Excess pork supply, tariffs mean losses for Illinois pork farmers

(Illinois News Network) – Pork farmers across Illinois are gearing up for what may be one of the more significant financial losses in recent years.

Pork production across the country is expected to increase by 5 percent this year, an increase that will force lower prices, according to the U.S. Department of Agriculture.

“Our farmers in the United States have gotten more efficient at raising hogs every year, and the bigger picture is those gains in efficiency have surpassed the gains in increased demand for pork products,” said Mike Doherty, senior economist and policy analyst for Illinois Farmers Bureau.

Due to the increased supply of pork this year coupled with the tariffs placed on pork exports to Mexico and China, prices are expected to drop significantly.

“They estimate that this will further decrease the price by about $9 per head,” Doherty said. “So, we are already looking at some kind of a loss per head going into late 2018 and then into 2019. Basically, it’s making a bad situation worse.”

The tariff on pork products to China is at an additional 25 percent since early July.

Doherty said the losses will be drastic.

“We have not had a price outlook this bad except for a couple times over the last 20 – 30 years. So, this is a particularly bad price cycle,” he said.

Illinois pork farmers were increasing their exports to China and Mexico, but with the tariffs in place, Doherty said profits from increased sales will likely be offset by the losses this year.

While many pork farmers may be eligible for farm aid, Doherty said it is unclear how any money will be distributed to help farmers absorb the loss.

“We just don’t have details yet,” he said. “But whatever it is, I doubt that it would be anywhere close to enough to make up for what’s going to happen by this fall.

Independent pork farmers will get hit the hardest because they do not have some of the benefits integrated producers have because they are not operating on a contract.

“We’d really like to see the Trump administration get an agreement locked in with Mexico because of all the countries we sell to, Mexico is the largest overseas buyer of pork from Illinois,” Doherty said.

The next step would be making a more favorable agreement with China to eliminate the tariff on pork products and then make other bilateral agreement with other countries, he said.