Pork producers, bankers face challenges

A University of Missouri ag economist says the financial crisis facing hog producers is likely to get worse before it gets better.

Ron Plain says until pork production is scaled back, the situation will not improve.  He says farmers must cut production 15 percent from the peak for hog prices to return to break-even. Plain went on to warn that bankers will begin forcing the issue.  Under their financial rules, Plain says, bankers don’t have much wiggle room and they will not be renewing many hog loans.

Plain made his comments at the annual Swine Institute in Columbia, Missouri.

Kim Greenland is a banker from Mount Ayr, Iowa who has hog loans on his books.  “We’re partners in this situation—we’re working hand-in-hand with those folks, with the contractor, with the integrator, to look to the future of this,” Greenland says. “There’s a future in the pork industry—we’re in it for the long haul, and our customers, for the most part, are in it for the long haul.”

Comparing today’s situation in the hog business to the ag financial crisis of the 80’s, Greenland says today’s farmers, for the most part, are not carrying the enormous amount of debt that was seen back then—and he sees some glimmers of hope.

“We’ve seen some liquidation in the numbers, so I think there’s some positive numbers out there,” says Greenland. “We’ve got some hurt yet to go.  There are some of the larger integrators—we’ve seen them retooling and possibly taking some looks at cutting back production further.  But we think in the long haul, we’re optimistic on this.  We think black ink is returning.  We’re confident we can work through this with the farmers.”

Greenland made his comments at this week’s meeting of the American Bankers Association Ag Bankers conference in San Antonio, Texas.