Starvation Prices For Hogs
May Be End For Many Farmers

INDIANAPOLIS —(AP)— A pork glut brought on by record production has left prices at a fraction of what they were just 15 months ago and hog farmers wondering how they'll make ends meet.

Pork prices have plummeted so severely this fall that experts say even the most financially sound farmers feel threatened.

"My counselors are basically in an uproar. We've got applications coming in like wildfire," said Roslyn M. Amor, who directs the state-funded Farm Counseling Project, which provides advice and mediation services.

Triggered by record-high pig production that has flooded slaughterhouses, the price plunge began in August 1997, when prices slipped under a then-robust $50 per 100 pounds.

By late October, they had fallen under $20 and now seem to have bottomed out in the range of $14 to $18 per 100 pounds.

That's half of what it costs to raise a hog to a market weight of 250 pounds.

Bill Arthur, a fourth-generation Hancock County hog farmer, figures his farm's losses at $16,000 a week. If prices don't recover, his reserves might enable him to hang on for just three more months, he said.

"We've never been late on a payment, never," said his wife, Jacque, who keeps the books.

In Carroll County, Indiana's top hog-producing county, agricultural Extension educator Steve Nichols worries about the stress on farm families who are watching their livelihood disappear through no fault of their own.

"I'm really concerned about the family situation, and here we are going into the holidays," he said. "If this goes too long, nobody can withstand."

The National Pork Producers Council last Friday took the unusual step of asking President Clinton to extend low-interest loans and other emergency aid to prevent tens of thousands of hog farms nationwide from going out of business.

Terry M. Fleck, executive vice president of the Indiana Pork Producers Association, estimates Hoosier pork producers could lose up to $300 million if prices don't improve.

The ripple effect will cause a $1 billion spending downturn for Indiana's economy, Fleck said, citing studies that show each dollar of income to a hog farm is spent three times by suppliers and others.

"You have to go back to the Great Depression before you see such a financial calamity as we have right now," said Christopher Hurt, an agricultural economist at Purdue University. "Producers are plotting out how many days before their total net worth is gone."

Kansas hog producer Cale Tredway says it just is not worth it anymore, not with hog prices the lowest they have been in more than 25 years.

Analysts worry the latest price crisis in pork could force the small producers like Tredway out and concentrate the industry in fewer and larger hands.

"I didn't have to stay in and take this beating," said Tredway, who runs a diversified farming operation near Erie. "The way the hog industry's going, it's tough to say whether we'll get back in or not."

Tredway, whose operation includes wheat, corn, milo, soybeans, hay and cattle, has sold his sows and his remaining hogs will be gone as soon as they reach market weight.

The hogs had been a small but important part of his farm — something that could be counted on for a steady cash flow.

Not anymore, as hog prices have fallen to a point many producers say is the lowest since 1972. About a year ago, pork producers could expect about $110 or more for each hog sent to market. Now, they get about $40.

Losses average $40 to $50 a head.

The price decline is blamed on high production of all meats, hog production exceeding slaughter capacity and economic problems in Asia that has reduced the expected growth in exports.

"Anytime you get an extended period of heavy losses — and let's face it, that's what you're seeing — you're going to have producers that don't have enough equity to hang on," said Rodney Jones, an agricultural economist at Kansas State University.

Large producers probably can survive low prices, Jones said. But even such large producers as Premium Standard Farms and Murphy Family Farms have had trouble.

Premium Standard cited unprecedented low hog prices in mid-1996 when it restructured its operations under Chapter 11 of the Bankruptcy Code. The Missouri-based company has since become 51 percent owned by Continental Grain Co.

Murphy Family Farms, meanwhile, has delayed plans to build two large farms in west-central Kansas because of the poor market.

Efficiency, not size, will be the determining factor in who survives, Jones said.

Doug Claassen, who farms with his father and two brothers near Whitewater, produces a truckload of market hogs each week from 650 sows. Claassen grows milo and soybeans, using the milo to feed the hogs and swapping the beans for soybean meal to supplement the milo.

"Over the years, that's been a pretty good way to do things," Claassen said. "Currently, it's not working out too good.

"I'm sure we have to get through some of these times to find out who the low-cost, efficient producers are. It's whoever has the most staying power."