Liquidations in hog industry will also harm consumers
Tough financial conditions for pork producers will continue for at least the next six months, with expected decreases in Minnesota's pork production.
Consumers, who are also under economic distress, will ultimately be harmed by disorderly and extreme liquidations in the swine industry. Retail pork prices could increase by as much as 30 percent.
Estimates show that hog producers are losing an average of almost $31 per animal in 2009. Thus far, 2009 is shaping up to be even worse than 2007 and 2008. This will make the longest period of continuous losses for the modern pork industry.
Things should improve for pork producers by July, 2010. However, some public policy responses could help pork producers weather the short-term crisis. They include:
* Providing capital or loan guarantees to agricultural lenders to support competitive pork producers.
* Providing mediation for pork producers. There is a real need to train and attract more professionals to serve as farm mediators. University of Minnesota Extension is one possible conduit to help producers make good decisions under financially stressful circumstances. More information about Extension's Farmer-Lender Mediation program can be found at http://www.extension.umn.edu/community/Mediation/.
* Expanding educational programs in marketing and business planning. Many producers with the necessary marketing skills have done quite well. However, those who do not have had large losses.
* Instigating pork purchasing programs for school lunch and food shelf aid. At a time of high demand for food assistance programs, it would seem natural to purchase pork to help support unprecedented needs based on 10 percent unemployment rates and declining personal incomes.
Brian Buhr is an economist with University of Minnesota Extension and head of the Department of Applied Economics at the University of Minnesota.