Some would say the pork industry is on the other side of the biggest financial downturn the industry has seen for the last 30 years. Others say we are not quite there yet. In a Farm Credit peer benchmarking review, Chris Ford, vice president corporate swine lender with Farm Credit, looked back over the past several years to see what differentiated pork operations that have done well and those that have struggled.
1. Production is king.
“Producers who have adhered to strong biosecurity measures, embraced technology and have taken a mindset of getting as much production out the door as possible have had as much success as anybody in this industry,” Ford says.
2. Good bookkeeping matters.
“Those who have done a nice job with financial acumen and understanding where they’re at from a financial standpoint have survived this downturn,” Ford says. “As a lender, we see that every day. Those producers that keep good sets of books and understand their cost of production make the best decisions in regard to what’s best for their farm.”
3. Take advantage of risk management.
“Risk management is probably the biggest thing that separates the top tier from the rest,” Ford says. “The markets have been what they’ve been, but there have been opportunities all along the last two years for guys to make money. If you understand your financials, what your costs are, there’s been opportunities to either lock in prices or lay off risk in your operation through risk management like insurance products, hedging and more.”
Ford says benchmarking allows producers to take a closer look at their cost of production and historical profitability. Now is a good time to ask yourself hard questions, he says.
How do you stack up in the industry? Where is the industry at when it comes to working capital per sow or equity per sow and where do you fall? Are you in the top third, bottom third, or around average for the industry? Ultimately these answers can help producers make decisions about their next steps, he says.
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