Will expansion continue with the drop in prices?

As carcass bids continue to decline at a relatively rapid rate and slaughter numbers grow, I’ve been asked about the expansion plans for 2015 that I and other have written about. Will producers go ahead with their plans in the face of mounting slaughter numbers and pressure on prices?

I’m not so sure of grow-finish plans. In the case of production systems that are in the midst of a sow herd expansion, there is no question that new wean-finish, nursery and grow-finish facilities will be constructed. In the past few weeks I’ve reviewed a number of facility bids (wean-finish and grow-finish) that are running around $235-250 per pig place. This doesn’t include land, road, water, electricity, permitting, etc. Some are making the decision to expand now in anticipation of higher interest rates in coming years as lenders react to the rebounding economy.

I also expect anyone who has worked for 1-3 years already to permit a new breed-wean unit will go forward with the project. Getting all of the puzzle pieces together (along with the necessary permits) is just too hard for many to want to drop it for 1-3 years and have to start again.

I do think there will be some independent producer projects delayed in light of the declining market. I haven’t talked directly with slat suppliers in the area but I would expect not as many anticipated projects have made the deposits required for the slat supplier to make plans for casting of slats for the project.

What will be driving some to continue with their expansion plans in spite of current economics is the very good reproductive performance I’m hearing about this winter. We still need pig spaces to house the growing numbers coming from our females.

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