October 23, 2009

The US Department of Agriculture is working on making its first pork purchases of fiscal year 2010, but the USDA has no plans yet to go beyond its normal buying in order to help out the struggling industry, Deputy Under Secretary Michael Scuse said Thursday (Oct 22).

 

It could take up to two months before the USDA makes that first purchase, taking surplus supplies of a depressed market, Scuse said. But when asked if USDA had plans to make any "special or additional" purchases, as it said it would for FY 2009, Scuse said, "No, not at this time."

 

On September 3, the USDA announced it would make an additional US$30 million pork purchase in an effort to help pork producers suffering from low prices and a supply surplus. Farm lobby groups were thankful, but said it wasn't enough.

 

Scuse, who spoke to reporters after testifying before the House Agriculture Subcommittee on Livestock, Dairy and Poultry, said the only pork buying the USDA would be doing in the foreseeable future would be for "our traditional purchases for our various food and nutritional programmes."

 

Don Butler, president of the National Pork Producers Association, told the panel of lawmakers Thursday that more needs to be done. A cap placed by Congress on how much pork the USDA can buy for its nutrition programmes needs to be lifted, he said.

 

"The US pork industry is in the midst of the most severe economic crisis in its history," Butler said. "Over the past 24 months US pork producers have lost an average of nearly US$23 on each hog marketed. Since September 2007, the industry has lost more than US$5.3 billion, or more than 66 percent of its equity as of October 14, 2009."

 

Butler and Scuse agreed that the last couple years have been extremely hard on pork producers, but had different takes on the near future.

 

The situation for pork producers "looks bleak going forward," Butler said, but Scuse told lawmakers the situation looks like it will turn around.

 

"Ongoing adjustments on the supply side are expected to ... contribute to improved profitability in the US hog sector in 2010," Scuse said.

 

From February 2004 through September 2007, strong economic growth around the world combined with a weak dollar produced record demand for US pork and brought big profits, he said. Unfortunately, hog farmers reacted by ramping up production just in time for a downturn in demand.

 

"The combination of large inventories and recession caused a sharp drop in the market value of live hogs, from a June 2007 peak of US$152.50 (down) to US$103.30 in November 2007," Scuse said.

 

But hog production is "cyclical," he said, and now it's contracting. Less will be produced, but profits will return.