No big losses for Iowa hogs
June 30, 2008
OMAHA (DTN) – Hog producers in flooded areas of the Midwest may experience some losses, but high feed prices are likely to remain the main reason for the shrinking size of the nation’s hog herd.
Liquidation has been occurring since about April due to high feed prices and further liquidation will occur because of the recent jump in corn prices, said John Lawrence, Iowa State University Extension livestock economist. It is nearly impossible to achieve profitability with corn futures prices around $8.
“While I am sure there will be some hog producers directly affected by the flooding and they could lose some hog numbers,” I think the liquidation we will see in coming months will be the result of “even higher feed prices,” Lawrence told DTN.
Iowa producers appear to have lost very few hogs due to the floods, said Ron Birkenholz, communications director at the Iowa Pork Producers Association, according to Reuters.
But the flooding could be the nail in the coffin for producers already struggling with higher feed costs. Hog producers have been limping along for a while now and for some, the flooding combined with high feed prices could be the tipping point where some decide to get out of the business, said John Harrington, DTN livestock analyst.
“We haven’t seen a great surge in sow slaughter yet, but it will be interesting to watch and see in the next 30 days to 60 days if we see an increase because of these flooding problems along with high feed prices,” Harrington said.
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Sow slaughter for the last six months or so has been running about five to 10 percent above year-ago levels, he said. If a surge does occur, it likely would push sow slaughter to around 15 to 20 percent above year-ago levels, Harrington said.
The floods have had an effect on hog producers in the state of Iowa in many different ways, said Leon Sheets, a hog producer from Ionia, Iowa, and a member of the board of directors for the Iowa Pork Producers Association.
“Obviously those producers who have buildings under water will be directly affected by the flooding, but other producers have not been able to get hogs to market and feed to the hogs because of roads and bridges closed because they have washed away,” Sheets said.
Sheets said a feed company’s facility in his home area was damaged from the recent tornados that hit northeast Iowa and is temporarily closed. Other neighboring feed mills have expanded their services while the damaged mill is closed, but this is not a cheap solution to the problem, he said.
All of these weather-related factors are working against hog producers, he said.
“Compared to some people who lost everything in the floods, this is really minor inconvenience,s but it does add additional input costs to hog producers during a time we really don’t need any more,” he said.
While he has not had any hog buildings flooded on his northeast Iowa farm, he does have some water standing in his corn fields as the nearby Wapsipinicon River overflows its banks. Some of his crops have been washed away by the flood waters but he does not know the extent of the damage.
With one exception, Sheets has been able to navigate around the washed out and closed roads to get his hogs to market as intended, though he did have to coordinate a meeting with an out-of-state contact who was attempting to deliver hog semen to the farm.
“He was not that familiar with the area, so I just told him to stay where he was and I would come to him,” Sheets said.
The flooding will have the biggest effect on independent producers, said Kelvin Leibold, Iowa State University Extension farm management specialist in Hardin County, north central Iowa. The flooding might affect some integrated operations by forcing the company to alter its plans by shifting production to other locations, but the smaller hog producers are the ones who will feel the full brunt of flooding.
“The smaller producer that has the hogs and the buildings, these are the ones that are going to have a hard time of it after the flood waters recede,” Leibold said. “When they assess what damage has been done to their buildings, some of these producers may choose not to get back into the business.”
Despite all the challenges currently facing the hog industry, Leibold does not believe this is the death knell for the hog industry in Iowa. The state still has the cheapest supply of feed anywhere and while some areas may lose the hog industry, he does not believe Iowa will be one of them.
“We did reduce hog numbers in about nine months, which is quicker than I think anyone who watches the market thought would happen, so I think we will continue to see this trend and at some point the cost of pork will have to rise and then hog prices will rise along with pork prices,” Lawrence said.