Pork producers have cut costs, weathered storm, but how much longer can they last?
WILLMAR -- Pork producers are waging a constant battle to try to stay ahead by cutting costs and managing their operations to be as efficient as possible.
That still may not be enough to keep the state's swine industry intact.
"We've done almost all we can do to control our costs," says Pat FitzSimmons, of Dassel. FitzSimmon's family operates a farrow-to finish operation, owns a feed mill in Mapleton and provides the daily management for nine sow cooperatives in the state. He also serves as a committee member for the Minnesota Pork Board and the Minnesota Pork Producers Association.
For many producers, cutting production -- raising and keeping fewer hogs -- as a way to cut costs and reduce losses isn't an option, he says. The costs to operate a hog building, the payments, labor costs and utilities, remain the same if the barn is full of animals or not.
With producers losing $30 for each market animal produced, the industry is losing producers, he says. Producers selling sows may have as long as two-week wait to market those animals.
"They are buying all the cull sows they can handle," FitzSimmons says, meaning that sow farms are either reducing or liquidating their herds. Plus, some finishing barns operated by farmers contracted to finish pigs to market weight are going unfilled.
Yes, producers have taken economic hits from the H1N1 flu and from changes in the export market due to the world economy, but the real blow to producers' profitability is the cost of feed, largely fueled by government support for ethanol.
The pork industry, which is not directly subsidized, has no qualms with the ethanol industry, other than the per-gallon subsidy the renewable fuel industry receives.
"We battle with someone getting $1.50 a bushel," he said.
FitzSimmons has numbers to back up the statement. In 2005, producers received an average of $136 per market hog. In 2008, they received $131 per hog. Meanwhile, corn was $2.09 per bushel and a ton of soybean meal was $187 in 2005, but in 2008, the price of corn was $5.25 and soybean meal was $333 a ton. The price increases were largely driven by government support for ethanol production and corresponding speculation in the grain markets.
The continued struggle for profitability could cost rural areas if hog farm employees are laid off from good-paying jobs with benefits.
"In lots of rural areas, there are no jobs to replace the ag jobs," he said. "The thought of losing those jobs is difficult."