This too shall pass.
“I kept hearing those words from my dad who raised pigs all his life,” said Colin Millang, a Camrose, Alta., farmer who lived through plummeting hog prices and is now expanding his feeder hog operation as prices improve.
The words were a comfort in December and January when things were particularly bad.
“Often it was so dismal that it was easy to think it was going to be down for a year, but then I kept hearing my dad’s voice.”
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At the worst part of the cycle, Millang lost about $30 per head. He hopes to recover those losses by increasing his herd this year. Instead of three batches of 500 pigs, Millang will bring in three batches of 660 pigs.
“When we went to buy back new pigs in January, my wife just sort of shook her head and said, ‘Why get new pigs when you’re going to lose?’ And I said ‘we won’t’. “
He remodeled his quonset to handle his 660 pigs and remains confident in his decision to lock in prices on the futures market for a June contract.
“I’m a farmer and I’m always going to be optimistic. I had people ask me if I would quit when the prices were down and I said absolutely not.
“If I quit or emptied the barn then, I never would get a chance to make up the loss,” said Millang, who feels his decision is safer than gambling on the cash market.
Low feed prices will also help the bottom line, said Millang, who estimates each hog in this batch will cost $5 less to feed than the last batch. As well, at $40, he thinks he bought weaner pigs for less than it costs the sow-to-weaner producer to raise them.
Not for everyone
Not all producers are willing to expand operations now, said John LaClare of Heartland Livestock.
“I think people are by far and large taking a wait-and-see approach. Those last few months have taken a lot of equity out of the industry.”
Although prices are climbing, many producers wouldn’t be at a break-even point, said LaClare, who thinks it will be another three to six months before the industry improves overall.
Heartland is contracting space now with private finishers but isn’t looking for any more in the short term, he added.
Roger Charbonneau, chair of the Alberta Pork Producers Development Corporation, thinks there is some expansion but producers are still analyzing the bottom line.
“Producers now have to relook at their finances to make sure if they do grow that they can sustain lower margins.”
As well, some bankers might like to see better hog prices before handing out more cash flow, said Charbonneau.
Millang admits he couldn’t have pursued his strategy without co-operation from the bank.
“The loss from 1998 ate up a fair chunk of equity and I didn’t have any cash on hand to buy back new pigs.”
As it is, he figures it will take him about two years to recover from last year. But Millang stresses that as a farmer his operation is about more than money.
“I guess what I’ve come to realize as a farmer is that how I make my money farming is just as important as how much money I make. Then when I’m losing money I still have the other half that says I’m still raising good food.”
In his childhood, farming was a way of life and not just a business, he said, adding it made low prices easier to bear.
“If we as farmers can continue to maintain that this is a way of life then when we hit real low times economically, we can still hang on and say this is the best way of life.”
Nonetheless, he’s happy the prices are looking up and that he has locked in a profit for his hogs.
“Put it this way, it’s a lot better to work with these pigs when I know I’m going to make money on them versus last year knowing I was going to lose a whack of money on them. It’s a lot nicer this time. I can sleep better at night.”
