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Lean days dooming many hog farms; Low prices blamed, but to the farmer, not at the grocery


RIDGELY -- Alfred Saathoff has been raising hogs on the family farm for 32 years.

"It's was always a good business," he said, adjusting the bill of a yellow John Deere dealership baseball cap. "It was the mortgage payer. That's what we always said."

But not anymore. Saathoff, 54, is quitting the business -- driven out, he says, by the lowest hog prices in 50 years and annual losses "running into the thousands and thousands of dollars."

"It doesn't make sense," he said. "You raise the pigs. You buy the feed. You provide the labor and you load them on a truck and pay some guy $75 to take them."

That meant he was losing $75 on every hog sent to slaughter last month, when prices dropped to as little as 15 cents a pound.

Saathoff is in the process of selling off his pigs. By June, when the last of them are big enough for slaughter, he'll be out of the business.

These are difficult times for hog farmers across the country. Maryland has already lost the bulk of its pig farms since 1990, and industry officials say more will disappear. The current industry crisis is expected to shake out another 20 percent of the nation's hog producers. A number of factors are blamed:

* The prices paid farmers for their pigs dropped to a 50-year low last month.

* A glut on the market. Production is at an all-time high as farmers geared up to meet a promising Asian market, but that vanished almost overnight due to recession in that part of the world.

* Consolidation of the U.S. pork processing industry, which has reduced the capacity of companies to slaughter all the hogs ready for market.

"The whole hog industry is undergoing a change," Saathoff said. "It used to be the packers and the independent producers like us. We would raise the hogs and sell them to the packing houses."

Now, he said, the business is moving toward a totally integrated system patterned after the poultry industry. "The packers want total control from farrow to meat. And when they have control of production, they'll pay us farmers whatever they want."

"Things really got bad last year," Saathoff said, "and I don't see any improvement in the future. It was time for me to get out."

Robert Hutchison, Saathoff's neighbor, raises about 3,600 hogs a year at a farm near Cordova across the Talbot County line. He's hoping his friend is wrong.

He draws encouragement from a recent rise in hog prices and predictions that they will go higher by summer. Instead of losing $75 on each hog going to market, he estimates, his deficit has been cut to $45 an animal. Since mid-December, local hog prices have risen from 15 cents a pound to 22 cents last week, Hutchison said.

"That's still a long way from my 38 cents to 40 cents break-even point, but it's a move in the right direction," he said.

Hutchison is hopeful that prices will rise even more in the second half of the year as the industry works its way through the current glut of pork on the market and production begins to taper off. "We're going to stay in, at least for a while," he said. "But we can't stay in for the long haul unless the market improves. Our pockets aren't that deep."

What bothers Hutchison as much as the low price he is offered for his hogs is the high price of pork in the supermarkets.

He said retail pork prices have slipped only slightly since the summer of 1997, while the price farmers are paid for their hogs has dropped from 60 cents a pound to a low of 15 cents in recent weeks. The farmer's share of the retail pork price fell from 40 percent in July 1997 to about 12 percent in November 1998.

Farmers feel that if the retail price of pork was more reflective of the price they receive, it would quickly cut into the big surplus of pork on the market and boost farm prices.

"The consumer is not benefiting from our misfortune," said Hutchison. "Somebody is making a record profit. Quite frankly, I think someone should go to prison for what is happening to the consumer."

On Friday, two says after a dozen hog producers met at the White House, Vice President Al Gore announced that the government will pay hog farmers $50 million to compensate for low pork prices.

In addition, the Agriculture Department will spend $80 million to speed its voluntary pseudorabies program to help reduce the oversupply of hogs. That money will be used to compensate farmers for the slaughter of as many as 1.7 million hogs infected with the virus.

The federal aid comes at a time when the market is showing slights signs of recovery. Low prices are expected to end sometime in the summer, said John D. Lawrence, an economics professor at Iowa State University, who expects prices to begin to moving upward sometime next month. He said it will take major debt-restructuring for many hog farmers to survive, however.

Hutchison feels lucky because the farm he operates with two brothers has diversified. In addition to raising 3,600 hogs each year, the brothers farm 3,600 acres of corn, soybeans, wheat and vegetables.

"I don't know how those poor guys in the Midwest who have hog-only farms can stay in business," Hutchison said. "They are really going through some rough times."

There are more rough times ahead for the industry here, too, according to Mark Estienne, an associate professor at the University of Maryland Eastern Shore.

He said the independent producers, like most of those in Maryland, are being forced out of business as the industry moves toward an integrated system. Under this arrangement, the packing houses own the hogs and pay farmers to grow them much in the same way that Eastern Shore farmers raise chicken for poultry processors.

"Adjusted for inflation," Estienne said, "pork prices are the lowest in history. This is driving a lot of independents out of business. A lot of Maryland pork producers have gone out of business.

"We don't have integrated systems like they have in North Carolina, Virginia and Pennsylvania," Estienne said.

In the early 1990s, Estienne said, there were nearly 1,500 hog farms in Maryland. "Today, there are probably less than a couple hundred." If there is to be growth in the industry here, he said, it will probably be in some kind of a contractual arrangement where farmers are paid to grow pigs for a pork processing company.

Estienne explained that big pork processing companies "buy tons and tons of feed and they get a better price."

Another thing that hurts the industry here, he said, is that these companies like to fill a tractor-trailer with pigs at one farm instead of having the truck make stops at five or six farms.

"There will still be some niche markets, like selling to Mom and Pop butcher shops," Estienne continued, "but I think the days of having a large number of pork producers in Maryland are over."

Pub Date: 1/10/99

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