990739 Pork Producer Economic Recovery Plan Presented

Washington - Reeling from a $4 billion loss in equity during the past 20 months, America's pork producers are struggling to overcome a degree of economic adversity few segments of American agriculture have ever experienced, National Pork Producers Council (NPPC) President John McNutt said in a letter to USDA Secretary Dan Glickman.

McNutt, a pork producer from Iowa City, Iowa, outlined an eight-point U.S. Pork Industry Economic Recovery Action Plan, designed to address the ongoing economic crisis facing America's pork producers. In December, live hog prices fell to below $10 per hundredweight. Since then, prices have risen modestly but remain stubbornly below the cost of production.

“Unfortunately, as the June 25, 1999, USDA Hogs and Pigs Report revealed, prices show no signs of rebounding in the near future,” McNutt said. “The University of Missouri is now estimating that up to one-third of U.S. pork producers could be forced out of business as a result of this economic crisis. Clearly, the future structure, control and ownership of the pork industry is being determined. The viability of a large number of professional, independent pork producers hangs in the balance. This economic reality is being played out in lenders' offices and around farm kitchen tables every day.”

McNutt commended Glickman for his assistance to pork producers in 1998, but noted that the continued bad economic news is now threatening many modern, efficient family operations, the backbone of the U.S. pork industry.

“You and your USDA team were tremendously helpful to pork producers last December and we are most appreciative of the assistance you continue to provide,” McNutt said. “Unfortunately, there are thousands of independent pork producer families, often several generations strong, whose operations are in danger of failing and whose size has left them outside the parameters of USDA's financial assistance programs. We strongly believe that we must again form a partnership between USDA and pork producers struggling to overcome a degree of economic adversity few segments of American agriculture have ever experienced.”

The Action Plan includes the following recommendations:

1) Implement a U.S. Pork Industry Humanitarian Inventory Assistance Program:

A program by the U.S. government to provide humanitarian assistance to targeted countries. The pork would come from hogs (sows and/or market hogs) purchased by the USDA from pork producers bidding production into the program. Successful bidders would be required to operate at reduced production levels (normal operation minus the bid production) for a prescribed period of time.

The following provisos would apply to this program:

a. All sows (including gilts) must be sold with sufficient supporting documentation to prove specific farm ownership. These sows must have a minimum 2 years' production history. Sow ID spot-checks would be required for verification.

b. No later than 8 months after all sows have been sold from the farm, all pigs must be removed from that farm for a period of 3 years. On multi-site production operations, only the sow-site must have the pigs removed. Greater than 1 mile must separate production sites or the farms will be considered to be one site.

c. Before returning to pork production (after 3 years), the farm must obtain a state environmental permit, have a nutrient management plan and lagoon closure plan (if applicable), as well as documentation of ability to perform.

d. If depopulated farm is sold, leased or rented, all the above requirements apply to all other sites operated by the purchasing individual or business entity, including acquiring nutrient management and lagoon closure plans.

e. Any individual or business entity participating in this Humanitarian Inventory Assistance Program would be prohibited from doing any swine-related facility construction or herd expansion for a period of 3 years.

2) Expand the Accelerated PRV Eradication Program (APEP). Continue to allow APEP funds to be available for the continuation of the current APEP and for future programs that will be developed with state animal health officials and industry. This program, the first cycle of which began in early 1999, has been dramatically successful, attracting participation from 40% of eligible herds. It reduced the incidence of a devastating disease by eliminating more than 500,000 affected sows, boars and pigs, removing their tonnage from the market. At the present time, we understand there is an estimated $35 million in unallocated APEP funds.

3) Complete the Canadian PRV protocol to permit export of live U.S. hogs to Canada for slaughter. U.S. pigs have been prevented from being shipped to Canada for slaughter, yet there is no remaining reason for qualified states to be prevented from sending hogs north. The USDA should send a technical/negotiating team to Canada to conclude the protocol by August 1, 1999, with implementation no later than September 1, 1999.

4) Double the 50,000 metric ton P.L 416 humanitarian assistance package to Russia. Announced in November 1998, and not yet completed (two tender offers have been rejected), the completion of this 50,000 metric ton humanitarian assistance package is vitally important. In addition, we are requesting at least 50,000 metric tons of additional Russian humanitarian assistance for delivery in fall/winter 1999.

5) Initiate purchases of pork and pork products under Section 32 and/or other domestic breakfast/school lunch feeding programs. USDA made record purchases of pork in 1998. However, in terms of government purchases, pork continues to lag behind both beef and poultry in volume and value. The process for accelerated purchases for the breakfast/school lunch program and all other domestic feeding programs should begin immediately.

6) Convene a Pork Crisis Summit. The Secretary should immediately convene an emergency “pork crisis summit.” This would involve meetings, conference calls and written correspondence with a) retailers; b) processors; c) food service operators, and; d) foreign buyers to encourage increased featuring, regional or national promotions or outright purchases.

7) Implement a Direct Cash Infusion program. Pork producers continue to request a meaningful, direct cash infusion. The Small Hog Operation Program (SHOP) and the FY 1999 Emergency Supplemental Appropriations Bill provided direct cash payments for economic loss assistance to pork producers, totaling approximately $150 million. Given the ongoing financial crisis facing pork producers, it is clear that a higher funding level is needed. As we have requested before, we continue to pursue a one-time, direct cash infusion based on sales on the last quarter of 1998, with a $50,000 payment limitation applying. We believe this program should be available to all producers, regardless of size. These payments, estimated to be up to $600 million, would be similar to the “commodity equity payments” currently being discussed in various farm assistance proposals.

8) Provide assistance and economic analysis for establishment of pork producer cooperative. The Undersecretary for Rural Development has pledged both technical and cost-share assistance in forming a national producer-owned cooperative and conducting an economic analysis of the feasibility of building and operating, processing and marketing operations. We are requesting a USDA commitment of up to $500,000 to efficiently and effectively complete this economic analysis and move forward on building and operating plants. Further, we believe it is imperative that USDA work with the pork industry to identify, secure and distribute sufficient grants, estimated at $150 million, to build new slaughter capacity -- once the feasibility study is completed. Clearly, this action must be taken to provide the opportunity for independent pork producers to realign themselves in the pork value chain.

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