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Pork industry sick, and not just with flu

ST. PAUL - "Swine flu" made an already-sick pork industry even sicker.

And while the rest of the world awaits a new, and predicted much harsher, round of what officially is known as H1N1 influenza this fall, pork producers fear that renewed talk of the flu will make a money-losing situation worse.

Ill-founded concerns that people could catch the flu by eating pork have combined with the recession, high crop prices and international trade issues to threaten hundreds of Minnesota pork industry jobs.

Brian Buhr, head of the University of Minnesota's Applied Economics Department, offered a glum assessment of the pork producers' situation: "They are in as bad a trouble as they have been in."

Hog farmers today lose more than $30 on each animal they sell.

Pork production is a big Minnesota economic engine. The state trails only Iowa in hog production, selling more than 15 million hogs annually.

Economists and pork experts agree that many pork producers will leave the business, either voluntarily or because they no longer can get loans to keep their operations going.

Just before news of the "swine flu" spread in April, pork producers were optimistic that the then-nearly $20-per-hog loss they were taking was a thing of the past. But even though scientists were frequently quoted as saying that eating pork could not give someone the flu, the industry took a deeper hit as consumer demand fell and some countries banned American pork amid flu fears.

David Preisler, Minnesota Pork Producers Association executive director, said that the H1H1 hit for Minnesota producers will be $130 million through October, with more to come if the flu accelerates again. Even if the term "swine flu" is not used this time, a lot of sick Americans means less pork and other food will be purchased.

Pork exports dropped about 5 percent after the flu outbreak.

Problems did not start with the flu. Pork producers have lost money for 23 of the last 25 months.

During that time, American shoppers have found bargains at the expense of Minnesota pork producers.

"For consumers, it has been bargain pork sales for some time," Buhr said.

Buhr predicted low pork prices will last at least through the fall.

But low grocery store prices further hurt pork producers.

The state's pork production could fall by up to 1 million hogs, the pork producers' group says. If so, 300 farm jobs and 950 off-farm jobs will be lost.

"There are some very good farmers in very tough spots," Minnesota Agriculture Commissioner Gene Hugoson said.

To deal with lower global demand for pork, economists say that the industry needs to cut production 5 percent. Many had expected the last two years' rough stretch to force farmers out of business, but that has not happened to any large extent. That may be about to change as bankers tighten credit to farmers.

Small farmers who raise hogs, crops and other commodities may be in a better position to survive than some who specialize in hogs, Buhr said, because they can drop or cut back hog production and continue to receive income from other farm operations.

"There is going to be a reduction in production on way or another," Buhr said. "The concern is that it is going to be a disorderly version of it."

Gov. Tim Pawlenty's office reports that he is writing a letter to the Obama administration about the pork problem, but his spokesman will not say what will be in that letter.

Pawlenty did not sign a letter from Iowa Gov. Chet Culver and eight other governors - including Wisconsin's Jim Doyle - asking the administration to buy more pork for a variety of public programs and to pressure China and other countries to resume buying American pork.

The pork problem started with high feed costs. Corn and soybeans were expensive, fueled in part by demand for using the crops in biofuels such as ethanol.

Pork producers almost got the high-crop-cost problem under control, coming to within $2 per pig of breaking even.

"We could see a positive cash flow for this summer," Preisler said.

Then came April and what most called the "swine flu."

Many American consumers have returned to eating pork, Buhr said, but the recession forces them to spend less and buy lower-quality cuts.

Despite all the gloom and doom, Preisler offered a bit of optimism.

"We do need to remember that long term and big picture, there is no better place in the world to raise hogs than right here," Preisler said. "We have a fantastic infrastructure, we produce the feed right here and we have plenty of land to spread the manure (as fertilizer)."

Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.