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Wright County News

Posted on: May 27, 2020

U of M Extension Discusses the Economic Woes Facing Hog Farmers Amid COVID-19

From University of Minnesota Extension

Hog farmers generate significant economic gains in Minnesota. What could disruptions in the pork supply chain mean for producers and their communities?

That was what University of Minnesota Extension researchers set out to determine in a newly released report (https://umn.edu.hogfarmimpact). Their conclusion: Applying the unemployment rate of 15% to hog farmers’ contributions to the economy yields an estimated loss of $660 million in economic activity in Minnesota.

“While there is much uncertainty for hog farmers, we wanted to understand the potential economic impact in Minnesota. So we used the recently released unemployment rate of 15 percent as an approximation of the potential impact,” said Brigid Tuck, Extension senior economic impact analyst. She co-authored the report with Extension economist Joleen Hadrich and Extension educator Megan Roberts.

The team also found a 15 percent drop in hog production would lead to an estimated loss of 2,100 jobs.

The average Minnesota hog farm generates $1.5 million in economic activity. Interruption of hog processing due to COVID-19 hurt farmers’ ability to sell animals. That’s led to cuts in what they spend on local and regional services such as feed, land rent, truck and veterinary services. It’s also affected payments on operating loans at area banks.

Meanwhile, hog farmers were already losing money.

“We know that Minnesota’s hog farmers are a significant economic contributor to rural communities and this analysis helps us understand just what has been at stake and the losses that may continue,” Hadrich said.

Widespread closures, and partial closures, of processing plants meant there was no market for approximately 45 percent of hogs that normally would have been processed during the last week of April. Resumption of processing and butchering alternatives will help offset some of the losses, but repercussions are expected to continue. Updates in the poultry and dairy industries will be released soon.

2019 data and projections moving forward 

Minnesota’s 3,562 hog farms range from small family operations to large enterprises; on average, they employ eight people. Minnesota produces nearly one-fifth of all pork sold in the United States, and ranks second in overall pork exports at $763 million. In 2019:

  • Minnesota had $2.7 billion in annual hog sales.
  • They sold 22.3 million hogs, with the average farm spending $891,840 to raise the animals. The average farm contributes $203,020 in direct labor income to the state.
  • The average operation contributed more than $33,000 in state and local taxes.

“The losses due to supply chain interruption might not have been apparent immediately, but that’s changing,” Hadrich noted.

Losses mount for farmers 

While hog farmers generate considerable economic activity, in recent years they made little profit—or lost money. On average, Minnesota farmers lost 32 cents per animal in 2019.

The 2020 outlook is challenging, at best, especially for independent farmers who own and raise their own livestock. “Between March and May, hog prices plunged 26 percent, from 50 cents per pound pre-COVID-19 to 37 cents in early May,” said Roberts, who has a family hog farm in southern Minnesota. It’s essential for independent farmers to develop additional options for selling their hogs.

What can communities and consumers do? 

Extension encourages communities to look closely at the pork industry and its impact on local revenue and expenses. Better understanding the industry can help communities plan for getting through the crisis, both in the short and long terms.

Consumers can help stabilize the supply chain by making normal purchases of pork to last a family one to two weeks, and be open to buying different cuts.

“Just understanding that many Minnesota families who operate hog farms are facing really tough times helps, too,” added Hadrich.

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