Mark Greenwood
April 2008
Background
This report outlines the economic situation the U.S. swine industry is currently facing. It is important to note that a large-scale liquidation of swine producers large and small will not only dramatically impact family farms, but will have a ripple effect on businesses relying on the swine industry. This in turn will cause a loss of jobs in rural America and will affect entire communities.
At the outset, it is vital to understand the current situation has no resemblance to the short-term hog market crisis of 1998-1999. This earlier crisis was caused primarily by hog overproduction and a lack of sufficient slaughtering capacity. In contrast, the current situation has more to do with dramatically higher feed prices than the oversupply of hogs. While the U.S. swine industry is producing and slaughtering a record number of hogs, it is also exporting a record amount of pork. Demand for US Pork has increased in the US and worldwide. In February of 2008, the U.S. Pork industry exported 20% of its supply which helped bolster prices. Current hog prices would be at breakeven which historically occurs during this time of year for many producers if their input costs were near what they were a year ago. The issues hog producers are facing today was not of their own making. This ‘perfect storm’ has been caused by dramatically escalating feed prices encountering stagnant pricing during a time of unexpected increases in productivity.
