WASHINGTON — U.S. hog producers received a late Christmas present from Washington: approximately $50 million in direct cash payments.
Eligible producers can get up to $5 per slaughter-weight hog (or feeder pig equivalent) marketed during the last six months of 1998. The maximum payment is $2,500 per operation.
Producers will only be paid on up to 500 market hogs, or an equivalent number of feeder pigs. The actual payment may be less than $5 per head, depending on the actual amount of funding available.
The program is designed to help farmers weather the worst economic crisis since the 1930s. Most pork producers have had losses of $50 to $70 per head in the past two months.
Although appreciated, the payments are fairly insignificant in the wake of billions of dollars of equity lost in recent months, says Ken Foster, Purdue University ag economist.
“The payments won’t do much,” Foster said. “It’s more a show of support for the hog industry and an effort to make others aware of the financial situation.”
According to the most recent USDA Hogs and Pigs Inventory Report, the average size farm with less than 100 hogs in inventory has 20 hogs. That would be $100 in cash payments, Foster said, although producers should expect to get less than $5 per head. “The money won’t be enough to go around,” the economist added.
Many pork producers would rather see government involvement in the form of guaranteed loans, which give farmers a better short-term option for access to capital, Foster said. “They need some help getting through this liquidity crunch right now.”
Producers are eligible if they marketed less than 1,000 hogs during the last six months of 1998 and are still in operation. Producers with fixed-price or cost-plus contracts are not eligible.
Applications will be handled through local Farm Service Agency (FSA) offices. Farmers must sign up Feb. 1 to Feb. 12 at the FSA office serving their county.
Payments will be made two to three weeks following the sign-up period.
“We haven’t seen the application form yet,” said Steve Maurer, FSA state executive director in Ohio, “but with all the other work our county offices have right now, they’re (USDA) going to try to keep this as simple as possible.”
Maurer is trying to get a handle on how many Ohio producers are eligible. In 1997, Ohio had approximately 1.5 million hogs on 9,000 hog operations, which includes all sizes, according to the Ohio Agricultural Statistics Service.
Pa. FSA State Executive Director William Baumgartner said the program will be “very beneficial” to Pennsylvania hog producers. “Many of Pennsylvania’s hog operations are small family farm situations,” Baumgartner said. Pennsylvania has approximately 1 million hogs on 45,000 farms.
Operations with a gross income greater than $2.5 million in 1998 will not be eligible.
The USDA estimates than 80 to 90 percent of U.S. hog producers, or nearly 100,000 farms, will be eligible for the payments.
Although actual forms are not available, it is likely the program application will ask farmers for the name of their operation and a list of people involved in the farm.
Producers should also be prepared to furnish the number of finished or feeder pig marketings in the last six months of 1998 and to list the buyers of those hogs or pigs.
The application will also ask producers to sign that they are still in business and did not market the hogs under fixed-price or cost-plus contracts. USDA will conduct spot checks on participants to verify eligibility.
The USDA has the authority under a 1935 act for direct payments to farmers. The Section 32 is typically used to purchase surplus commodities for distribution through federal food assistance programs. This is the first time in 38 years that payments will be made directly to producers under this ruling.
The cash payments are a “good first step,” comments Gene Paul, National Farmers Organization president, “but doesn’t go nearly far enough.”
The ag leader said the industry really needs to wrestle with the overriding issue of unchecked ag consolidation, which he claims undermines the entire farm producing sector.
“I believe the Justice Department should immediately begin an investigation into the impact consolidation has on agricultural buyers, which dramatically affects market prices.”