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Pork Powerhouses 2010: Back in Black

Updated: 09/17/2010 @ 11:05am Executive Editor, Successful Farming

How close was the U.S. swine industry to a total meltdown this year? When the hog market finally swung black in April, many of the Pork Powerhouses® were within weeks of disaster. Bankers were scrambling to restructure loans, producers were putting back-up capital plans in place, and packers were pre-purchasing pigs and providing unsecured loans.

“The markets turned just when they had to,” says one of the largest producers on the 2010 Pork Powerhouses ranking, compiled exclusively each year by Successful Farming magazine. “We were three weeks from disaster. The industry was starting to topple. If the bankers had forced us to revalue our fixed assets it would have imploded.”

Another producer says this: “If the market situation had gone on another quarter I don’t know what would have happened. It almost took the whole industry down. Everybody was in trouble.”

It was too late for two farms on the Pork Powerhouses list in 2009 – Coharie Farms and Coastal Plains Pork. They went bankrupt last fall and most of their sow barns in North Carolina are still empty (some are being converted to finishing). Another large producer, M2P2, of Ames, Iowa, was acquired in August by AgFeed Industries, one of the largest independent hog production and animal nutrient companies in China.

Sows Down Slightly

Overall, sow numbers for the largest 25 U.S. pork producers dropped less than 1% in the past year, although the nation’s largest producer, Smithfield Foods, cut its domestic herd by 5% (about 45,000 sows), mainly in North Carolina. Joe Szaloky, director of financial planning and analysis with Murphy-Brown LLC, the production arm of Smithfield Foods, says reducing sows doesn’t always mean fewer pigs sold. “The remaining sow base has increased its level of productivity, so there is no real change in output, rather, increased system efficiency.”

Sow productivity continues to climb, with some of the Pork Powerhouses weaning 11 pigs a litter and closing in on 30 pigs per sow per year. “The whole industry is getting better and better,” says one producer. “Slow down in production and you are behind.”

Today, the best producers on the list are making $50 on each hog marketed, but nobody is talking about major expansion soon. “We’ve been through a lot of stress,” says one producer in the Midwest. “We have to deleverage before we expand the business.”

What Are They Worth?

The difference between the past year and the financial meltdown in the pork industry in 1998, say insiders, is a lack of buyers. The bankers don’t want to own these big companies and there is a short list of buyers. The only names that surface are from Brazil and China. And what are these big pork companies worth? AgFeed paid $26 million for M2P2, but the value of others is uncertain.

Here’s what the Pork Powerhouses see for 2011: Supplies flat, prices bullish, exports strong. It should be a good year if that holds. Hog prices are going to have to stay high, says one North Carolina producer. “Feed is up $15/ton from this time last year and corn is up $1 per bushel from June 29. That’s $10 a hog.”

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From Ohio farmer 09/20/2010 @ 10:34am I got this feedback to the story from Ohio: Betsy, Nice to see the update on the pork powerhouses in your article. A lot of hog farmers (well the two still in business) talk trash about these big operators. But the rest of us in central Ohio love them for creating a good market for our corn. Almost all of our corn goes south on rail to the big chicken and hog powerhouses in the Carolinas. We have two big elevators competing for our corn, one sends a train (60 cars) a week to a hog feeder. Now Poet comes along and builds an ethanol plant right here in the middle, they need every kernel of corn in a 45 mile radius to keep the operation running. We really have a market! I know the big pigs have run the little piggy's out of the hog market, but overall it has helped the grain farmer, even the ex hog farmer can grow corn and make a living. I thought I would share my point of view, whatever it is worth.

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