Should the U.S. government help finance new hog and poultry production facilities at the same time it's buying excess meat due to overproduction?

That's a question farm policy watchdogs are asking the Obama administration.

Last month, more than 100 agricultural, rural and environmental advocacy groups sent a letter [pdf] to Agriculture Secretary Tom Vilsack asking the Agriculture Department to immediately suspend loan programs for the construction or expansion of specialized hog and poultry operations.

"The use of public resources for this purpose, particularly at this time, hurts farm families and rural communities, and is a wasteful and risky use of American taxpayers' dollars," they wrote in the letter dated Nov. 16.

A similar letter [pdf] was also sent to Vilsack on Nov. 19 by 25 Waterkeeper organizations from states including Alabama, Florida, Georgia, Louisiana, and the Carolinas. The letters follow a petition with more than 25,000 signatures that was delivered to Vilsack in October by sustainable agriculture advocates.

In fiscal year 2008 and 2009, the USDA's Farm Service Agency provided direct and guaranteed loans for construction of such production facilities totaling more than $264 million.

But at the same time, USDA has been using taxpayer money to make bonus pork and poultry purchases -- "ostensibly to stabilize prices resulting from the very overproduction that USDA is facilitating through direct and guaranteed loans," according to the Nov. 16 letter.

In March of this year, USDA committed to buying $25 million worth of pork. In September, it made another $30 million pork buy -- and the industry is now asking for an additional $100 million in purchases.

The organizations opposing the purchases point out that when there was a similar oversupply problem a decade ago, USDA suspended financing for hog facility construction, noting in the Federal Register at the time:
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 over-supply conditions.
The farm advocacy groups say they understand that beginning farmers need government help to give them access to needed credit. "However, when those programs encourage beginning farmers to make large investments in high-risk operations, particularly in times of industry oversupply, the intent of the program is defeated," they wrote in the letter to Vilsack.

The watchdog groups point out that it's especially important for the USDA to be a careful steward of tax dollars given the current economic crisis, which is hitting farmers and rural communities hard.

In North Carolina, for example, Coharie Farms -- a company founded by former U.S. Sen. Lauch Faircloth (R-N.C.) and one of the state's biggest pork producers -- recently declared bankruptcy due in large part to the national pork surplus. The bankruptcy left the company owing vendors including farmers more than $3 million. North Carolina is the nation's second-biggest hog producer after Iowa.

The pork industry also blames its current woes on the global recession, skyrocketing feed costs due to an increasing amount of corn being used for ethanol fuel, and the H1N1 swine flu epidemic, which led to a drop in demand for pork even though the virus isn't transmitted through meat.