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Groups Urge Congress to Aid Ailing Pork Industry

by 5m Editor
23 October 2009, at 9:29am

US - “There are many challenges facing the economic viability of the pork sector including higher input costs for feed and energy, an over-abundance of supply in the domestic market, weakening demand and international trade barriers,“ said AMI Chairman and President and CEO of Seaboard Foods, Rod Brenneman, in testimony yesterday to the House Committee on Agriculture Subcommittee on Livestock, Dairy, and Poultry.

Mr Brenneman told the committee that prices paid for feed had doubled from 2006 to 2008, largely due to higher corn and soybean meal prices. “While there are various reasons for the increase in feed prices, certainly one of them has been the determined government policies to promote the use of corn for ethanol. This effort, while seeking a desirable goal which is to lower the US reliance on fossil fuels, has had an unfortunate, unintended consequence to the US meat industry and ultimately to consumers,” he said.

Mr Brenneman explained that from a supply side, the productivity of US hog producers has continued to increase and the long-term trend is approximately 1.5 per cent per year. Mr Brenneman said that the US pork industry was producing too much pork to match up with the demand that has been weakened, and that eventually, “we will need to ‘right size’ the industry by either a further reduction in supply, an increase in demand, or more likely, some of both.”

On the demand side, Mr Brenneman noted that there were several reasons for the current state of depressed prices. “Economic factors facing both domestic and foreign consumers in a recessionary period can be pointed to as one reason for low hog and pork prices and lower export demand,” he explained. “You can imagine the impact on prices when you combine an over-supply of pork with decreased demand and closed market access around the world,” he added.

Mr Brenneman told the committee that another reason for the drop in hog and pork prices was the outbreak of the novel H1N1 influenza. “Fueled by confusion between a public health and an animal health issue, swine prices dropped and consumers questioned the safety of the pork products they were eating; however, novel H1N1 is not a flu that was caused or spread by pig production nor is this virus transmitted to humans by consuming pork.” Those fears led to US pork being banned by 17 countries, including Russia and the fastest growing market for pork exports, China.

Mr Brenneman concluded by pointing out two areas he felt the committee should pursue immediately. First, the Secretary of Agriculture should immediately make available Section 32 funds for additional purchases of pork for various federal food programs with a maximum emphasis on purchasing meat from sows with the objective to reduce breeding stock to reduce hog numbers. Second, the US Trade Representative (USTR) should work to open export markets to US pork, particularly China, which continues to impose non-science-based restrictions on US pork since the outbreak of novel H1N1.

NPPC's Plea to Congress

The US pork industry has lost more than $5.3 billion since September 2007, with producers losing nearly $23 on each hog marketed since then, NPPC President Don Butler told the House Committee on Agriculture Subcommittee on Livestock, Dairy, and Poultry in testimony today.

Many factors have contributed to the economic crisis, including the unwarranted bans on US pork by some countries, citing fears of the H1N1 flu, Mr Butler pointed out. But the biggest reason, he said, has been high feed grain prices. Feed prices, which account for 60 per cent of the cost of raising a hog, have increased over the past two years mostly because of US biofuels policy.

Mr Butler asked Congress to:

  • Urge the US Department of Agriculture to make more purchases of pork for various federal food assistance programs. USDA recently bought $30 million of pork.
  • Reexamine a spending cap on USDA’s Section 32 program so the agency can meet the goals of the program. Congress implemented the cap as part of the 2008 Farm Bill.
  • Pressure US trading partners, particularly China and Russia, to eliminate their barriers to US pork imports.
  • Approve as soon as possible the pending free trade agreements with Colombia, Panama and South Korea, which would add greatly to pork producers’ bottom line.
  • Conduct a study of the economic impact on the livestock industry of an expansion of corn-ethanol production and usage. EPA is considering an increase in the amount of ethanol that must be blended into gasoline to 15 per cent from its current 10 per cent.
  • Support allowing the ethanol import tariff and federal blenders’ tax credit to expire.
  • Support regulations and legislation that promote pork producers’ ability to run their operations.
  • Oppose measures that would place on pork producers undue burdens and higher costs such as restrictions on access to capital and contract arrangements or prohibitions on production practices, including banning the use of certain animal health products.

“To stop producer foreclosures and bankruptcies and for us to continue providing consumers around the globe with the safest, most nutritious meat protein, we need to find a way out of this 2-year-old crisis,“ Mr Butler said. “We are asking Congress and our government for some help.“

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