Expansion is ramping up rapidly

Is expansion finally happening in the swine industry? In the past few weeks I’ve talked with a lot of gilt suppliers, builders and equipment suppliers and I think the answer is a resounding – YES. Many gilt suppliers are telling me of very strong sales with many of the gilts destined for new breeding site projects. There are many new breed-wean units currently under construction (generally 2500-5000+ plus in size) and permit hearings on-going for new units to be constructed beginning next spring.

In addition to expansion there are several smaller production systems and mid-sized breed-wean units being sold and/or offered for sale. Producers with cash are looking to expand and in some instances older producers with limited family interest by the next generation are selling while there is strong interest in their production capacity.

In almost every case, pigs from the sow units are destined for facilities located in the upper mid-west with access to corn and soybean meal at relatively cheap prices and a cropping system that benefits from the application of the accumulated swine manure. In the case of new ownership, the expectation is improved production and or conversion of production to a size that fits economically with the buyers’ needs.

All of this spells massive infusions of capital into pork production. The big concern by many of us who work with producers on a daily basis – will there be ample shackle space in the fall of 2016? Steve Meyer has written about this already but I’m not sure every producer has put enough thought into this possible limit on our productive capacity.

We know PEDv knocked our productivity about 5-6% this year from what it would have been. What will production look like in late 2015 and 2016, especially if we manage to limit the impact of PEDv? We routinely talk about 30 pigs/mated female/year now as an attainable goal. Are we closing smaller breed-wean units and very low productivity units fast enough to offset the productivity that many units are now obtaining and the productivity being added by the new units under construction?

I know some of the new units are backed by pig purchase contracts. What is different about these contracts versus the contracts in place in 2006-2008 to prevent the contract failures that occurred then? Back then (seems like a long time ago) many weaned pig sale contracts were broken when the pig buyers lender said ‘enough’ and refused to lend any more money to pay for pigs that would only lose money at slaughter. A lot of lawyers have been busy sorting out this fall-out and we really don’t want to have to go thru it again.

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