Market Access Program and Foreign Market Development
Program. Provide additional
MAP support when additional opportunities for U.S. pork
exports are identified by
cooperators.
4. Give full consideration to early release
without penalty of non-environmentally sensitive CRP
acres for the 2009 crop year.
5. Fully implement the inter-departmental
livestock task force, which was authorized to examine
and to address challenges facing the livestock industry.
We appreciate your immediate and full consideration of this
request. We also pledge to continue to monitor this
challenge to our industry and to fully communicate pertinent
information and relevant suggestions.
Sincerely,
Bryan Black
President |
