Capital Press

The National Pork Producers Council is seeking help from Congress through additional government pork purchases and knocking down trade barriers, but the National Farm Family Coaltion says those measure focus attention away from the root of the problem.

At an Oct. 22 hearing by the House Ag Committee's Subcommittee on Livestock, Dairy, and Poultry, National Pork pointed out that the two-year dairy crisis in the pork industry is exacerbated by lost exports but is tied most directly to high feed costs.

The organization asked Congress to oppose measures that would cause pork producers undue burdens and higher costs such as restrictions on access to capital and contract arrangements.

Pork producers with the National Farm Family Coaltion contend captive supply, consolidation and vertical integration are the real culprits. They call 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, Adel, Iowa. "And they're barking up the wrong tree on contract supply and competition," he said of the coalition.

"I don't think there are any loans being made. USDA has some programs for small farmers," but they are not participating in large operations, he said.

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 producer-to-producers buyouts happening, but not expansion.

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 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 boogeyman. They'd like us to raise hogs like we did in the '50s."

The way the industry evolved in the last 10 years, contracted production and supply, was a way to grow a producer's business. It gave him more capital to work with and less risk, he said.

It also led to being able to control supply more closely, better products, more consistency, better flow and fewer transaction costs.

Conclusions from a study by RTI International, commissioned by USDA and released in 2007, showed the current contract system does lend to some market power by packers. But 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:

RTI International study on meat markets:

Recommended for you