By Daryl Timmerman, Compeer Financial

Managing through a porcine reproductive and respiratory syndrome outbreak poses significant challenges, even under normal economic circumstances. In that moment, it’s hard to believe there could be anything worse. The reality is that regardless of the economic cycle phase, PRRS, porcine epidemic diarrhea and other disease can still strike. Times of disease challenges can potentially be farm-changing.

Pig farmers across America have tirelessly worked to safeguard their herds from PRRS and other diseases. Strategies such as locating farms in remote areas, incorporating air filtration to barns, building truck washes, incorporating feed mitigants and conducting extensive biosecurity training are common industry practices. Whiles some herds have been fortunate to avoid significant health issues, many experience intermittent breaks, leading to increased difficulty and longer stabilization periods. These events result in a higher cost structure during inflationary economic cycles.

Understanding where your farms stand within the industry and your own system is crucial. Embracing a data-driven approach and comprehending historical facts places pig farmers in the best position to make difficult decisions.

Collaborating with production record-keeping service providers can reveal how your farm performs compared to others in the industry. Leading providers publish an annual report detailing key production metrics, allowing you to assess your farm’s rank. Multi-year trends show operational performance percentiles. If farms consistently fall below the 30^th percentile and fail to achieve a multi-year average in the top half of the industry metrics, it is critical to evaluate the long-term economic viability of that farm.

Some challenged farms are older with no debt. Despite the absence of debt service charges, regular interruption in throughput due to disease challenges can erode the advantage, making the farm vulnerable to long-term economic viability issues.

Similar comparisons should be made for nursery and finishing phase close-outs. Aggregating closed groups and comparing production metric percentiles is key. Assigning a cost factor to benchmarking exercises helps to understand opportunity cost between the best and underperforming groups.

Whether in good times or bad, understanding where your production system stands is critical for sustained long-term success. If a farm faces a PRRS break or another disease challenge during a tough economic period, evaluating depopulation and finding alternative pig sources may become necessary for an interim period. Some producers may need to use this opportunity to optimize their operation to align with the financial capital required to sustain their business throughout the remaining economic challenges until a return to a profitable phase in the economic cycle occurs.

Warren Buffet is often quoted as saying, “The market can stay irrational longer than I can stay solvent.” The same principle applies to pig farming, especially when managing dynamic health issues within an inflationary environment and modest pork demand. Finding a way to navigate through this current economic cycle will look different for each producer. Deliberately managing your unique situation is essential, but you don’t have to go through it alone. Make sure to involve your veterinarian, nutritionist, lender and other key advisors to assist you.

If the difficult decision to depopulate is made, whether temporarily or permanently, it is vital to work with your insurance agents, county feedlot officers and facility advisors. They can help ensure the longer-term integrity of the building structure is considered when deciding to discontinue ventilation and water service after removing pigs from the facility. If your lender has a mortgage on the property, you will also want to keep them informed of the plans and intentions for property care.

There may be biosecurity enhancements or management practices that can restore competitiveness to these sites once profitability is regained in the U.S. swine industry. Another industry participant in a different economic cycle phase may be interested in purchasing these assets to make the investments necessary to achieve top-tier performance. Given the high cost of new construction, leveraging existing assets can prove beneficial. The key lies in making the reinvestments in the right farms to establish a robust performance for a sustained competitive cost structure.

At the end of the day, make decisions based on data and facts to position your farm for long-term viability in the ever-changing landscape of the swine industry.

Timmerman is a senior animal ag lending specialist – Swine for Compeer Financial. For more insights from Timmerman and the Compeer Swine Lending Team, visit their website.