Wild swings called threat to hog sector growth

The hog industry has always had price cycles and often suffered from low margins, but market price crashes have become more frequent in recent years, and thin margins in the good times haven’t allowed many producers to plan for the future. | Reuters/Nicholas Pfosi photo

U.S. producers say price volatility, thin margins, disease outbreaks and management issues hamper long-term planning

The gyrations of the hog cycle are undermining future investment in U. S. pig farming, said a panel of industry players.

As well, the ongoing nightmare of trying to staff hog operations adds distraction to those managing the many challenges of production.

“The swings in the industry have gotten more aggressive,” said Clint Schwab, president of Aquity Genetics, in a virtual industry panel organized by Farm Journal.

“If you were looking at investing your capital in animal agriculture, particularly the swine industry,” would thin margins and wild volatility dissuade you?

Mike Paustian, a farrow-to-finish producer in Walcott, Iowa, said years of thin margins, disease outbreaks and ongoing management issues have got in the way of long-term planning.

“When everybody is in survival mode and just trying to make sure they can weather the next big event… they’re less likely to invest in innovation,” said Paustian, who is president of Iowa Pork Producers.

“The more stability we can bring to (profitability), I think, would accelerate the pace of people being willing to try out new things in their operations.”

The hog industry has always had price cycles and has often suffered low margins. However, recent years have seen a number of major disease epidemics that have shattered thousands of farmers’ profitability, market price crashes have become more frequent, and thin margins in the good times haven’t allowed many producers to build and plan for a long future career in the business.

Farmers both south and north of the Canada-U.S. border have been trying to find ways to even out their sector’s profitability, plus share in some of the processing industry’s better returns. Formulas, including parts of the hog carcass cut-out value, are being used in the U.S. and Quebec, and some western Canadian farmers are pushing for the same thing.

“It would be nice if we could begin to think more collaboratively at different stages of our supply chain,” said Paustian.

“These are tough conversations to have, especially when we have decades-long entrenched opinions about relationships between producers and packers and retailers.”

Schwab said the profitability situation today is bad, but he’s hopeful a better pricing structure can be found that makes the hog industry something people will want to invest their money in.

“We can make a whole bunch of progress throughout the entire supply chain… I think there’s lots of opportunities embedded in some of the challenges we have,” said Schwab.

However, another distraction for U.S. hog farmers is their very ability to run their barns due to critically few workers. As long as they’re scrambling to find workers to fill crucial barn jobs, they aren’t likely to be doing long-term strategic planning.

“You’re not allowing yourself the time to innovate and drive the business forward,” said Jen Sorenson.

Chronic problems finding staff to work in the hog industry is a major problem for producers, she said. The industry needs to find a way to draw more people to the growing industry.

“We have to challenge ourselves to be an industry of choice when it comes to employment, and go beyond some of our traditional pathways,” said Sorenson.

Schwab agreed it is a problem.

“It’s a big item for the industry,” he said.

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