Mark Greenwood
January 2008
Bad As I Have Ever Seen - The current economics of the pork industry makes me look back at 1998 and 1999 and that seems not as bad. With most producers in the last 60 days getting maybe a $100 for their hogs on the open market and with cost of production on close outs at $140 a head producers are losing money quickly. The other part of this equation is that cost of production keeps going up with corn in Southern MN at $4.75 a bushel and soybean meal at $330 a ton. In looking at cost per head on a farrow to finish operation we are over $90 per head! We were almost at a point where feed costs were not being covered by what the producer was receiving for revenue. The mood of the industry is one of almost disbelief and fear.
What Could Have Been -There were opportunities to lock in a margin in August of 2007 through a good part of 2008. August 3, of 2007 was probably the day when if you would have locked in hogs and feed for the next 12 months you could have locked in almost $15 a head margin. People call me frequently and ask how much of this got done? In my estimation, I would say 30-40% of the production that I would work with had some margins covered for the 4th quarter of 2007 and the 1st quarter of 2008. I would say very few had all of this covered. The issue on this is let’s say you locked up 40% of your production at a $15 per head profit but the balance you are on the open and you are losing $40 a head. The next effect of this is that you are still losing $18 a head. ( 40% x $15 = 6, 60% x -$24= -$24 net affect = -$18) The issue that I am running into is producers that are beating themselves up for not locking more feed and hogs in. I stress to them that you can’t look back only forward and not beat themselves up and not do anything. If you always made the right decision everybody would be doing this!
AgStar’s Presence at MN Pork – I did have some people ask me about our change in presence at the MN Pork conference. We did not have a booth this year. We sponsored the Internet Café where people could log on and answer emails, check markets, etc. AgStar also sponsored the Family Farm of the Year award and that was the Dennis Potter family from Springfield, MN. We also did not sponsor a breakfast and or have a hospitality room and people are wondering if we are cutting back on promoting AgStar. I can assure you we are not. I would say we are reallocating dollars to what we think we can help your industry. AgStar is now a member of the Pork Action group on behalf of the NPPC. I also serve on its board. AgStar is also an Alliance member of NPPC. I have spoken several times that we need to get more active politically to help protect this great industry and by spending dollars to help protect what we have is a big part of where we are spending these dollars. I have also been to DC three times in 2007 and plan on being out there as many times this year. This is on your behalf to promote our industry to the people in DC. If you should have any comments, please call me or send me an email. I will be writing another column next week. I have got a lot to say and a lot on my mind.
