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Feed costs, swine flu put small hog farms in peril

Associated Press

DES MOINES, Iowa — Marty Malecek got a business degree intending to take over the Minnesota hog farm that his father started nearly 20 years ago. Instead, they are selling their 1,700 hogs and auctioning off land after it became clear that they could no longer cover their costs.

It was a combination of blows: rising feed costs as the production of ethanol increased competition for corn and soybeans. High energy costs. A drop in demand as the recession meant people were eating less meat. The resulting oversupply that kept prices low. And then, swine flu.

"We wanted to be a family farm and keep on producing hogs," said Malecek, 33. "We were holding out hope until two or three weeks ago."

The pain has been felt across the industry. While larger, more-diversified operations will likely survive, industry officials, producers and analysts say many small- and medium-sized farmers could be forced out of business. Most are family-run operations, meaning relatives could all be out of work. And it could mean roller-coaster prices at the store until supply and demand come back in line.

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The industry produced a record number of hogs in 2008, with the U.S. Department of Agriculture showing 116.5 million hogs slaughtered. Now, since the swine flu outbreak, USDA forecasts call for U.S. pork exports to decline at least 12 percent in 2009. Through April, they’re down about 11 percent, or about 167 million pounds, according to the USDA.

The industry has lost an estimated $4 billion over the past 20 months, said Dave Warner, spokesman for the Washington-based National Pork Producers Council. Although a drop in exports has worsened matters, feed costs may be the biggest problem.

"Maybe not the really big guys, but some medium-sized operations will get out too, but it’s harder for the smaller guys to handle the sustained losses," he said.

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