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Pork Commentary: Govt-Controlled Big Sky Farms and Creditor Protection

by 5m Editor
17 November 2009, at 9:42am

CANADA - This week's North American Pork Commentary from Jim Long.

Last week the World’s largest Government owned swine operation Big Sky Farms applied for creditor and court protection. Big Sky is considered to be Canada’s second largest swine operation and is owned 63 per cent - 70 per cent by the Saskatchewan Provincial Government. The President and CEO Casey Smit of Big Sky said the company is reorganising so it can access Canada’s federal loan program. What a joke! A government controlled entity reorganising to get more government money! Big Sky has failed and now government upon more government money is being chased to prop up an organization that goes from failure to failure. The whole idea of the Canadian Federal Government loan and transition program is to put the Canadian Swine Industry on a sustainable footing. Further funding of a government owned farm of over 40,000 sows like Big Sky is a slap in the face of all Canadian hog farmers. It’s wrong that a socialist aberration created by the former socialist government of Saskatchewan is being sustained in competition with independent producers. No Government needs to own hog farms. Close them, shut them down. Big Sky Farms creditor protection and Hytek (Canada’s largest hog producer) supposed huge reduction in their sow herd, are a reflection of the challenges our industry face.

We expect several other large entities in Canada and the USA are deeply feeling the harsh reality of financial losses our industry has encountered the last two years.

Tell us it ain’t so Mr Meyer

Steve Myer an economist writing in the National Hog Farmer Weekly Preview last week offended us as Pork Producers. Writing about H1N1 which he referred to as swine flu he wrote about producers - "You can whine and wallow in self-pity and martyrdom or pick yourself up, dust yourself off and get on with life."

Sorry Mr Meyer, we have a hard time taking your lecture. We are not sure you own any hogs? How much skin do you have in the game? Taking lectures from an economist is hard for an industry and people who have lost billions with many losing their farms and livelihood. In fact Mr Meyer, we took your comments as condescending. Why? Producers are not whiners, wallowing in self-pity. Far from it. Producers are proud, independent entrepreneurs who have borrowed money and given their soul to this industry. Producers live in reality; it’s not an academic exercise. Mr Meyer, an apology is warranted to all producers.

Other Observations

We were reading the US National Agriculture Statistics Service statistics. Some observations:

  • The US average pigs per breeding animal per year was 10 per year in 1980, 17.5 in 2005, and 18.7 in 2008. In about thirty years, 1980 to 2008 an almost doubling of efficiency. In the three years from 2005 to 2008, a jump of 1.3 pigs per year. There has been a definite increase in efficiency. The increase has helped the cost of production to be lower but the extra hogs being produced is increasing pork supply.

  • In 1980 the United States had a 10 million head breeding herd. In 1982 it had dropped to 8 million. 2 million sows down that was real liquidation. This happened because sows 30 years ago were mostly outside. Capital was invested in inventory not buildings and equipment. It was a lot easier to cut inventories fast.

  • The hog to corn ratio has been running over the last two years near 10:1. In 1998. 1999, 2001, and 2002 years considered to be unprofitable, we had hog to corn ratio over 15:1. Is it any wonder? It has been so hard.

Corn

The corn crop is late being harvested. There are reports of serious vomitoxins. All efforts will be made to not feed toxins to hogs. There is a good chance vomitoxin corn will still get fed. There will be breeding and some growth problems. 1 per cent effect on each would be market positive.

US Dollar

The continual decline in the US dollar is positive for pork exports and price enhancing for US pork producers. Expect continually strong pork exports especially if access to China and Russia markets is available.

Summary

We are in tough times. Losses still reach over $20 per head. Hanging on is the name of the game. There is light at the end of the tunnel. Hog supply will be lower going forward. The breeding herd continues to get smaller. Pork exports are strong and will be aided by a weaker US dollar. Global grain and soybean supplies are good aiding our cost of production. As H1N1 (swine flu) dissipates, it will be positive for pork demand and market psychology. We expect 2010 lean hog futures have upside of over $5.00 their current level.