Second Look: To be or not to be in the hog business?

Monday, February 4, 2008

In this time of industry soul-searching, pork producers need to get rid of some misconceptions and do some serious evaluation of their strengths and weaknesses before deciding whether to stay in the business

by RICHARD SMELSKI

To be or not to be, that is the question;
Whether 'tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles,

The phrase "to be, or not to be" comes from Shakespeare's Hamlet, Prince of Denmark, Act III, Scene I, and it is often used in reference to the whole speech. It is arguably one of the most famous quotes in world literature and it can readily be applied to pig farming. Do I continue producing pigs or is there life after pig farming?

There has never been more soul-searching than now in this industry. Do business people in other sectors have the same woes, highs and lows as pig farmers, and how come they get to have cottages, boats and weekends off, when all we want is a fair return?

The way to decipher this new phenomenon in the pig industry is probably the same as how one eats an elephant - one bite at a time. Start with the questions, but don't jump to your own emotional answer.

So, first, let's set some misconceptions straight:

1. There is no such thing as "it's all I know."
2. There is no conspiracy that is controlling your outcomes.
3. The economy is always final and sometimes downright ruthless.
4. There are alternatives.
5. Count your blessings.

Because you really like working with pigs doesn't mean you have to own pigs. Everyone wants to be an entrepreneur with no risk. You wouldn't take a risk in booking hogs or feed (because you don't gamble), yet you let your inventory vary with the market price. If that isn't gambling, what is? If you don't want to gamble, don't own pigs. Many business people undertook joint ventures in the value chain to remove risk, and it especially removes you from "gambling" alone.

Building a business without a marketing plan is poor business. All those hog buildings that were constructed to produce pigs in the expectation that "someone" would develop a market for them and give you a fair return as well was poor planning.

The economy is not that generous. Would you build a widget factory and keep producing widgets while expecting that someone is going to come along and buy your widgets? Know where your end product is going and what the market signals are. Whether you are a contract grower or producer, be aware and prepared for supply challenges such as the 2.4 million weekly kill, the Burlington packer threat, and the decrease in our per capita consumption of pork.

If you want to influence the exchange rate, give your head a shake. The foreign exchange commodity market is huge ($2.9 trillion daily) and substantially bigger than Canada's gross domestic product ($1.269 trillion yearly). Although we may be able to influence exchange rates infinitesimally, it's global trade that really controls them.

There is a feeling that big is bad, with big usually defined "as anyone who has more than I do." Take the United States, where a little over 50 organizations control 75 per cent of U.S. pig production. We might not like it, it might not be right, but that is the situation.

Besides, there are tremendous advantages to having an economy of scale business the same as yours right next door. Can you imagine what it would be like if there were a lack of packers in the United States, as there is in Ontario? What happens to Ontario if U.S. production moves to Eastern Europe or South America? Can we learn something from them, rather than trying to change their ways? We should determine what their essential services (needs) are and supply them at a competitive value.

Do you really want government support in your business over the long term? We can ask for a level playing field, crisis support, regulation, trade equalization and tax incentives, but Canada is next to a very big country which has agriculture at its forefront. Pick your battles carefully and be careful you don't get what you are asking for "without full knowledge."

A lesson in history may be appropriate because in spite of our government's role - a problem can still be persistent and create major changes to the industry. It's easy to blame government, but at the same time, you should count your blessing that you live in Canada.

So after doing a little SWOT (Strengths, weaknesses, opportunities, threats) on yourself, ask yourself the question again. To be not to be in the hog business? BP

Former Ontario government swine specialist Richard Smelski most recently served as general manager of Ontario Swine Improvement Inc.