June 5, 2009
                             

A group of US pork producers has launched a voluntary, self-funded initiative to reduce the US sow herd to help producers return to profitability.

The Producer Retirement Programme, or PRP, is designed to supplement the cull price that producer members would receive for their sows as they sell off all or a portion of their breeding animals.

Chuck Wirtz, chairman of the PRP's board of directors, said Wednesday at the World Pork Expo that the retirement programmes "is a new initiative sponsored by, controlled by, and paid for by US pork producers."

The nation's hog producers have been losing money since September 2007. Many are facing severe cash-flow shortages, lack of operating capital and possible bankruptcy.

Mark Greenwood, vice president of agribusiness capital at AgStar Financial Services, said in a PRP news release that producer losses in the past 20 months have amounted to at least US$3.5 billion in equity. "That trend cannot be sustained," he said.

Producers voluntarily participating in the PRP will pay US$20 per sow, which will be used to create a fund to help compensate producers for sows they elect to send to slaughter. The program requires that participating members whose sow retirement bids are accepted to agree "to designate specific facilities and not use those facilities for sow production for a two-year period," the release said.

The funds to supplement the value of culled sows are meant to help offset losses that producers would take otherwise because slaughter sow prices do not reflect the "true productive value" of the animals, the release said.

Market analysts have estimated that a supply reduction of 3 percent to 5 percent is needed within the next six months to bring producers back to profitability. Producers, however, face a critical time over the next 60 to 90 days if prices do not rally and trim losses or return to a profit, according to industry leaders.