Zig Ziglar once said, “Success occurs when opportunity meets preparation.” Some of the best preparation often happens during tough times, something the U.S. swine industry has faced plenty of in the past two years. Adversity, like the heat applied to steel during tempering, makes us stronger as we prepare for the future.
Learning opportunities stem from economic challenges, herd health issues, losing a family member, pandemics, market volatility and unpredictable black swan events. In my 18 years working with farm families, I’ve seen the next generation of farm leaders evolve from observers to hands-on managers. Senior leaders have gained confidence working alongside their successors, facing today’s market challenges together. This shared experience prepares them for future cycles. While it may not feel positive, adversity builds leadership and character in the next group of key leaders.
Profits for pig farmers this summer have eased some financial stress. The market rally earlier this spring suggested a larger recovery than we’ve seen. Some producers extended coverage, while others waited for a seasonal timeline to lock in winter market pigs when summer cash markets typically support strong futures through the fall and winter. Bankers often stress the importance of hedging in commodity marketing. While important, I understand how difficult it is to make real-time decisions. It’s not fair or healthy to look back and say what should have been done. These experiences provide context for future hedging decisions as producers continuously prepare for the future. Knowing your business’ financial position and understanding how to lock in profitability helps in making tough decisions. Having the numbers and facts lined up helps navigate decisions you can live with, despite hindsight.
Feed costs have improved by $30 per head from the peak of the corn markets. A wean pig placed today will incur roughly $85 in feed expenses by the time it reaches market weight, which is a good thing. Producers are working their production costs down to the low $80s per carcass hundredweight, with rolling herd average inventory costs running in the mid-$90s per head for an ongoing flow. Fixed costs remain high, but there are signs that farm machinery costs are starting to relax, which will help operations needing to replace essential equipment. The Federal Reserve is expected to lower interest rates in September, with potential further easing in November and December. Lower inventory costs and interest rates would benefit producers working to stay ahead of tight profit margins for the 2024 fall and winter marketing periods.
Updating your projection model helps you navigate these tight marketing windows. It prepares you for communicating with your lender, and more importantly, with your family and key stakeholders. Keeping these people informed and focused on key business drivers is vital to sustaining support and engagement.
Find more insights from the Compeer swine team at compeer.com/swine.
