Raleigh, NC - 1998 will go down in the record books as the most trying year ever for North Carolina's pork producers as prices paid by packers to farmers for their hogs hit their lowest levels in over 40 years.
According to monthly price data obtained from the N.C. Department of Agriculture, average monthly live hog prices were below 40 cents per pound in 10 out of the last 12 months. Only in May and June did hog prices reach levels that were slightly profitable. Using 40 cents per pound live price as the breakeven point, losses during the other 10 months of 1998 ranged on an average of $7.77 per head to $60-70 per head on each 245 pound market hog sold. Estimates for North Carolina alone show that North Carolina's hog farmers lost approximately $270 million dollars on market hogs during 1998. This loss does not include losses on feeder pigs or breeding stock that was sold.
The farmer's share of the retail pork dollar hit an all time low during the past year. From 1986 to 1998 the farmer's normal share was 37% of each retail dollar with the packer getting 16% and the retailer getting 47%. During October of 1998 the farmers share plunged to 18% while the packer share moved up to 22% and the retail share soared to 60%.
This change in retail share was caused by a number of factors. Demand for pork products remain strong. On the demand side, export demand was up some 30%, domestic demand was up 7.1% and per capita consumption of pork was expected to increase by about 5 pounds per person nationwide. On the supply side, the number of hogs going to market was burdensome. During 1997 and early 1998, as discussions of moratoriums on new farms and increased regulations took place, farmers nationwide that needed to expand during the next 4-5 years decided that they had better do it now or they would not be allowed to expand in the future. In effect pork producers squeezed 4-5 years worth of orderly expansion into a 12-18 month period of time. The pigs from this stepped up expansion started coming to market during the second half of 1998. During the same 12-18 month period of time, slaughter capacity nationwide dropped from 418,470 to 382,270 head per day. This drop in capacity was a result of the closing of three processing plants in the Midwest. In addition, the Smithfield Foods plant in Bladen County was forced by the N.C. Department of Environment and Natural Resources to restrict their daily capacity. It is believed that the Bladen County plant is the only pork processing plant in the nation forced to operate under these types of restrictions.
The expansion in North Carolina's hog numbers was to assure the new Smithfield plant a steady supply of hogs. With the restriction placed on the plant by DENR and the subsequent moratorium on new swine facilities, farmers were forced to ship market hogs to other states for processing and were forced to ship weaned and feeder pigs to other states for finishing. Currently farmers ship market hogs to PA, VA, SC, MS, IN, IL and Iowa for processing. In addition, North Carolina producers shipped approximately 3 million feeder and weaned pigs to other states for finishing due to a lack of finishing space in North Carolina. This amounted to some $30 million dollars in contract payments alone that was shipped to farmers in other states.
While the decrease in prices was the most important factor in producers losing money on hogs in 1998, the additional expense involved with shipping hogs and pigs hundreds of miles to other states for processing and finishing played no small part in the overall profitability of pork production in North Carolina during 1998.
Meat Industry Insights News Service
P.O. Box 553
Northport, NY 11768
Phone: 631-757-4010
Fax: 631-757-4060
E-mail: sflanagan@sprintmail.com
Return to Home Page