If someone were to mention what industry in Minnesota generates nearly $2 billion/year in direct sales and contributes approximately $7 billion to the state’s economy, very few people would guess the pork industry. However, those are the most recent estimates of the impact that Minnesota swine producers have on the state’s economy. Minnesota ranks third in the nation in hog production, producing over 15 million hogs/year. The pork industry is extremely important to the economy of south-central Minnesota. Blue Earth, Nicollet, Martin and Brown counties are in the top-five hog-production counties in the state. In fact, Martin County is in the top-10 hog-producing counties in the U.S., producing over 1.5 million hogs/year. Blue Earth County produces just under 1 million hogs annually, while both Nicollet and Brown counties produce about 650,000 hogs/year.
The pork industry supports over 20,000 jobs in Minnesota, including a significant amount of employment in the south-central Minnesota region. These jobs include hog management and care, meat processing, building construction and equipment manufacture, feed processing, trucking, veterinarians, etc. This region contains some of the state’s major producers and integrators in the swine industry, several major feed processors and equipment manufacturers and some of the largest veterinarian clinics in the upper Midwest. Two of the largest soybean processing plants in the U.S. are located in Mankato, ADM and CHS, both of which have a large employment base. The primary product produced at these plants is soybean meal, of which nearly 95% is fed to livestock, and in south-central Minnesota, a large percentage of the soybean meal is fed to hogs. Approximately half of the corn and one-third of the soybeans raised in Minnesota each year is fed to livestock.
The manure generated by swine facilities has become a valuable resource to south-central Minnesota crop producers. Fertilizer costs for corn production in 2010 are expected to be $200-300/acre. A crop producer with some well-managed hog finishing facilities to provide liquid swine manure for fertilizer can provide a large percentage of the annual fertilizer needs for crop production. The availability of high-quality swine manure has become an important part of crop economics in the region. This is why there have been a large number of crop producers willing to invest in swine finishing facilities on their farms in recent years. Most of the liquid swine manure is injected into the soil in the fall or early spring, in order to take full advantage of the crop nutrients. This method of application is very environmentally friendly and poses very minimal risk of nutrient runoff into rivers and streams, especially on the heavier soils that exist in most parts of the region.
The U.S. swine industry is currently experiencing the equivalent of an economic tsunami, and the time has come for all of us to become more concerned, as this entire industry is under extreme financial stress. Most hog producers have experienced negative monthly profits for nearly two years, and some for even longer. In several of those months, the losses have been $15-30/hog produced or more, meaning that many producers are loosing tens of thousands of dollars each month. A considerable amount of equity is being drained out of rural America, especially in the upper Midwest, as swine producers are forced to use farm real estate and other assets as collateral to continue their swine operations in production.
The major economic and low profitability challenges that the swine industry has faced in the past two years – and is currently facing – is the result of a combination of several issues. Skyrocketing expenses for feed and other input costs in late 2007 and early 2008 were the beginning of the profit challenges. Increases in pork production, along with reduced export markets late in 2008, led to even more economic issues in the pork industry. Finally, the outbreak of the H1N1 virus, and the method by which it has been reported by the national media outlets, has lead to even greater challenges for the industry, and has delayed any potential economic recovery even longer. Producers are also faced with the potential of added environmental compliance regulations through the climate change bill, Clean Water Act and other proposed legislation in Congress, which could add even more expense to the cost of hog production, and further reduce future potential for profitability.
In the end, the swine industry in Minnesota is still alive and well, and it will likely be that way for a long time to come. Even though pork producers are currently facing some very difficult economic challenges, as well as some challenging long-term issues, the Minnesota swine industry has shown a strong resilience to overcome the economic challenges and industry issues that have existed in the past. There is no reason to suspect that things will be any different now or in the future. The pork industry in Minnesota will likely to continue to be a major economic factor in the future; however, there are likely to be some changes and adjustments to the industry in the coming months and years.
Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at [email protected].