Christmas in May?

On Sunday morning at 5 am the outside temperature at my house was 28F and the ground was white with frost. This followed over 0.5 inches of rain on Friday. While everyone has been waiting for the one-last frost of the season, the rain was more welcome. The weather outside today is windy and cold with a current temperature of 56F. Sure feels more like early April than mid-May

For pork producers, so far the spring increase in prices has been more like a Christmas present. While most expected an increase in prices due to the reduction in the sow herd both in the US and Canada, few expected it to rise so fast and so far. In a few months we went from losing money on every pig sold to making over $20 per pig sold. On my side of the fence, it is sure nice to talk with producers who remain in the business of pork production – a smile has returned to their faces and they have some optimism.

How much optimism – I have heard reports of at least 3 empty sow facilities being repopulated with females. However, there are only a few reports of summer building projects, suggesting bankers are keeping a tight rein on credit until the industry rebuilds the equity it lost the past 2 years. At the same time, I am getting requests from contacts not in the swine industry asking about the availability of small to mid-sized systems for sale. With the return to profits and the continued worries on Wall Street and elsewhere, outside investors are once again looking to invest capital in agriculture. So far, I’ve not heard of any recent investments by these outside sources.

A concern many have is the very large dependency our industry now has on the export market. We now export around 20% of all the pork we produce. As documented by the ag economists at the University of Missouri, the export market contributes greatly to the profitability of our industry. However, our reliance on exports means we must also become extremely sensitive to the world forces that impact our foreign buyers.

When 95% of all the pork we produced was consumed in the US, we didn’t need to worry too much about the strength of the US dollar, or whether the economic crisis in Greece would impact our EU-27 trading partners. Suddenly, we now follow this news, as well as the daily price of crude oil and the progress of Free Trade Agreements in Congress.

Whoever succeeds in the future will not only have production and financial skills, but will also have an understanding of the impact of world trade issues so that the appropriate risk management strategies can be implemented.

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