Analyst blames hard times on rapid rise in feed costs
By CAROL RYAN DUMAS
The National Farm Family Coalition says industry pressure for government efforts to revitalize low pork prices will only distract from the root of the problem.
The National Pork Producers Council is seeking congressional help, including additional government pork purchases and efforts to dismantle trade barriers, to help hog farmers. At an Oct. 22 hearing by the House Ag Committee's Subcommittee on Livestock, Dairy, and Poultry, National Pork representatives stated the two-year crisis in the pork industry is exacerbated by lost exports and is tied directly to high feed costs.
The organization asked Congress to oppose measures that would cause pork producers undue burdens and higher costs, including restrictions on access to capital and contract arrangements.
Other groups say different issues are behind the industry's woes.
Pork producers with the National Farm Family Coalition contend captive supply, consolidation and vertical integration are the real culprits. They have called for Congress to suspend all loans and loan guarantees to build or expand hog facilities and address competition.
"These guys are barking up the wrong tree on loans," said Steve Meyer, livestock industry analyst and president of Paragon Economics in Adel, Iowa. "And (the coalition is) barking up the wrong tree on contract supply and competition.
"I don't think there are any loans being made," he said. USDA has some programs for small farmers, but they are not participating in large operations.
USDA does guarantee bank loans, but one would be hard-pressed to find a bank that would finance hog expansion right now, he said.
"There's no expansion going on," he said, adding that there could be some producer-to-producer buyouts.
Captive supply and competition isn't the problem, either, Meyer said.
The problem is the higher cost of corn and soybean driven by a push for biofuels, he said.
"The disease is cost," he said. "It doesn't matter how much competition there is when they jack the cost 30 percent."
Meyer said he gets irritated when he hears people blame the business model of the current industry for low prices.
"It was a natural evolution, there's no conspiracy," he said. "They're just trying to create a bogeyman. They'd like us to raise hogs like we did in the '50s."
Contracted production and supply evolved in the last 10 years as a way to grow a producer's business, he said. It gave producers more capital to work with and less risk.
It also allowed more control over supply, better products, improved consistency, better flow and fewer transaction costs.
Conclusions from a study by RTI International, funded by Congress and released in 2007, showed the current contract system does give packers some market power, but it is also good for producers and consumers.
The negative impacts were outweighed by the positive impacts, Meyer said.
The study found that eliminating alternative marketing arrangements would hurt producers and consumers, and packers would neither gain nor lose in the long-run.
Staff writer Carol Ryan Dumas is based in Twin Falls. E-mail: firstname.lastname@example.org .
The RTI International study is on the Grain Inspection, Packers and Stockyards Administration Web site: www.gipsa.usda.gov.