Confusing economic signals make my head hurt. So I've been reaching for the ibuprofen lately every time I read something on Minnesota's hog business.
One of the nation's largest hog producing states, Minnesota is part of a crisis so big that the state ag commissioner is asking the feds to buy another $50 million in pork products.
USDA says Minnesota hog producers intend to farrow (birth) 570,000 sows between June and November of this year -- unchanged from the same period last year.
So shouldn't there be a pullback when all the economic signals seem to be yelling "Stop!"
Maybe it's just human nature not to pull back, even when you're losing $15 a head. You're a hog farmer so you keep producing hogs thinking the other guy will cut back and prices will rebound.
Plus, productivity's improved dramatically. The Minnesota Ag Department notes that big advances recently in animal health have cut death loss on farms and helped boost hog numbers. And a recent post by University of Missouri economists notes increased productivity nationally is offsetting recent declines in hog breeding herds.
One guy who knows a lot about the business is Irv Busman, a southern Minnesota farmer who's a source in our Public Insight Network and helps us keep watch on the region's farm economy.
Irv last week told us:
We have cut back our hog operation dramatically, and we are very happy we did...One individual who used to feed for us, in an older barn, has since torn down his hog barn. Another had the opportunity to feed for a large operation.....some of the larger operations haven't "blinked" as of yet...
I know of a few independent hog operations that have lost massive equity in the past year. ... I think there are some real struggles in the dairy business around here as well. One nearby 3 generation dairy was told that they have the bank's support until this fall.
I don't really know what that means, but I know the bankers are really struggling with some of these long established operations. Land is being sold/signed over to lenders in some of the dairy operations.
As my colleague Bob Collins has noted, these problems tend to run in cycles. Ten years ago, MPR News was reporting "Hog Farmers Losing Money Due to Over-Supply."
The difference: That happened when the overall economy was great. What happens now?