Pork Commentary: Big Sky Disaster - Redux

26 September 2012, at 8:26am

CANADA - Three years ago Big Sky Farms of Saskatchewan went into receivership. The unsecured creditors got 10 cents on the dollar when the dust settled. Lots of independent businesses suffered from the failure. After the haircut of the creditors Big Sky re–organised (in concept).

Now three years later, Big Sky is in receivership and Ernst and Young the receiver is trying to sell. Big Sky 42,000 sows approximately – secured debt of about $69 million, unsecured debt of about $11 million. The total debt is just over $80 million. That is lots of debt.

Recently in Saskatchewan a 2400 sow unit and 8,000 head nursery was listed with a big ad for C$700,000 or about $292 a sow including nursery. The farm was built at the same time of most of Big Sky’s facilities. Hopefully for Big Sky’s creditors they get more than C$292 a sow for 42,000 sows or about $12 million. Ouch! With C$80 million debt –a big difference with pig inventory value dropping daily.

Pork Powerhouses – Successful Farming Magazine

For a number of years Successful Farming has listed what they termed Pork Powerhouses. We are always being asked by readers why don’t the big guys get hurt in the hog cycle. Below we show the listings for 1994, 2006, 2011.

When we look at the list of 20 from 1994 we count 12 entries that do not exist independently today or are in business. We count three of 20 in the 2006 list in the same boat. The bottom line is size is not a guarantee. Big means you can lose money fast and furious just like everyone else.

1998 was a watershed year in the swine business. Many have compared this year to 1998 when financial losses were huge. How the dust settles when this gets corrected is anyone’s guess. Big Sky 42,000 sows, Puratone Corp 28,000 sows will not be the only big groups hurt in North America this year.