Drought Based Liquidation

Earlier this week I had a chance to talk with a cull-market sow buyer. So far the consensus of the sow buyers appears to be 35-40,000 sows have been liquidated due to the drought and associated high feed prices. There are rumors of increased sow liquidation going into the fall and I think they will happen.

If you think about who is/will be selling sows, the traditional producer who grows some/most of their feed grain needs appears to be the most likely to sell. We’re seeing this already with several Hutterite Colonies in South Dakota selling sows in the face of a bad harvest.

I’ve had conversations with several producers/owners who have been offered 1,200-2,500 sow units for purchase. For many of the sellers, the drought and associated high grain prices is the final straw that will drive them out of the pork production business. These are generally well run operations since they managed to survive thru the 1988-99 down turn and the low prices of 2002-3 and again in 2007-8.

In many cases the sale of the unit or depopulation is the exit plan. If there are no members of the next generation returning to the farm who will take over ownership/management as the present owners gracefully age? Not everyone wants to be making pork production decisions when they are 65-75 or even older. If I were 55+ in age and owned a significant amount of land for feed grain production, why would I want to be involved in pork production, other than to have the manure as a fertilizer resource to raise even more grain if there isn’t a ‘next’ generation involved?

Given the severity of the drought in Indiana versus the western corn belt and the more traditional structure of their industry (not as many 2500-5000 head sow units vs smaller farrowing sites), I think we will see a higher liquidation of the sow herd there than we will in Iowa or southern Minnesota.

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