"Even the best team, without a sound plan, can't score." - Woody Hayes
Remember the old westerns where the wagon train is passing through the canyon and the wagonmaster catches a glimpse of some motion up on the canyon's rim? The camera pans closer and we see thousands of Indians moving slowly, methodically along with the entourage. The music builds. The pioneers start to get nervous, anxious. A confrontation is near. It's time to circle the wagons and figure out a strategy.
This Old West scene could be used to characterize an impending confrontation in the hog industry. All indicators on the horizon are telling us we'll likely hit an annual production of 100,000,000 hogs for the first time by the close of 1998.
If this year's production levels don't make you nervous, perhaps the expansion plans batted around during World Pork Expo will. Veteran economists and hog market prognosticators are predicting upwards of 135 million market hogs when this century turns to the next. No need for a musical crescendo to announce this confrontation - but a circling of wagons and a strategic planning session would be well founded.
Environmental regulations and low hog prices could curb some of these expansion plans, sure. But don't be fooled; we're in for record levels of pork the next couple of years - even if expansion plans are tempered.
At the high end of the projections, we need to find a home for 15-20% of that production beyond our domestic boundaries.
Circle the wagons boys (and girls), we need a plan!
Industry leaders are well aware of these projections and, I'm sure, are making plans accordingly.
What's Your Strategy? The plan that needs attention most is yours. What strategy will you adopt to get through this probable price downturn? Now is an excellent time to do an honest appraisal of the strengths and weaknesses of your staff, your management, your production facilities. Where are the opportunities for fine-tuning?
Should you slow production, decrease stocking density, alter production levels to tackle a remodeling project? In this period, redirecting the production staff's energies to updating your facilities could offer greater, long-term payback potential than trying to improve lowly heritable reproductive levels, for example.
Can you take advantage of low-interest rates to update production facilities? Is it a good time to update genetics, reposition your production for a specific market, seek out a cooperative arrangement with other producers facing the same struggles?
As history attests, those who are best prepared stand the best chance of success. Woody Hayes may have said it best: "Even the best team, without a sound plan, can't score."
So what are you going to do to position your hog enterprise for several months of minimum, possibly no, profits?
Prioritize First, don't panic. Gather together the best advisors you can find. Second, prioritize. Put together a program to cover all or a significant portion of your feed needs. Don't confuse that with "buying" all of your feed needs. The corn and soybean crops look very good, to date. Develop a feed-buying strategy that fits current circumstances. The 1999 crop year may be a whole different ballgame. Be prepared to make adjustments as opportunities dictate. With feed costs notching out about two-thirds of your cost of production, it should be a high priority.
Record numbers of hogs make your marketing plan more important than ever, too. That doesn't mean you have to sign a packer contract. It does mean you'd better make sure you have a place to sell your hogs. Marketing services/specialists can help build a sensible program. Leaving your marketing program to chance is never a good idea, but it's a particularly unwise strategy for the next couple of years.
Surround yourself with people who understand the hog business, people you trust. Some may have a vested interest in your success - your lender, your feeder dealer, your hog buyer.
"Plans" Can Be Changed Review your short-term and long-range plans. Remember, they are exactly that, "plans." They are not cast in stone. If your plan needs revision, do it. Now is not the time for lollygagging. You'll feel better because you're taking positive action, and so will your business associates.
"We're a victim of our own success," warns veteran pig price prognosticator Glenn Grimes. Hog profits over the years have placed the industry in the enviable position of being the most profitable segment of agriculture. That alone drew more capital to the industry, spawning steady growth. Growth fuels competition. Competition often pushes the envelope for improved efficiency, greater productivity. The result of all of the above - more hogs!
Like I said: Circle the wagons and put a plan together. This battle could be a little rougher and longer than previous encounters - but those with a good plan will emerge the victors.
The wisdom in an English proverb fits nicely here: "Hope for the best, but prepare for the worst." Good luck with your plan.