AgDM newsletter article, April 1998

Developing a pork production strategy

John LawrenceBy John Lawrence, Livestock Economist, 515.294.6290, jdlaw@iastate.edu

During this period of sub-$40 prices and rapid changes in the pork industry, many pork producers are facing difficult decisions about their future.  An analysis of the March Hogs & Pigs report suggest that there may be a light at the end of the tunnel (Iowa Farm Outlook Letter).  However, the tunnel will run at least into mid-1999. 

While most Iowa professional pork producers are well positioned to weather the current storm, others are considering significant changes in their operations.  However, during stressful times there is a tendency to react first and ask questions later.  For example, during the sub-$30 hogs prices of late 1994, many farmers quit raising hogs.  As a result, they wondered what to do with the extra resources (labor) they had available from not raising hogs.  Also, they were concerned about how to makeup the lost income. 

Strategic planning

Although you are entering the busy spring fieldwork season, you should still give careful thought and do a serious analysis of your operation before you make major changes.  This process, called strategic planning, should include the long-run goals of the family and the business.  It should also include an assessment of your skills and the operation’s resources.  In addition you need to consider the short-term cash-flow needs of your decision. 

Although the alligators may be at your elbows, strategic planning is important in deciding how to drain the swamp.

Strategic planning is a comprehensive process of evaluating the internal strengths and weaknesses of your business and the external opportunities and threats of the pork industry.  This process is commonly used by businesses and organizations throughout the world.  It is also an excellent management tool for pork producers.  Although the alligators may be at your elbows, strategic planning is important in deciding how to drain the swamp.

Below are strategies involving significant changes that you may want to consider in your operation.  These are not a substitute for coming up with your own unique strategy.  However, after carefully evaluation, one of them may be of value in your operation.  At least they deserve your consideration. 

Strategy 1: Planned depop / and extended repop

This strategy involves depopulating the current herd, cleaning-up and remodeling the operation, purchasing new breeding stock, and returning to production on the upswing of the price cycle with a leaner and healthier herd.

Advantages:

Disadvantages:


Strategy 2: Sell sows and join network

This strategy involves selling the breeding herd, depopulating the farm, and buying into a sow unit to receive early-weaned pigs.  You convert the farrowing facilities to nursery space.  You can treat the facility as one large nursery or two smaller nurseries.  You will need two finisher spaces for each nursery space.

Advantages:

Disadvantages:

Strategy 3: Sign a marketing contract with packer or feed supplier

With this strategy you maintain the current operation but secure contract to reduce the probability of selling hogs at low prices.

Advantages:

Disadvantages:

 

|Ag Decision Maker Home Page|