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Economic impacts of pork shutdowns will reach well beyond Minnesota farmers

Even before COVID-19, Minnesota’s pork farmers had been having a tough time, with trade disputes holding down farm profits for the last few years.

Just as things were starting to look up, with federal payments designed to offset trade losses stabilizing many farmers’ income, the coronavirus hit, halting production at some pork processing facilities, slowing it at others and creating a backlog of animals that has forced some farmers to euthanize hogs.

Minnesota is the U.S.’s second-biggest pork-producing state.

While processing facilities are open again, they’re operating at reduced capacity, and farmers are suddenly looking out on a year clouded with the uncertainty of a global pandemic — a shock that will hurt farmers, but also their communities and the broader Minnesota economy, according to a new report from the University of Minnesota Extension.

The report found that a 15 percent drop in pork production — a rate equivalent to the U.S. unemployment rate in April, would have a $660 million impact on the Minnesota economy and mean the loss of 2,100 jobs.

Estimating impact

Joleen Hadrich, an Extension economist and her colleagues decided to quantify the effects COVID-19 could have in the economy after hearing from farmers concerned that it wasn’t being talked about.

“They felt like this part of the story was missing in a lot of the media coverage of the plants shuttering,” she said.

The team, including Hadrich, Extension educator Megan Roberts and senior economic impact analyst Brigid Tuck, first determined the economic impact of the average pork farm in Minnesota. They found that with $2.7 billion in 2019 sales, pork farms generated an average of $1.5 million in economic activity apiece and $33,100 in state and local taxes.

That means that to whatever extent hog farmers are affected by COVID-19, it will mean those effects are felt in the many communities in Greater Minnesota where they make up a big part of the economy, and in the state more broadly.

“It’s going to have a ripple effect on all of those industries that economic activity is tied to. They’re not going to be buying feed from that local feed mill. They’re going to have to find different ways to pay their loans,” Hadrich said.

A series of hard years

Denise Ryberg is a sixth-generation farmer on a Jackson County farm that produces about 46,000 head of hogs per year.

Like many hog farmers, Ryberg said she was hoping 2020 would be a good year after a few years where trade disputes diminished foreign markets for American pork and pushed prices down.

Median income for pork farmers has been volatile lately. Between 2010 and 2012, the median farmer netted more than $300,000 annually, according to farm income studies by the Extension. Incomes went up and down for several years, but dropped to $27,800 in 2018, and $96,200 in 2019.

“We were all expecting a time of hopefully making some money after the last few years of not; to be able to go forward,” Ryberg said.

Then the pandemic hit.

Dozens of food processing facilities temporarily shut down around the U.S. in recent months as a result of COVID-19, where close working and living quarters among employees help the virus spread quickly.

Notable for the Minnesota pork industry were the shutdown of Smithfield in Sioux Falls, South Dakota, and JBS Pork in Worthington, which together processed roughly 70 percent of the state’s pork. Those facilities are up and running again, albeit at reduced capacity.

Ryberg started to notice rumblings about farmers having trouble scheduling loads with processors in April. She’s been lucky so far, working with more than one packer, to be able to get hogs sent to plants.

“I have not had to euthanize anything yet, but I have quite a bit of production that needs to go to market in the next six to eight weeks, and I’m concerned,” she said.

In a good year, hog farmers make between $5 and $10 in profit on a pig, said Mike Boerboom, whose family has farmed in the Marshall area of Southwestern Minnesota for generations. Last year, the Extension estimated losses at 32 cents a head. The average hog farm sends about 6,000 hogs to market each year, according to extension.

Boerboom’s family has been lucky in that they haven’t had to euthanize market-weight pigs.

“We’ve been more aggressive on euthanizing low-viability pigs on the front-end,” he said. They’ve also somewhat reduced their sow herd to reduce output, and reduce breeding slightly.

“The challenge there is the decision we’re making on a sow bred today impacts a market pig in 10 to 11 months,” Boerboom said.

“The economics of it are challenging, but even beyond that is just the emotional toll that this is taking on folks,” he said of euthanizing pigs. “The thought of it is so difficult and it’s hard to comprehend.”

Some help on the way

This week, the USDA announced it would provide relief payments to farmers and ranchers affected by COVID-19, including hog farmers. The payments will help, said Lauren Servick, the director of marketing and public policy engagement at the Minnesota Pork Board, but they won’t likely make up for all of farmers’ losses. The Pork Board is hoping farmers see more relief through the federal Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, she said. The act has passed the U.S. House but has not been voted on in the Senate.

“We do appreciate that help coming,” Ryberg said of the USDA payments. “It will not make us whole but it will hopefully help with cash flow for a short time.”

Whether it’s weather or trade issues, there are many variables in farmers’ business models out of their control.

“I really look at us  as one of the only businesses where we don’t get to set our price, we take what the market offers, we work hard and do the best we can,” Ryberg said.

A pandemic, though, is unprecedented.

“The whole world is facing this health scare and economic scare, and we are as well. We will continue to try to provide the food that everyone needs, but at some point, it needs to be economically feasible for us to continue to move forward as well,” she said.

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