USDA may buy more pork in effort to boost hog prices Pigs going to market in record numbers

Agriculture

December 25, 1998|By BLOOMBERG NEWS

CHICAGO -- The U.S. Agriculture Department will consider buying more pork and quit lending money to expand hog production as the agency seeks more ways to lift hog prices that are near 57-year lows.

Agriculture Secretary Dan Glickman said yesterday that his agency also is encouraging meatpackers to set a minimum price they will pay for hogs to prevent further price deterioration, and he encouraged bankers to be flexible with loan repayments by hog producers.

"We are moving as quickly as we can, exploring every option we may have under the law, to help producers get through this very difficult time," Glickman told farm broadcasters at a news conference.

Record numbers of hogs are being sent to market, outstripping slaughter capacity, analysts say. With the cash price down almost 60 percent since Oct. 1, farmers are losing as much $50 per head.

As a result of excess supplies, worsened by diminished exports, the price of a hog in the benchmark Iowa-Southern Minnesota cash market stood at 13 cents to 14 cents a pound after hitting 8 cents a pound last week, the lowest price since 1941.

"Because the crux of the problem is oversupply, we want to stop any government action that could exacerbate the situation," Glickman said in announcing the moratorium on loans for hog production. The department guarantees or provides direct loans beginning or smaller farmers who may not qualify for regular bank credit.

The department issued about $45 million in loans for hog plant construction in fiscal 1998, which is only 1 percent to 2 percent of its total loan portfolio. While the loan amount is small, the department hopes that "lenders in general will follow suit," said spokesman Andy Solomon.

Much of the overproduction stems from large commercial producers who received loans from major banks to expand two years ago, when hog prices were more than triple what they are now.

In addition, Glickman says, he has asked other federal departments about buying more pork, as he was urged to do last week by the chairman of the Senate Agriculture Committee, Republican Sen. Richard G. Lugar of Indiana.

"I have spoken with other federal agencies, the Defense Department, Veterans Affairs, the Justice Department and the Bureau of Indian Affairs to increase the amount of pork in their volume purchases," Glickman said.

The agency has announced $65 million in pork purchases for school lunch programs, in addition to the $64 million in pork the agency buys for the programs annually.

More will be known about supplies Tuesday, when the department reports its tally of the nation's hog herd as of Dec. 1. zTC Analysts expect the herd to be the largest in 18 years.

The two largest pork processors in the nation, IBP Inc., based in Dakota City, Neb., and Smithfield Foods Inc., based in Smithfield, Va., were not immediately available to comment on whether they would also offer price floors. The industry has long been dominated by IBP, Smithfield and Excel, owned by Cargill Inc.

The Agriculture Department has been adding economists and statisticians in its effort to ensure that swine producers receive fair prices.

Pub Date: 12/25/98

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