Following his morning routine, Dan Buechler walked through the nursery on his hog farm on St. Anthony Road West south of Jasper early Thursday morning to check on his piglets. Buechler and his father, Wilfred, grow their own grain, but because of this summer’s severe drought, they have to buy much of the grain they need for the hogs. They have about 5,500 animals at any given time. Staff photo by Dave Weatherwax
Pork producers, both locally and throughout the industry, are facing a tight squeeze and potentially severe losses.
Losses in the final quarter of 2012 could be anywhere from $50 to $60 a head, according to Purdue Extension economist Chris Hurt.
“They have a chance of being the most severe losses that the industry has ever seen,” he said.
The high cost of corn and soybeans is raising input costs while the liquidation of some animals is saturating the market and depressing the price of hogs. While the conditions put a strain on small, family-owned and independent operations, the largest pork corporations are expected to be the hardest hit.
Weisheit Hog Farms Inc., which is headquartered in Petersburg, is one of the largest pork producers in southern Indiana. The company contracts with farmers in seven counties in Indiana and Illinois, including Dubois County.
“We’re in the process now of cutting back production,” co-owner Terry Weisheit said. “It’s not the price of the hogs that’s the problem, it’s the price of the input.”
The company is liquidating a portion of its herd to minimize losses. Beyond feed prices, Weisheit said, a developing issue is the availability of feed, something that in the past has never been a problem.
“Just getting our hands on physical corn is going to be a dilemma,” he said.
A major factor affecting the future of these operations is whether lenders choose to keep the money flowing. Regardless of their size, farms entering this period from a position of financial strength are much more likely than struggling operations to emerge intact, Hurt said.
Farmers who own smaller, family-owned and independent operations could face losses as well, Hurt said, but to their advantage, they usually have a certain amount of farmland, the worth of which is at a record high. That land provides a strong equity base on which to borrow money.
Father and son Wilfred and Dan Buechler run Green Valley Farms Inc., an independent hog farm south of Jasper where they raise 2-week-old pigs to finish weight. They have an average of 5,500 animals at a given time.
“We’re going to see it through,” Dan said of the tough season ahead. “We’re hoping that things turn around again.”
The industry fluctuates between profitable years and years with losses. While the Buechlers were able to turn a profit in 2010 and 2011, from 2007 to 2009 they took a loss.
“Now we haven’t made back those losses and we’re getting hit again,” Dan said.
Contract farmers, who get paid by a supplier to fulfill some part of the production process, face a risk that is contractual, not financial, Hurt said.
“The risk is that the contractor can’t pay them, and then what do they do?” he said.
Mark Hochgesang is a contract farmer who raises hogs south of Jasper for Weisheit Hog Farms. He worries, not for himself but for the other pork producers in the area.
“It’s just going to be terrible,” he said of the expected industry losses. “Hopefully not only (Weisheit) but everybody around can keep going.”
Although the losses could be intense, they might not last very long, Hurt said. By April or May of next year, the industry could start to break even, he said, and the situation could turn a profit as early as late 2013.
“We’re going to have a lot of red ink, but it looks like it could turn fairly quickly,” he said.
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