Kent Bang and Steve Malakowsky normally write Compeer Financial's monthly columns for National Hog Farmer, but I asked if I could take their spot this month. They are doing their best to work with each of our clients during these times of uncertainty.
First of all, there probably isn't a day, or in fact an hour, that goes by I don't think of you and the swine industry. There are very difficult decisions you are all making about your operation that you never thought you would ever have to make. We are doing our best to listen and provide feedback for each of you on a case-by-case situation.
This gets to my headline — we just want to know. Whether you are a wean pig producer, a farrow-to-finish operation, contract grower, a processing plant, or an employee at a processing plant — we all want answers. You want certainty on when we get back to normal, or what the new normal will be. I will be candid; I don't believe we will know for some time on either of those two points. This uncertainty creates more frustration by the day. If you are a producer, this uncertainty is the reality that even 60 days ago never crossed your mind. You never thought you would have to depopulate your operation and you would not be able to have a spot to have your pigs to be harvested. This happened for a short period of time in 1998.
Compeer had a webinar and Kent Bang had a slide that really captures many of the discussions we have been having with everyone in the industry. This has to do with how long will it take for us get back to normal harvest capacity, and our hope is we get back to 90% capacity.
We have run multiple scenarios where we are at 90%, 80% or even 70% of capacity. By the end of this week as I write this, which would be May 15, we are behind over 2.5 million head since the beginning of April. It has been good to see processing numbers moving up the last couple of days. With cutout at over $110, this gives packers incentive to do everything possible to run. But the other factor has been harvest weights which reached over 295 pounds last week. These are real numbers and are a harsh reality for any producer who has pigs being backed up on their operation.
This goes back to the headline — we want to know! The level of frustration from all producers is understandable. But there is also a harsh reality to face. Pigs unfortunately will need to be euthanized, and the industry will need to downsize. Here are some key points everyone needs to consider about your operation.
- If you are fortunate enough to be delivering to a plant that is running — stay current!
- If you are a producer who has a plant not running at capacity you need to ask them two questions. 1) What is their best estimate on when they are going to be running? 2) At what percent of capacity will they be running?
- You then need to take action on how to manage your supply and depopulate your inventory to ensure you market your pigs at maximum value. There is a belief that we hope to get back to 100%, but we do not know when that will occur. You can no longer afford to wait; you must take action. I encourage all of you to work with your veterinarian, consultant and lender ASAP.
There are two other points that I want to know if I am a producer.
- What are we going to be paid for indemnification for animals? We need to know now.
- Are the limits on payments for COVID relief being lifted? Again we need to know.
There will be a pork industry once we get through this pandemic. There is a quote that I saw that rings true more than ever. "If you desire to be a person of hope, a person that has the will that what is good might be reality, you must be a person of two things: meaning and action." I encourage all of you to put meaning and action behind your operation. The clock is ticking.