JANUARY 11, 1999 VOL. 153 NO. 1
Lean Times on the Farm
If hog prices are so low, why isn't pork cheaper? Struggling farmers want help--and some answers
BY DANIEL EISENBERG
It's an irony that makes Gary Muller's financial troubles that much harder to bear. If the Iowa hog farmer were to hang out at a local supermarket, he might suspect that his business was thriving as never before. After all, there's no lack of customers buying pork chops or roasts for dinner; and in spite of the Asian economic woes that devastated most American farmers in 1998, pork exports keep on growing. But while Americans pay top dollar for their hams or BLTs, Muller and the rest of America's 115,000 hog farmers may as well give their animals away (some are doing that). His 220-lb. pigs, which a little over a year ago fetched 60[cents] per lb., now command around 15[cents] per lb. When he's not selling his livestock at a loss, he's trying to rearrange his bank payments and save his century-old family farm from going under. "We're getting killed out here," he says.
The pigs, on the other hand, can't be killed fast enough--though 2 million a week are being butchered. And therein lies the problem. Hog farming, until recently the most profitable sector in agriculture, is stuck in the mud. A glut of live pigs on the market, exacerbated by a sudden drop in slaughterhouse capacity, has pushed the price of pigs down to levels not seen since the Depression. "It's a lethal mixture," says Al Tank, CEO of the National Pork Producers Council. Across the South and Midwest, farmers are losing thousands of dollars a day, drifting deeper into debt and near bankruptcy; fully 20% could be belly-up by spring. A government forecast on the hog supply last week promised little relief. "It's the most serious agricultural crisis in this century for an individual commodity," says Gilbert Hollis, a professor at the University of Illinois. The industry, which has lost $2 billion over the past 12 months, is asking the government for help.
On Christmas Eve, Washington answered the call. Secretary of Agriculture Dan Glickman increased federal purchases of pork for humanitarian aid, established a moratorium on direct loans for new production plants and urged supermarkets to start passing on savings to consumers and meat packers to buy at voluntary minimum prices (two in the Midwest have already started doing so).
Of course, at this point, no proposed remedy--including the idea of a "gilt lift" of 300,000 sows to hurricane-ravaged Central America--may do much for the independent hog farmer. George Bailey is one of that fading breed; he owns 650 sows in Walstonburg, N.C., and unlike corporate megafarms, isn't blessed with deep pockets. In the past year Bailey has had to use most of his savings just to stay afloat, and he still racked up $35,000 in additional debt. "We're slowly going broke," he notes. "The [meat] packers are making a killing."
Bailey isn't alone in his suspicions that something more than simple market forces is at play. Many farmers have pointed the finger at their Canadian brethren for flooding the market with swine, and are urging tougher import restrictions. Meanwhile, some critics believe that a few dominant corporate hog processors, like IBP or Smithfield, have unfairly profited from the farmers' misfortunes. "This isn't a matter of outmoded hog producers falling victim to the invisible hand of the market," says Senator Tom Harkin of Iowa. "Pork in the grocery store costs the same now as six months ago. An anticompetitive pork industry is victimizing farmers and consumers." Still, shoppers may begin to see savings at the butcher's counter in the next few months. Unfortunately, by then, hog farmers may not be able to bring home the bacon.
Meanwhile, in the Citrus Aisle...
While waiting for a break on pork prices, consumers can brace themselves for a jump in the cost of table oranges. The eight days of freezing weather that devastated California groves have already driven the wholesale price of the state's navel oranges to $25 a carton, up from $10 a few weeks ago. Shoppers can expect retailers to pass along that extra cost: prices could soar to $1.50 per lb., compared with 39[cents] to 49[cents] two weeks ago. Orange juice, however, should be unaffected. The juice crop comes from Florida and Brazil, which so far have enjoyed mild weather. "You can't compare oranges to oranges," says Kathy Jones, manager of futures research at Prudential Securities. Even table oranges may come down soon: a warming trend in California means that some of the crop might survive. In the meantime, drink your juice.
