Hog producers just aren’t making the bacon right now. In fact, most hog farmers are losing money and the outlook for the future isn’t bright either. Roy Lee Lindsay, the CEO of the North Carolina Pork Council, says its possibly the worst economic conditions ever seen in the pork industry.
Our economists are projecting that losses for 2023 on virtually every hog that’s still in the market this year will be something in the neighborhood of $30. If you think about North Carolina, we would expect there to be 15 million plus homes born in North Carolina this year. So you do the math on that and you get to a really big number. Wherever you look, if you look across the country we’re talking about 130 million hogs going to market, and you do that math and it gets to be a really big number.
Lindsey cites a number of contributing factors as well.
Much like everyone else in the world, we are seeing higher costs for us to do business. So labor costs us more money. We’re short labor to begin with, and then what we have is costing significantly more money. Transportation for animals for feed for supply costs, more fuel prices are higher. Grain prices have been very high. Now we anticipate that with the record corn crop, grain prices are going to come down this fall. But they still have been a tremendous challenge for us. And so even though hog prices are not bad historically, what we’re being paid for live hogs, it simply doesn’t cover our costs. And there’s not anything in the near future that markets don’t indicate to us that that’s going to get much better anytime soon.
In addition, borrowing working capital has become cost prohibitive.
You could borrow money at 2%, 3%, maybe 4% on the high side, now interest rates are 6, 7, 8 percent. So you double the cost of just accessing capital. And that cuts into what you can do and how you can do it. So until we can get a grasp of how to reduce some of these costs, or figure out how to get paid more for our hogs, we’re going to continue to face these kinds of challenges.
Under these kinds of conditions the question becomes, how long can hog producers hold out?
Some folks were in better shape, financially better shape with equity, had more resources that they can deploy as time goes on, and they may be better situated to ride out these challenges. Those that did not have equity, that did not have cash reserves, etc., they’re not going to be as able to ride this out.