Story originally printed in the La Crosse Tribune or online at www.lacrossetribune.com
Published - Thursday, May 15, 2008
Feed prices are going hog wild; higher meat prices to come
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FOUNTAIN CITY, Wis. — It’s hard for farmers Jim and Julie Litscher not to squeal a little about feeding their 200 Hampshire pigs.
Low pork prices coupled with higher input costs — feed, transporting manure and hogs to market, diesel fuel to run tractors through corn fields and energy to heat barns — have squeezed the Litschers into downsizing 25 percent over the last several years.
“It’s been getting lower and lower,” Jim Litscher said. “Back in the heyday, the most we had was 40 sows, and now we’re down to 10. We used to put 600 pigs to market a year, and now we’re down to 200 a year.”
The Litschers are not alone.
The National Pork Producers Council says America’s hog farmers have been in crisis over the past several months, mainly because feed prices have doubled. Producers on average lose $25 to $50 on each hog, creating an industry deficit of more than $2.1 billion.
“Feed costs are way up, and hog farmers are losing money every time they’re selling a pig,” said Tom van der Linden, University of Minnesota Extension Service educator. “Eventually something has to happen. Either they’ll quit raising or lower their numbers.”
Getting a grip on the problem means reducing the supply, which could lead to further agriculture consolidation and harder times for small producers like the Litschers. It also means consumers’ pocketbooks are about to get leaner.
Going into the summer grilling season, meat prices haven’t increased more than normal, said Bob Sula, manager of Ledebuhr Meat Processing in Winona, Minn. But he expects it’s coming soon.
Pig and cattle farmers can’t afford to feed their pigs and cattle so they’re bringing them to market early, Sula said. He knows a couple of small farmers in the area who recently abandoned the hog business.
“My costs have gone up a little bit, but I’m trying to hold prices as long as I can,” he said. “People have it rough enough with gas prices.”
Ernie Gorman, co-owner of Midtown Foods in Winona, said the meat department has been the least affected part of the store. “(But) when it comes, I expect it to be drastic,” Gorman said. “The price of feed is going to catch up.”
The National Pork Council estimates hog farmers will need to reduce production by at least 10 percent, or 600,000 sows. Retail prices will go up as supply goes down, said Dave Warner, the council’s communication director.
The council partly blames the ethanol industry for higher feed costs. Independent farmers can’t compete with ethanol plants that can pay corn growers more because of federal subsidies, Warner said.
“We support ethanol and alternative fuels, but we want to compete on a level playing field for that corn,” he said. “It’ll be cheaper for me to get rid of my pigs and grow corn and sell it to ethanol.”
Randall Doyal, Renewable Fuels Association board member, said that’s misplaced blame.
“If there were a limited number of bushels or limited supply, that’d be right,” Doyal said. “But we fed more corn to livestock last year than ever, and that includes pigs.”
The cost of oil bears the responsibility, Doyal said. A weakened dollar and crop failures in Australia that led to high grain prices and a volatile commodities market have contributed to the problem, he said.
“The thing that impacts everybody from every side is the cost of oil, whether it’s driving to work or driving your tractor or a truckload of hogs or a ship across the ocean,” Doyal said. “That price gets passed through to the folks at the end of the line, consumers.”
Prices for corn and soybeans may be at a record high, said van der Linden, but everything farmers buy to produce those crops have also gone up. This problem expands beyond hog farmers to almost every segment of agriculture, he said.
“Recent high grain prices and high fuel prices have thrown everybody in agriculture through a loop, and they’re thinking how we’re going to make it work,” van der Linden said. “Right now, I would say hog farming is the tough spot to be.”
In this case, bigger doesn’t mean better.
La Crescent, Minn., farmer Erick Abnet finishes about 1,200 hogs a year. Market prices for farmers — 55 cents a pound — have gone up in the last week, but he’s still losing $25 a hog. That’s $30,000 this year.
On average, pigs eat nine bushels of corn and one bushel of soybean mix concentrate from farrow-to-finish or over six months.
Both the Litschers and Abnet grow their own corn for feed and don’t like to think about the money they’ll lose with corn selling at about $6 a bushel.
Like the Litschers, Abnet supplements his hog’s diet with soybean meal. That costs Abnet about $170 a ton more — and he goes through three tons a week.
“It’s going to take a while to get that back,” he said. “At 55 cents per pound, that’s a little over break even.”
Reducing his market pig weight from 280 to 250 pounds has helped, but Abnet said it’s not the answer. Abnet has experienced low pork prices before, but the combination of factors adding to his input costs are unlike he’s ever seen. The market will eventually even out, he said, but that takes time.
“The combination’s probably the worst … If prices stay this way, there’s going to be less and less people raising animals,” Abnet said. “People just can’t do it..”
The Litschers have been farming for 27 years. Most of their pork is sold for grade yield, but 40 percent is sold directly to customers.
“The only farmer that ever got paid for his time is the one that quit farming and got a job in town,” Jim Litscher said. “If it wouldn’t be for my direct marketing I’d probably quit. We’ve got a pretty decent customer base, and they’re pretty faithful. That’s what keeping me in the hog business.”
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