As he said to me this morning, and as I put in my last post, Glenn Grimes has a grim outlook for pig producers for the next year.
“I’m not looking forward to the next 30 minutes or so,” said Grimes at the beginning of his presentation at the World Pork Expo in Des Moines.
Grimes detailed the litany of woes that are crippling hog producers’ profitability, and offered a dark cure: bankruptcy is going to be needed to drive production out of the system. I asked him afterward how bankruptcy alone can get rid of production, when most hog barn bankruptcies simply lead to somebody else buying it up at pennies on the dollar and putting it right back into production.
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“I don’t know,” he said. That’s the scary bit. The 58 year veteran economist of the hog industry can’t see how the glut’s going to disappear.
What should producers be focusing on for 2009-10? The same thing he recommended last year at the Expo: “I believe your strategy for the next 12 months should be survival.”
I also spoke to Steve Meyer, another famous hog market economist, after the session and he noted the same problems and the same needed cure. I asked him what would get rid of the extra 5 to 10 percent of the sow herd that needs to go to get supply and demand back into balance: “A few more days like today,” he said, referring to the slaughter of hog prices in the Chicago futures market.
Both Grimes and Meyer told me that bankers are very close to pulling the rug out from under a lot of producers, with an estimated 30 percent of producers about to see all their equity disappear.
