Published on: 10:44AM Oct 26, 2009
As a hog farmer, I am hearing a lot right now about how hog farmers have to reduce our numbers, because there are too many hogs being produced and prices are so low. But now we’re hearing that lenders are saying that the mega hog operations are “too big to fail,” that they are going to carry them through these low prices. This statement was made by a major lender at a meeting I recently attended. Although I was not surprised to hear that, it was very disappointing to realize that they are going to repeat the mistakes from the 1980s farm crisis. As an independent hog producer, why should I help finance the megafarms, which is what I’m doing when lenders won’t let them fail?
One thing is for sure. Since we need to cut back on hog numbers, then the federal government should stop subsidizing the construction of new hog production facilities with either direct government loans or federal loan guarantees through the Farm Services Agency (FSA). That’s bad policy, and bad business.
When similar over-supply circumstances existed in 1999, the USDA suspended issuing federal direct and guaranteed loans for hog operations, saying “It is inconsistent with USDA policies for FSA to continue to finance construction of additional production facilities through direct loans and loan guarantees while other agencies within USDA expend resources to ameliorate oversupply conditions.”
It is just common sense that lending practices should be fair. Lenders should not give the big operations undue advantages, and we should have smart public policy that doesn’t spur further overproduction when prices are down.