AgDM newsletter article, January 1998

Why farmers quit producing pork

John LawrenceBy John Lawrence, Extension Economist, 515.294.6290, jdlaw@iastate.edu

From 1992 through 1996, over 14,000 Iowa farmers quit raising hogs.  This represents a 40 percent decline in the number of hog farmers. 

During this time period, enormous changes were taking place in the pork industry.  Some of these changes were:

There has been a great deal of speculation about why Iowa farmers quit raising hogs.  But little is known about what types of individuals and operations left the industry, why they quit, and whether they will return. 

During August and September of 1997, a telephone survey was conducted of 849 Iowa farmers who quite raising hogs since 1992.  This article includes a summary of the survey results and provides insight into some of these questions.

What type of farmer quit?

The average age of farmers quitting pork production was 48 years of age.  By comparison, the average age of the Iowa farmer is 50.  About 30 percent of the farmers quitting were from 35 to 44 years old.  Another 25 percent were 45 to 54.

Annual hog marketings averaged 745 head.  As shown in Table 1, just over half (32 + 20 = 52 percent) of the producers sold 500 head of hogs or less during their final full year of production.  Almost 80 percent sold 1,000 head of hogs or less.

Table 1.  Annual marketings of farmers quitting hogs

Marketings

Percent

300 or less

32%

300 to 500

20

500 to 1,000

26

over 1,000

22

How has their operation changed since they quit?

On average, the farmers who quit raising hogs received 40 percent of their farm income from hogs.  In spite of the important contribution of hogs to their income, only six percent reported quitting farming altogether. 

Of those continuing to farm, what are they doing with their time and how are they replacing the income?  As shown in Table 2, about one-third reported an increase in crop production, another one-third showed an increase in other livestock production, and another one-third worked more off the farm.

Table 2.  Change in activities since quitting hogs *

Reason

Increased

Decreased

Crops

30%

8%

Other livestock

31

9

Custom farming

10

3

Time worked on farm

12

46

Time worked off farm

34

5

* Figures don’t add to 100 percent because many responses either indicated no change or not applicable.

What will they do with their facilities?

Most of the farmers who quit raising hogs had relatively little money invested in facilities.  Over 80 percent of the breeding-gestation and finishing facilities taken out of production were either open lots or open-front facilities. 

The farmers surveyed indicated that the facilities were not likely to be used for hog production again. However, as shown in Table 3, almost three-fourths of the facilities will not be torn down and two-thirds plan to convert their facilities to another use or will let them sit idle.  Only 12 percent of the facilities will be rented to another producer.  This may reflect the difficulty in renting technically obsolete facilities. 

Table 3.  How facilities will be used

Reason

Yes

No

Maybe

Return to hog production

8%

63%

30%

Rent to another producer

12

80

8

Contract to raise hogs

3

88

9

Sit idle or conversion

64

25

11

Tear down

17

73

10

When and why did they quit?

Of the farmers who quit raising hogs in the last five years, almost 40 percent quite during 1995 (13 percent in the first quarter of 1995).  This followed the period (4th quarter 1994) of lowest hog prices in over 20 years.

This timing is consistent with the reasons given for quitting hogs.  The top four reasons given for quitting were economic reasons as shown in Table 4.  Three of the next four were more personal reasons.  Condition of facilities, access to markets, and disease control complete the ten most important reasons for quitting.  Pressure from neighbors, the inability to access information, lack of technology support, and dislike of raising hogs were the least important reasons given for quitting. 

Table 4.  Ten reasons why farmers left hog production (in order of importance)

1) Low hog prices
2) Returns not high enough
3) High corn or feed prices
4) Cost of production too high
5) Health of operator
6) Better ways to use my time
7) Age and condition of facilities
8) Age of operator
9) Lack competitive hog market
10) Disease too hard to control

What was their cost of production?

Even though low returns and high cost rank high for reasons to quit the hog enterprise, 82 percent of the respondents said they did not know their cost of production during the last full year of production.  Of the 18 percent who did know their cost, the average was $39 per cwt. as shown in Table 5.  Over 60 percent of those who knew their cost of production had costs less than $40 per cwt.  One-third had costs less than $35.

Table 5.  Cost of Production (farmers who know their costs)

Percent of farmers

Cost of production

62%

less than $40/cwt.

33%

less than $35/cwt.

21%

less than $30/cwt.

Average

$39 per cwt.

Will they raise hogs again?

The farmers were asked under what conditions they would return to hog production.  The conditions under which they would return are listed in Table 6.  A more favorable hog-to-corn price relationship was the highest ranked condition. 

The second highest condition was for increased restrictions on large hog operations.  The response to this statement highlights the tension in the pork industry.  Almost 20 percent of the farmers strongly agreed with this as a condition for their return to hog production (higher response than for any other of the conditions).  However, 50 percent either disagreed or strongly disagreed with this as a condition. 

Table 6.  Why you would raise hogs again (in order of importance)

1) More favorable hog-to-corn prices
2) Increased regulations on large producers
3) Not under any circumstance
4) Hog-to-corn prices same as recent years
5) Low interest loans to modernize facilities
6) Cost share assistance to modernize facilities
7) Reduced regulations on my own operation
8) In a producer initiated network
9) In an input supplier initiated network
10) Have a packer contract to share price risk
11) Be a contract grower for another producer.

Conclusions

The farmers that quit the hog business had relatively little invested in facilities and quit the business for both economic and personal reasons.  While some would be interested in producing hogs again if hog and corn prices were more favorable, many said they would not return under any conditions. 

The farmers that have quit had little interest in:

These results suggest that the future of Iowa’s pork industry will depend on current and future producers and not those who have quit.

 

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