An ominous cloud tempered near-perfect weather at World Pork Expo.
There were a few wisps of optimism — a fractionalized resiliency that often accompanies pork producers attending trade shows. Clearly, many were on the lookout for new ways of squeezing a little more efficiency out of their already tightened down production units.
The more seasoned in the crowd reassured others that the pork industry had been through tough times before — perhaps not this tough — but tough nonetheless.
Pork producers and allied industry representatives often spoke in somber tones as economists delivered less-than-good news about the prospects for a return to profitability.
One universal point gained consensus — the U.S. sow herd is too big and too productive for the current domestic and global economic conditions and per capita pork consumption trends.
Too productive? It sounds implausible, but the good and bad reality is that specialized maternal lines and the intensive care and management of the nation's sow herd has consistently recorded more pigs weaned per litter for several consecutive quarters, as the total sow count was being trimmed.
Professor Emeritus and widely recognized University of Missouri agricultural economist Glenn Grimes, who has tracked market trends in the U.S. pork industry for many years, recounted how the number of sows on U.S. farms has declined 42% since the 1930s, while production has increased nearly 250%.
As feed costs climbed, pressure to save more pigs increased. A move to later weaning nudged the pigs weaned per litter average upward, those pigs were finished at heavier weights, and the percentage of pork exported to foreign customers climbed.
The march toward greater productivity and efficiency has been steady, but this lockstep advancement has bumped into a wall made up of a global economic downturn, a wrongly named influenza virus, and a backlash that will likely be felt well into the New Year.
No Laughing Matter
A brief story from a book I recently purchased at the Lincoln Library & Museum in Springfield, IL, seems fitting. From “The Wit & Wisdom of Abraham Lincoln” by James C. Humes, the story pretty nearly reflects how many in the pork industry feel these days. When a friend asked Lincoln how he felt about his defeat by Stephen A. Douglas for the U.S. Senate seat in 1859, Lincoln replied: “I feel like the little boy who stubbed his toe and said: ‘I'm too big to cry, but it hurts too bad to laugh.’
There is nothing easy about the financial state of pork industry today. In general, the quality of facilities and management capabilities at its core is solid. U.S. pork production is geared to efficiently produce 114-115 million market hogs annually — apparently more than the domestic and global economy can support. Clearly, production must be reduced and, one way or another, it will be. Operating losses of the magnitude we are currently seeing are unsustainable.
Whether you are a pork producer, an Extension swine specialist, a swine consultant, a pork packer or a hog magazine editor, we are all in this together. Belt-tightening already has most budgets cinched to the last notch. Lenders are challenging balance sheets and insisting on workable risk management plans.
Waiting this one out without making adjustments in total production levels will not work. Clearly, the U.S. sow herd must be reduced by 5-10% before profitability will return.
Those committed to staying in the pork industry must look for strategic partners who will help develop a risk management/survival plan that will help carry them through this year and into the next. Those who step forward to stand with business-minded pork producers will build trust and loyalty that will serve them well when profitability returns — and it will.
From this struggle will emerge new paradigms and greater efficiencies to position progressive-minded pork producers with a competitive edge in supplying the world with quality, nutritious pork.
Many difficult decisions will be made in the coming months. Some will be made slowly, deliberately. Some will be made out of necessity. All will likely carry emotional and economic price tags that will linger.
Another quote from the book on Lincoln provides an insightful passage about “reason” that seems appropriate. Lincoln said: “Reason — cold, calculating, unimpassioned reason — must furnish all the materials for our future support and actions.”
These stealth words by our 16th President could serve as a mantra to help guide you to — and through — the difficult decisions that lie ahead. I wish you all the best.