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Falling prices trap farmers; Iowa hog producers mired in debt after expansion collapses

THE BALTIMORE SUN

COLLINS, Iowa -- At the dining-room table of his sunny, tidy farmhouse, Dave Struthers sat down with his wife, Becky, and their 2-year-old, Stephanie, to a lunch of pork burgers, macaroni and cheese, and pork and beans. Cold winds off the plains noisily swept snowdrifts against the side door. Together they bowed their heads and Dave Struthers asked for help.

"Dear Lord, thank you for the sunshine, the warmer temperature today and the food we're about to eat. But help us in these tough times. You know what I'm talking about -- the prices and the hogs. Help us stay strong and positive and looking to you. Amen."

There's been a lot of praying in America's heartland, where something almost unthinkable has happened: The hog industry has been thrown into crisis, forcing many longtime farmers and their families toward bankruptcy.

Struthers, 31, watched grimly last fall as the price he'd been receiving for hogs dropped to its lowest level in 50 years. Last month, it dropped even more, and the Struthers family farm began losing $15,000 every week.

Like thousands of Iowa farmers -- and many more in Nebraska, Missouri, Oklahoma, North Carolina and Maryland -- Struthers fears for his survival.

A year ago, Struthers sold his hogs for about $100 each -- a $25-per-head profit, as it costs about $75 to raise a hog for six months until it reaches market weight of 250 pounds.

Last month,he was getting $20 apiece, and losing $55 on every hog sold.

The losses hurt not just Dave Struthers, but his partners: father, Don, brother Dan, and sister Deb. They merged five years ago to create an 800-acre family operation on land farmed by their ancestors since 1840.

There's little expectation of wealth in farming. But Becky and Dave Struthers' $1,000 monthly salary, with free house and truck, provided them and their three children a lifestyle they had hoped would last, even through the ups and downs that accompany modern farming.

The turmoil in the hog industry came like a bolt of lightning striking out of the clear blue sky of a solid U.S. economy.

"I think it caught everyone by surprise," said Norm Schmitt, a hog farmer and president of the Iowa Pork Producers Council.

Too much success

It was caused, of all things, mainly by success. Too many Iowa-produced hogs flooded the market, according to farm economists. A "tsunami of pigs," says Pete Theodore, of the Iowa Pork Producers Council.

Worse yet, the price drop came after a year of expansion, in which farmers borrowed money for new buildings, equipment and hogs. Many of those loans are at risk.

Stories abound here of farmers emptying their retirement accounts. Some, already heavily leveraged, are asking their banks for more loans. Spouses are taking "off-farm" jobs and commuting to Des Moines and Ames and Cedar Rapids. Many are quitting, selling their equipment and their land -- at a loss -- and moving elsewhere.

Iowans' responses to the problem, and to their dire situation, have been creative, sometimes comical.

Creative responses

One couple tried to sponsor a "Hog Hunt," at which hunters would pay $100 for the chance to hunt a pig -- an event canceled after animal-rights activists complained.

A task force proposed a "pigs can fly" scenario -- loading Air National Guard planes with hogs and sending them to hurricane-ravaged Honduras and Nicaragua. Too expensive, the National Guard said, and no one would want the plane afterward.

Many farmers simply gave their hogs away -- donating them to charities and food banks during the Christmas holidays.

Like Chesapeake crabs or Maine lobsters, Iowa's name is linked to hogs. One in four U.S. hogs is raised and processed here, making Iowa the biggest provider of the nation's bacon, hot dogs, pork chops and hams.

Nearly one in six employed Iowans works in agriculture. And of 36 million acres, 92 percent is farmland, a greater percentage than in any other state.

But never have Iowans seen the likes of this. "This is unprecedented in how low the price went and how long it stayed there," Struthers said.

Normally, state farmers sell 1.9 million hogs a week to the packing houses, which slaughter and butcher the hogs. But most of the profits of 1996 and 1997 -- two stellar hog years -- were funneled last year into producing more hogs. By late 1998, more than 2.1 million hogs a week were flooding the packing houses, creating a giant bottleneck.

Contributing to the problem was an influx of hogs from Canada to Iowa processing plants, and the decline in pork exports to Asia.

With so many hogs on the market, the price plummeted.

Farmers had no choice but to sell at a loss. Hogs are sold at between 230 and 270 pounds. After that, the quality declines. Since hogs gain two pounds a day, farmers couldn't wait for a better market. They had to sell for as little as 8 cents a pound. They had gotten used to 50 cents a pound.

'Pork powerhouses'

Some farmers -- like Struthers -- blame the troubles on the greed of giant corporate farms, so-called "pork powerhouses," which provide half the nation's pork.

Struthers calls it "the Wal-Mart-ization of agriculture."

Indeed, the number of hog farms in Iowa has fallen from 90,000 in 1970 to about 18,000 today. But hog production has risen steadily, and the number of hogs per farm has risen from 150 to nearly 900 over that time.

"It's easy to think agriculture is a bunch of guys in their caps standing by a tractor, but there's a lot of money to be made," said Betsy Freese, livestock editor of Successful Farming magazine, which annually ranks the nation's top 50 pork powerhouses.

In hog farming, "only the strong, which tend to be the larger ones, survive," said Iowa State University economist John Lawrence.

A midsized farm

The Struthers' farm is midsized. After the farm incorporated -- with Dave, Dan, Don and Deb as shareholders -- they grew to own 7,000 hogs among them, including 875 breeding sows.

"We're small enough to be hurting bad, but we're big enough that we don't qualify for these so-called family farm programs," Dave Struthers said.

The Struthers sold 13,000 hogs in 1997, for $1.2 million. But profits, as always, go right back into the hogs. Cash flow is limited.

So, they've had to borrow from the bank, using land that had long since been paid off as collateral. They've let truck and tractor tires go bald. They've been unable to replace broken parts. Even the $100 price for a new feed grinder motor is too steep.

"When you don't have cash flow, there are some things that you just have to let go," said Don Struthers, 53, yelling to be heard above the roar of his grinding machine.

Dave and Becky Struthers stopped their once-a-month restaurant dinner with the kids. They stopped getting a baby sitter and going to the movies. Becky Struthers is thinking of going back to her old insurance job.

"Nobody works off-farm now, but that may have to happen," Dave Struthers said.

Business decisions

He becomes quiet when he describes another of the many effects of the crisis: Sick hogs he'd normally nurse to health aren't worth a $3 vaccination.

"Sometimes you just eliminate those animals. You euthanize them," he said, looking down at his stocking feet while Stephanie played with her pork burger. "It's not something that you want to do, but it comes down to a business decision."

Strangely, the crisis had minimal effect on the price of pork chops at the grocery store. Consumer prices dropped slightly, but still, "You can pick up a ham that's worth more than the entire cost of the hog that a farmer gets," Lawrence said.

That fact has not gone unnoticed by the federal government. Agriculture Secretary Dan Glickman asked for a Justice Department probe this month into possible price fixing and collusion between large, corporate hog farms and the packing plants.

Government help

Federal and state governments are also investigating how to help get farmers back on their feet.

Vice President Al Gore visited Iowa nine days ago to offer a $50 million bailout for hog farmers, though only small farms qualify. The government will buy $50 million in pork for the federal food assistance program.

Iowa's newly named agriculture secretary, Patty Judge, created a task force that is scheduled to release a list of proposals.

On Thursday, some members of the task force convened at an Iowa State University conference titled "Serving Iowa During Times of Agricultural Stress." A number of farmers spoke angrily and tearfully to panel members of their woes.

For counties that rely on tax revenues from farms, a potential devaluation of land and equipment could affect public services.

"The taxes come from people whose ability to pay them is going to be in question," said Kim Wilson, a county supervisor in Tama County, where 50 percent of the local taxes come from agriculture.

Meanwhile, the stresses on farm families go beyond dollars and cents.

"We are beginning to see some of the symptoms," said Dianne Patton of the Ecumenical Ministries of Iowa. "Marriages are in jeopardy. People are at risk for substance abuse, domestic violence, farm accidents, militia activity, suicides."

Bankers have given the Struthers six months to turn things around. The family has talked about the possibility that they might have to find jobs or sell some of their land. No one likes the idea. Dave Struthers said he found his father in tears one morning.

"I told him this is what God wants us to do," Dave Struthers said.

But there's not much time to dwell on all that. There are hogs to be fed.

After lunch, Dave Struthers drives down the gravel road toward the hog pens, between two snow-covered cornfields. A piece of cardboard is duct-taped over the broken rear window of his pickup truck.

Pub Date: 1/18/99

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