The big market factors may be largely beyond their control, but pork producers can apply fresh thinking to build a stronger economic future. New precision- farming approaches, using advocacy more effectively and dramatically modifying financing approaches are all key options, say speakers at the Banff Pork Seminar.
The numbers tell the story of an industry facing a perfect storm, says agricultural economist Ron Plain of the University of Missouri-Columbia.
North American hog producers lost over $7 billion in 2008 and 2009. Reduced production drove a brief spike in hog prices and decent profitability for some in the summer of 2010, however optimism of a recovery was slashed by three months of the worst pork industry economics in decades that rounded out the year.
High feed costs, weakened global and domestic economies and generally unfavourable pork trade conditions have all contributed. U.S. biofuels policy diverting a huge chunk of the corn supply to ethanol production has fuelled a dramatic rise in feed costs while a strong Canadian dollar has crippled the economics of Canadian production and contributed to a dramatic reduction in the Canadian swine herd.
“The difficulty is, none of these forces are within the control of hog producers,” says Plain. The challenge for producers is to weather the storm while finding new ways to strengthen their business.
Sustainable precision livestock farming, an emerging trend led by Europe, is one fast-rising new concept, said Leo den Hartog, director of research and development and quality for Nutreco, the Netherlands. The concept takes a broad approach to precision management and advocates harnessing innovations from areas such as genomics, microsystem technology, nanotechnology and information and communications technology.
“In the future, these technologies will offer opportunities for innovation in all parts of the chain,” said den Hartog. Animal feeding is a top target for the concept since it is the biggest cost factor in pig production. “It’s a critical junction in the pork chain, between crop cultivation and meat processing, where the precision approach will become increasingly more important.”
The “sustainable” part of the concept also includes building in broader considerations such as environmental management and consumer preferences, including tactics such as building stronger producer-retailer relationships. “Today more than ever these demands and opportunities need to be taken into account and managed properly, to generate more value.”
Using advocacy to shape the future is another valuable approach. Part of this is keeping on top of and responding appropriately to issues raised by industry critics, says consultant Michele Payn-Knoper of Cause Matters Corp. “It’s important to learn from the activist rhetoric and then put facts to work on an emotional level with consumers to tell your story more effectively. In agriculture, we’re missing that consistent voice in the conversation.”
Payn-Knoper added it’s critical to get out in front of issues and she challenged individuals in the industry to spend at least an hour each week talking to people outside the industry and telling their story.
NEW FINANCIAL MODELS
Taking advantage of new financial models is also key for a sector facing ongoing volatility, says Mark Greenwood of U.S.-based AgStar Financial Services, which has a large swine portfolio. “Ever since 2008 we have had significant volatility in the marketplace and in all commodities. This is becoming the new normal. Producers need to monitor their financial situation and strategy all the time because of volatility, and modify their models as things change.”
Those who succeed will be those who are the best managers and students of the game, says Greenwood. “Wayne Gretzky once said, ‘A good hockey player plays where the puck is. A great hockey player knows where the puck is going to be.’ Successful pork operations need to have that type of mindset.”