By Caleb Shull, director of research and innovation for The Maschhoffs

The requirement of pig farmers to have thick skin was in full force in 2023. There is no sugar coating it – this past year was not fun. Losses were severe and red ink forecasts remain till this coming summer. As the saying goes, with challenges comes opportunity. Those that respond to adversity with ingenuity and a renewed focus on execution should be stronger in the future. This coming year will undoubtedly present more challenges but promises to shed some light on a few key issues that may have a lasting impact on how our industry is shaped in the future.  

More Challenges Ahead

The list of external factors that could impact our industry in 2024 is long and daunting. Rather than focusing on things largely outside of our control, we have plenty of challenges directly facing our industry that need to be addressed.  

•    Profitability

While the decrease in commodity grain prices have brought relief in feed costs, hog prices have also dipped to the point where margins are still largely negative. A portion of the margin problem can be attributed to non-feed cost inflation and, though this cost inflation has leveled off, these costs likely are not going to return to pre-pandemic levels anytime soon. One negative consequence of lower feed prices is the potential for a delayed liquidation of the sow herd, which would prolong the losses in our industry. Though generally regarded as a good thing, a continued increase in sow productivity has led to a supply and demand position that is not favorable for U.S. producers. Short of disease or other catastrophic reduction in production, sow herd liquidation needs to occur for sustained profitability to return, which began this past year and should continue into the coming year. At the same time, more resources need to be dedicated to increasing demand for our product, through the improvement of taste and/or product categories that make pork more convenient to consume.

•    Pig Survivability

It is hard to talk about headwinds within our industry without discussing pig health and survivability challenges. While it may seem counterintuitive to discuss this topic while the industry is facing significant financial losses, improving pig survivability must remain a key issue. This past year has not yielded much fruit in terms of novel solutions to manage for improved survivability. Each of the technical disciplines (health, nutrition, genetics, etc.) must continue working together to reverse current trends and start gaining incremental survivability across all stages of production.

•    Construction

Another challenge facing our industry is the prolonged inability to cash flow new construction of finishing barns to replace aging facilities. Since 2020, the leading reason for cash flow challenges has been elevated construction costs. This past year brought higher interest rates which makes it even harder to cash flow for those needing financing options. Many of these older facilities lack the equipment, technology, or other parameters to fully optimize pig performance and cost of production. Older facilities also present challenges with adopting innovative technology that might enable producers to better manage their herds.  And yes, you could argue that building new barns is the last thing we need when producers are losing money and sow herd liquidation is occurring. However, multiple years of minimal new construction of finishing barns is a growing concern.    

•    Workforce

The emergence of the TN visa program has been a huge success for the U.S. swine producer. This program has provided access to tremendously talented people, and continued access to this program is critical to the success of our industry. The success of this program has highlighted our inability to recruit a talented domestic workforce that wants to work in our industry. We need to be supporting infrastructure and technology that makes working in our industry more desirable and allows people to maximize their productivity.

Silver Lining of Struggles

The U.S. swine industry is competing on the global stage and must continue to get better. One consequence of prolonged industry losses is that it generally forces improvement. 

•    Cost Management

This coming year should shed some light on cost of production and what business strategies are working by means of which companies remain or even grow stronger. All costs will be scrutinized in 2024 and that renewed focus and rigor will make us better in the long run.  An optimistic person should view the challenges our industry has faced as an opportunity to get better as a whole and eradicate some production practices that were making us less competitive globally.  

•    Focus on Execution

Even within historically successful production systems, periods of prolonged losses force a renewed focus on execution. Systems that can execute consistently will have more predictable outcomes that enable better decision-making regarding cost management. Sow liquidation in the front half of 2024 will hopefully lead to positive margins in the future and companies that are executing at a high level will be best positioned to take advantage of those opportunities.

Hope for Clarity

Clarity is still needed in 2024 in some areas of the pork industry.

•    Interstate Commerce

The impacts of Proposition 12 in California in its current state have likely already been absorbed by the U.S. swine industry. However, the potential precedent of one state enacting laws that affect how goods are produced in other states has the potential to have significantly more impact even beyond the swine industry. After multiple failed attempts to block the implementation of Prop 12 in California, the hope of guidance of how future interstate commerce issues will be governed lies in the upcoming farm bill. Without federal oversight, the risk of other states passing legislation like Prop 12 is a significant barrier to the U.S. swine producer competing globally.

•    Gene Editing

The coming year should also provide some clarity as to how future technologies like gene editing will be regulated, but perhaps more importantly, be viewed by the consumer. The potential benefits of such technologies are many, with one of the main and obvious advantages being the ability to improve animal well-being through better disease control and providing solutions to the aforementioned pig survivability challenges. The potential improvement in production efficiency and associated carbon footprint is another intriguing benefit. With that said, we must manage the perceived benefits against the risk of negatively impacting demand for our product.  

At the risk of sounding cliché, the coming year promises to be interesting. The challenges we face should lead to a more efficient and robust industry. There is significant opportunity for our industry to improve the supply and demand picture, refocus on production execution, work across disciplines to improve the health of our pigs, and continue to adapt to emerging technology that positions us for long-term success.

Read More:

A 2024 Health Outlook for the U.S. Swine Industry