Pork Producers Hoping to Put Rough Stretch Behind Them

While many segments of agriculture were having a relatively strong year, the pork industry got pounded in 2023. Feed prices were high, demand was down. Several major pork producers closed sow farms. Processing plants were shuttered. And on the horizon were new rules in California coupled with efforts to curb foreign ownership of farmland.

Scott Brown, Agricultural Economist, University of Missouri: “Both 2021 and 2022 were phenomenal years of growth in U.S. farm income in this country. I think I heard Secretary Vilsack recently describe 2022 as the second or maybe the best time ever for U.S. agriculture. That's not equally felt, however. It’s commodity by commodity.”

Brown likes to point out that 2023 can also be  viewed as a return to the norm after a few years of strong prices following short supply associated with COVID, when packing plants temporarily closed or slowed production.

Scott Brown, Agricultural Economist, University of Missouri: “I like to remind us that we’re just going back to the demand levels we might have seen in 2020. That 2021 and 2022 are going to be what stick out as extremely positive years, not that 2023 is so negative. It’s just putting us back on the same track.”

Iowa State University economists say 2023 brought the worst farrow-to-finish returns in Iowa since 1998-99, and, depending how 2024 goes, the pair might go down as the worst two-year stretch on record. Iowa State University’s Estimated Livestock Return model forecasts an average annual loss for hog producers in 2024 at $18 a head, which looks bleak but is an improvement over the loss of $32 a head in 2023. 

Brown acknowledges that feed costs remain a concern. Corn prices have been higher for much of the last few years.

Scott Brown, Agricultural Economist, University of Missouri: “I will say it’s amazing how well this industry has done with what’s been record-level corn prices at least for part of the time. I think that’s been part of the important profitability question at the end of the day. Where hog prices are today, if we were talking about sub-$4 corn, the profitability would look a lot different than it does today.”

Although exports have offered some hope to farmers, sales to other countries have slipped back to levels seen before China’s African swine fever outbreak that struck between 2018 and 2021. Brown says adding more markets in places like Central America could help reduce the reliance on major players like China.

In past decades, when more independent producers were raising hogs, Brown says experts would have expected a more traditional pork cycle: two years up and two years down.

Scott Brown, Agricultural Economist, University of Missouri:  “If feed costs were to go up, what did the industry do? You would have folks who would not produce at 100 percent of the capacity they might have had at the time. When you think about where the industry is today, by and large, it’s characterized by a lot of very large confinement operations that have huge capital outlays in those facilities. So I often say we're becoming much less responsive in the short run to things like higher feed costs because if I'm operating one of those confinement operations, I have no choice but to be at 100 percent efficiency.”

USDA data backs that up as the December 2023’s snapshot of the national hog inventory sits at 74.9 million, the fourth largest since 1963. Even when sows are culled, those cuts are offset by a typical sow having more piglets every year. The number of piglets per sow per year shifted from 18.2 in 2007 to 21.8 in 2022.

Bank accounts might dip further into the red if producers undertake sow building renovations to comply with California’s Proposition 12. The new rules, which went into effect at the beginning of the year, dictate that sows must have a certain amount of floor space if their offspring are to be marketed in the Golden State.

Scott Brown, Agricultural Economist, University of Missouri: “I just think we're early in the what's the long-term change that the industry makes trying to service California because we again, we know the cost of changing my operation so it's Prop 12 compliant is not zero…I think we're going to have operations continue to grapple with that.” 

Global leader Smithfield Foods, closed 35 Missouri sow farms in October of 2023. Officials said many of the buildings were older. They also say they are maximizing efficiency during a period of challenging market conditions.

Local officials in northern Missouri, where many of the facilities were closed, saw the immediate impact in jobs being relocated or eliminated.

Cheston Easter, Associate District Commissioner, Mercer County, Missouri - “Ag in general is our largest economic driver. And when we’re looking at livestock, crops, you know, specifically here in Mercer County, it is pork production. … And so they are our largest employer: almost five out of ten directly and another four out of ten indirectly.”

Amid all of this, states like Missouri are looking at banning or tightening foreign ownership of land beyond the current limits. Residents of counties like Mercer understand the concerns the state legislature is trying to tackle, but also hope to avoid additional closures by Smithfield Foods, whose parent company, WH Group, is a publicly traded company based in Hong Kong.

Cheston Easter, Associate District Commissioner, Mercer County, Missouri: “Obviously it would be a big impact here with tens of thousands of acres in Mercer County that are owned through Smithfield. …The exact language has gone through several iterations so we’ll have to see what ultimately it would be. I’d be surprised if there was a total foreign ban and we tend to go with property rights, but we’ll have to see.

Easter remains optimistic while recognizing the complexity of the debate. 

Cheston Easter, Associate District Commissioner, Mercer County, Missouri - “If you asked anyone who lives here locally, they would say, ‘Well, no, I don’t want my neighboring farm to be foreign-owned.’ But at the same time, you may have children and grandchildren who are employed by Smithfield and that’s what helps fund, not just the labor force, but property taxes, sales tax for the local area, school districts, emergency medical services…. It’s a unique balance here.”

By Colleen Bradford Krantz, colleen.krantz@iowapbs.org