What did we learn from the worst economic period in U.S. pig production history?

Four key takeaways as a production swine nutritionist to remember during the next down cycle.

Trey A. Kellner, Swine Nutritionist and Managing Partner

April 30, 2024

6 Min Read
National Pork Board

There is no “normal” year for a pig producer. Since starting as a production swine nutritionist in May 2017, numerous “once-a-career events” have occurred.

In March 2018, pork prices plummeted due to trade tariffs. In August 2018, China reported its first case of African swine fever, creating what many economists hoped would be the U.S. Pork Industry’s Black Swan Event. This increased hope, mostly unrealized in hindsight, for export to Chinese markets by packers, and saw the elimination of ractopamine as a tool to improve pig feed efficiency and sustainability for pork producers. In August 2019, a destructive derecho mowed down corn from South Dakota to Illinois. 

March of 2020 brought the COVID-19 lockdown, resulting in market facility shutdowns and supply chain disruptions that we are only now fully recovering from. Policies created during the COVID-19 lockdowns also resulted in an inflationary period domestically and market/economic chaos globally.  The pork sector saw the food service industry shut down, and at the same time, new consumers discovered at home the tastiness of preparing pork for their families. 

New energy policies and regulations set after the election of 2020 caused the price of added dietary fats and oils used in livestock feed to triple. The crop growing seasons of 2022 and 2023 were historically dry in the western corn belt, resulting in three straight years of below-trendline corn yields. Retailers, packers and state governments continue to alter housing regulations, making pork producers undergo further remodels, investments and decreased efficiencies. 

After drafting this list, it dawned on me why I seem to struggle to answer when a young leader in school or starting their career asks what a “normal” year, quarter, or even day is like for me.

What is normal for a pig producer is the up and down economic cycles of our commodity and our inputs. There will be good times. There will be tough times. The past two years have been analyzed by many to be the worst sustained economic period within modern U.S. pig production history. 

Hopefully, our community does not have to endure another sustained period like we have just forged through. Here are four key lessons learned as a production swine nutritionist to reflect on and remember during the next down cycle as a pig producer.

Lesson 1: Control the controllable

It can be easy to focus time and energy on uncontrollable items. It can be easy to want to do something new and revolutionary when times are tough. However, regardless of whether economic conditions are good or bad, we should always focus our time and energy on what we can control. For example, focus on a feed efficiency improvement plan with reducing corn grind size, moisture, and variation, feeder adjustments, and feed budget execution. Have a plan to improve or eliminate the worst 10% of production sites from an economic perspective. 

Focus on controllable costs. Improve market pig weight variation and sort loss. When losses are $30, $40, $50 or $60 per pig, it can be easy to lose focus of areas that help improve the cost of producing a pig by $1 to $10. One may ask the question, “Why does that matter right now when it doesn’t move the needle enough?” However, controlling the controllable costs and production outputs can mean the difference between staying in operation or not.

Lesson 2: Elevate your strengths, improve on your weaknesses

It is important to know what you and/or your system are good at executing repeatedly at an elevated level and understand your weaknesses. For example, your system may be exceptionally good at placing quality pigs on feed and getting them off to a good start, but your weight variation and sort loss at market needs improving. You may excel at employee recruitment but struggle with employee retention or continuous training. 

Once you have evaluated the areas you perform well at and the areas that need improving, you can determine how to assess your strengths and improve on your weaknesses continuously. You can enhance your strengths and correct your weaknesses by seeking external opportunities and partnerships and allowing your internal team to focus their time and efforts more effectively.  

As a bonus, outsourcing may be a key way to reduce costs. Why have additional payroll and redundancy when other external teams can do the job more effectively, efficiently and economically? However, evaluating your current partnerships and providers is also important to determine if they are the correct fit and provide the greatest possible return on your investment.

Lesson 3: Be responsible, realistic; but not a revisionist with management strategy decisions

Profit/loss-changing decisions should be made with a disciplined and data-backed approach that is responsible and realistic. It is one thing to lock in profits with risk management decisions when economic times are good; it is another thing to make the same decision to limit losses when economic times are poor. Furthermore, once a decision is made with the best information available, it is best to leave it as is, rather than continue to look in the rear-view mirror and attempt to justify the decision.

If the decision is made to depopulate a farm, acquire a farm, change a flow, change genetics, etc., support the decision 100%. If time unfortunately proves the decision was incorrect or could have been better, it is easy to be a revisionist on why the decision should have been different. 

Rather than focus on what would have been a better decision, a more effective approach is to take a deep dive into the decision process. For example, ask questions such as did we have the correct data when the decision was made? Did we have unaccounted costs? What did we not know at the time? How do we have more complete, detailed, or better information the next time? This process will allow you to learn from the disappointing outcome and improve rather than disenfranchise your team.

Lesson 4: Once again, feed is your No. 1 cost; prioritize it

As a production nutritionist, I must state at the end of this article how crucial feed program design and execution are. The largest cost of your operation must have the best data to use in formulation, the most optimum formulation strategy for your scenario, and the best execution possible at the feed mill to the slat level. A modest 2% improvement in feed conversion through better execution can improve cost by $1.50 to $2.50 per pig (depending on feed costs). Modest improvements in feed formulation, feed mill execution and slat-level execution stacked together will lead to significant cost reductions.

To conclude, I hope we see a more stable and profitable period for our industry for a long time. However, there will inevitably be another downcycle. The lessons we learn and apply from this down cycle will better prepare us to weather future storms.

About the Author(s)

Trey A. Kellner

Swine Nutritionist and Managing Partner , AMVC Nutritional Services

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