Time to bail out the pork industry
OMAHA, Neb. -- A storm as economically devastating as Hurricane Katrina is roaring across the U.S. pork industry and causing financial devastation to a business segment that didn't build below sea level, didn't engage in risky sub-prime mortgages...
OMAHA, Neb. -- A storm as economically devastating as Hurricane Katrina is roaring across the U.S. pork industry and causing financial devastation to a business segment that didn't build below sea level, didn't engage in risky sub-prime mortgages and didn't build a product that struggles to compete in the world market.
Despite this, the U.S. pork industry and hog operations have had millions of dollars sucked away because the virus H1N1 is called "swine flu," and fears of illness and a global pandemic have resulted in unwarranted bans against U.S. pork -- even though you can't catch the virus from eating pork. Reality has been replaced by fear and emotion. Unfortunately, that means equity is being replaced by financial ruin for many pork producers.
It's time for the federal government to step in and provide funds to help U.S. pork producers who are being crushed by an event they did not create, but threatens to be their demise.
Chris Hurt, agricultural economist at Purdue University, says U.S. hog producers have experienced three traumatic events in the past year. Using an analogy to baseball, he says the first strike against producers was the record high grain prices last summer. The second strike was the onset of the world financial crisis in the fall. For some, the outbreaks of flu have been the third and final strike, he says. Hurt estimates 25 percent to 33 percent of the nation's hog producers may be forced to seriously reconsider their positions in the industry. He also says the effects of such historical events on the market can linger for several weeks or even longer.
The U.S. pork industry is a proud one. The industry doesn't ask for bailouts or handouts and, instead, lobbies for free trade agreements and a level playing field to compete in an open market. And that's as it should be. But today, the industry is facing something new, unpredicted and unexpected. And I think the federal government should provide disaster aid to the hog production segment of the U.S. economy.
I'm no politician and don't know the best form for this aid to take, or even the amount. I'll bet $15 per head per market hog sold by a producer during calendar year 2008 in the form of disaster aid would help out. Pork producers have been suffering from losses for the past 18 months and have been waiting and hoping for the seasonal upswing in the market. Now hope for an upturn instead has become a downturn, and not only are producers not "healing" they're getting sicker financially, and some will not survive.
I'm not talking about an insignificant industry here. According to Texas AgriLife Extension Service economist, Dr. David Anderson, the U.S. had 67.22 million hogs and pigs on feed as of March 1. Approximately 116.5 million hogs were processed in the U.S. in 2008. About 23.4 billion pounds of pork were produced in the U.S. in 2008. U.S. per capita consumption in 2008 was an estimated 46.5 pounds, retail weight. The U.S. is the world's largest pork exporter, with a 39 percent market share in 2008. In 2008, the largest export markets for U.S. pork were Japan, China, Mexico and Russia in 2008. The U.S. also exported the equivalent of 20 percent of production in 2008, Anderson says.
It seems to me that a country that can bail out bad business enterprises because they're important to the economy certainly can fund one-time disaster aid to an industry that works hard, plays by the rules and is getting hammered by an event not of its own making. If you agree, don't call me. Call your senators and representatives in Congress and tell them. Time is of the essence.
Editor's Note: Ellinghuysen is vice president of Omaha, Neb.-based Producers Livestock.