Falling prices trap farmers

Iowa hog producers mired in debt after expansion collapses

January 18, 1999|By Neal Thompson | Neal Thompson,SUN STAFF

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'

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