When markets move to extremes, fallout is assured and business fatalities become a reality.
Norlin Gutz has been raising hogs for over 35 years. In the early '70s, he ran a 120-sow, farrow-to-finish operation near Storm Lake, IA. His wife pursued a nursing career until they started a family.
In the late '80s to early '90s, he began dabbling in the Isowean/feeder pig market, buying a few pigs and placing them on feed on other producers' sites when he could lock in a profit.
In the early '90s, when the purchased pigs showed more profits than the continuous-flow, 120-sow operation, the sow herd was sold.
“I was buying pigs on the open market. Whenever my feed distributor had a finishing floor come open, I would place the pigs, he would get the feed business and I could make a little money. That's how I got started,” Gutz explains.
The feeder-pig finishing enterprise grew to over 12,000 head on feed with independent producers scattered across northwest Iowa, up to Sioux Falls, SD. Gutz spent most of his time on the road, monitoring the pigs, over half of which came from Canada.
“In 1998, things began to change. The crashing hog market left many pork producers filing bankruptcy in its wake, including a brother-in-law's 1,000-sow unit near Jackson, MN,” he explains. “Everybody had walked out on his contracts for Isoweans.” Gutz purchased the unit.
In 2001, Gutz bought a 1,200-sow unit with a nursery and a house north of Albert City, IA. It had set empty for three years,” he notes.
The two operations began cranking out feeder pigs and Isoweans that were sold to independent pork producers across Iowa and southern Minnesota.
“Our costs were below the industry average. Weaning averages were running at about 9.3 pigs/litter. Even when costs began escalating, our costs were still below $34/pig. Our facility costs were very low,” he says.
The situation took a bad turn in the summer of 2007, however, as Canadians began sending more pigs to the area and pig prices dropped to about $10.
“We did not sell an open market, Isowean pig after that. Normally, we had about 3,000 of our pigs on feed, but that grew to 12,000 by Feb. 1, 2008. The feed costs just ate us up. We didn't want to get into finishing because it would have stretched our management too far,” he explains.
In late February, Gutz had 12,000 pigs on feed on sites that were old and not very efficient, but they were all that was available.
In early March, the local banker that carried the loan asked Gutz to form a liquidation plan. He did. The last sows farrowed the first week of June. The unit closes down a month later.
“If we had continued for another six months, we'd have probably lost another quarter-of-a-million dollars. It's very frustrating,” he says.
Worse yet, Gutz is trying to find positions for eight employees - all hired through the worker exchange program, Communicating for Agriculture.
“They come to work with us for a year to learn a trade. They are really good kids and they'll work their tails off to earn some money so they'll have opportunities when they return home. A lot of them are third-year veterinary students who take a year off to work here. Some stay up to three years,” he explains. Most of the workers are from Brazil, the Ukraine and South Africa.
“We've worked with this program since 1998, and built some wonderful relationships. I am trying to look out for their interests, too,” he adds.
“I don't know where the situation in the livestock business will lead. It has upset the whole structure of the industry. A year to 18 months down the road, I think there will be some terrible consequences for jobs that are related to the livestock industry — especially in Iowa where we are so tied to the livestock industry,” he says.
“You really value your family and the relationships with friends — and your faith. You really see what's important,” he says of the experience. “As for my future, we are still sorting that out. I doubt I will be involved with hogs. It would be hard to get involved again once your heart has been broken.”