090102 Swine Year Highlighted By Record Prices, Flat Profit

January 5, 2009

By Blair Koch, Ag Weekly

Twin Falls, ID -- In many aspects, 2008 proved to be a record year for the swine industry. Too bad for farmers, profits wasn't one of them.

"It was a tough year," said Kuna Hog Farmer Brad Thornton. "With soaring feed and fuel prices producers were losing money on every pig, except for a short time in the summer."

Record prices for corn and soybean, coupled with soaring input costs - from medical supplies to building maintenance - ate into producers' profit margins.

"Feed prices have come down and fuel prices have declined, too, so that helped, and we aren't seeing those losses right now," Thornton said.

Thornton said many factors, including oversupply, contributed to substantial losses for some producers, with prices peaking at around $40 a pig.

Nationally, the United States had more pigs in inventory than ever before.

According to the USDA Quarterly Hogs and Pig Inventory, released in September, U.S. inventory of all hogs and pigs on Sept. 1 was 68.7 million head. This was up 2 percent from Sept. 1, 2007, and up 1 percent from June 1, 2008.

U.S. hog exports soared in 2008, thanks to emerging markets in places like China, Hong Kong and Singapore and expanding markets in Canada, Mexico and Japan.

"Exports grew to account for about 25 percent of total production," said Independent Meat Company CEO Patrick Florence.

Even with increased demand for pork within the restaurant and foodservice market overall, domestic demand gains were offset by falling retail sales.

"In terms of sales, the industry enjoyed a very good year. However, farmers faced many challenges," Florence said. "For our own company, we experienced growth in exports but had flat demand in our domestic markets, which consist of half retail, half foodservice. There was some fall in retail but some growth in foodservice."

With tight profit margins and weakened demand expected for 2009, Thornton ended the year with fewer pigs.

"We depopulated the herd and have just a few animals we're raising now," Thornton said. "Next year isn't looking much better and with market conditions changing so fast, we figured that was the best move to make for now."