Beef Producer Upset With Pork Industry's Aid Plan

August 20, 1999

Something of a tug-of-war is developing between beef and pork producers. Cattlemen are upset with pork producers for asking Congress to pay each pork producer $50,000 because of low prices. The National Cattlemen's Beef Association empathizes with the "tough economic times" hog producers are going through, but direct payments "do nothing to alleviate the supply-demand situation that typically is the root cause of low prices," says NCBA Trade Media Manager Todd Inglee.

When one livestock sector gets direct payments, it creates inequities relative to other livestock commodities, "not to mention destabilizing the free enterprise and open marketing system all ag producers rely upon," says Inglee. Ted Schroeder and James Mintert, Kansas State University economists, say the pork producers want eight primary actions to address their economic woes, and that "also will impact beef markets, because beef and pork are substitutes in consumers' diets."

The first of the eight points in the National Pork Producers Council plan (click here for our August 16, 1999 story on the NPPC proposal) calls for USDA to buy pork (sows and/or market hogs) from producers who reduce their production levels for a prescribed period of time. A bidding process would be used to select participating producers, and the pork would be distributed for humanitarian purposes worldwide.

That would increase short-run supplies of pork on the world market as sows increase short-term slaughter, say Schroeder and Mintert. "Giving away free pork internationally does not make it disappear from world markets," they add. "Because approximately 6% of domestic pork is exported, declines in world prices will lower domestic hog and pork prices in the short run."

International "trade friction" with other meat export countries probably would develop by "dumping pork" on world markets, NCBA claims. In the long run, when the program is completed and the pork industry adjusts back to "normal operations," this particular action "would likely have little impact."

NPPC's request for $600 million in direct cash payments to pork producers regardless of size "discourages less efficient hog producers who otherwise might reduce herd size or exit the industry during cyclically low hog prices.

"Consequently, this proposal, to the extent it is successful in achieving its objective of reducing financial stress, could actually lengthen the amount of time required to reduce pork supplies which, in turn, means that it could increase the amount of time required before pork prices recover," according to Schroder and Mintert. "Since pork is a substitute for beef, this proposal is expected to negatively affect beef and cattle prices."