Lender Outlines Swine Industry Challenges

US - For the past couple of years, "life's been good" for swine producers, according to Mark Greenwood, the vice president of commercial lending for AgStar Financial Services, a company that specializes in providing financial services to farmers and agricultural businesses.

"The financial strength of the swine industry today is unbelievable," Greenwood told a group of producers at a recent Iowa regional pork conference. "I don't want to offend anybody, but you could be fat, drunk and stupid and still make money in the swine industry the last couple of years."

Although "the good times are still rollin'," Greenwood, who works with pork producers from Iowa, Minnesota and Wisconsin, said the high profits in the hog industry will likely come to an end at some point. The challenges in the industry that make that probable are many, including slow growth in domestic demand for pork, increasing costs of production, limited herd productivity and increasing age of hog producers.

"If we happen to have a disease outbreak in this country, we'd better learn to eat more pork," Greenwood said. He explained that, although U.S. pork exports have increased, domestic consumption of pork - stuck at a little over 50 pounds per person per year - has not grown much in the past two decades.

"Exports have been our savior, but how much more can we grow our exports," Greenwood queried. "We need more creativity on the domestic side to stimulate demand for pork." Specifically, he'd like to see more fast food restaurants selling more pork on their menus in the United States.

Increasing costs of production are also a factor challenging hog producers these days.

"Eight to ten years ago, one sow space in a brand new sow unit cost a producer $750," Greenwood said. "Now one sow space costs $1,300. To have the same cash flow as eight to ten years ago, you'd need a 28-year amortization." Likewise, for the same cash flow on a wean-to-finish pig space that cost $180 three years ago that now costs $230, you'd need a 14.5-year loan, he said.

Limited herd productivity might also hinder the success of U.S. swine producers in the years to come.

Source: Livestock Roundup
calendar icon 25 March 2006
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