Iowa Pork Producers Lose Money in 2002
January 14th, 2003
AMES, Iowa — The numbers are in and they aren't good news. Iowa pork producers experienced significant losses in 2002.
"Farrow-to-finish producers lost an average of $16.22 per head marketed during the year with losses in September near $36 per head," said John Lawrence, associate economics professor in the Iowa State University College of Agriculture.
"While hog prices did not fall to single digits as they did in December 1998, live hog prices dipped below $20 during the last week of August, the lowest level since January 1999," he said.
Red ink for producers began in November 2001 and is expected to continue through late spring 2003. "While prices are forecast to be above breakeven briefly in the summer, losses are predicted for the fourth quarter of the year unless something changes," Lawrence said.
Not only are Iowa farmers losing money on hogs, they're also losing equity in their operations. Equity is the value of a property after deducting any charges to which it is liable.
"A farrow-to-finish farmer marketing 1,000 head a month would have lost nearly $200,000 in 2002," Lawrence said. "Producers were slowly rebuilding from the financial losses of 1998-1999. However, losses during 2002 put accumulated returns for the five years since 1997 back into a negative position."
The accumulated returns for a producer who started marketing hogs in January 1997 is negative leaving that producer with less equity than five years ago. Lawrence said given the forecast for 2003, it is unlikely producers such as these could recover to their initial positions during the coming year.
The U.S. Department of Agriculture's Dec. 30 hogs and pigs report provided further proof of the financial losses in swine production. An estimated 5,780 U.S. hog farms, including 500 in Iowa, went out of business in 2002. The report showed the number of Iowa hog operations on Dec. 1, 2002 at 10,000, down from 10,500 in 2001 and from 12,300 in 2000. Iowa has lost more than 7,500 hog farms since the market crash in 1998.
John Lawrence, Economics, (515) 294-6290
Susan Thompson, Communications Service, (515) 294-0705