When confronted by an angry audience of producers complaining about the market (“pork producers are slapping $50 bills on the back on their hogs”), and that “everyone” (feed mills/dealers/consultants) is going out of business because they can’t make money, my traditional answer has been “Yes, but haven’t we seen this movie before?” The same applies when profits are good. Producers invest, but this requires increased processing capacity to avoid a crash: that’s also a movie we’ve seen before. So why is this time so different? Why is this a movie we haven’t seen?
Profits aren’t bad, feed costs could edge higher, but no one is planning new plants with irrational exuberance. This time, however, the movie is different: we really don’t know how it ends, because the degree of uncertainty is unprecedented in our lifetimes – in geopolitics, economics, and nature.
Russia’s invasion of leading grain producer Ukraine has made it impossible to predict the fate of 30 million tons of annual grain production. China’s increasingly confrontational relationship with the U.S. means the leading consumer of pork isn’t playing nicely with the world’s largest exporter. The U.S is at full employment, yet still showing all the signs of recession. Rampant inflation is pushing central banks to raise interest rates to cool it down. Pandemics are still affecting economies and supply chains. Record droughts and fires are increasing market uncertainty in both grain and feed protein.
And, in the middle of all that, technology and digitization relentlessly evolve, with the speed of change accelerating. What should companies do when they are cash-rich and have fundamentally sound business generating record profits, but all the professional forecasters say disaster is around the corner?
A Jungle of Challenges
CEOs have to react to a movie they’ve never seen. McKinsey notes that CEO’s often feel “very lonely,” and this scenario exacerbates that sense of isolation. There is no mentor or consultant who can offer answers because they haven’t seen this movie either. Key operating assumptions that have shaped the business environment for the last 30 years are no longer valid. This movie has the leaders of the pork industry in a jungle of challenges, with no map showing the way out.
Two narratives are emerging. The first is that economic collapse, or at least a major recession, is just ahead, so pork leaders should be conservative. When inflation and sky-high interest rates hit over the next couple of years, those who have kept their powder dry will have a plethora of chances to buy whatever they need, from farms to integrated operations, at rock-bottom prices. Better safe than sorry and maybe even a chance to come out ahead.
The other emerging narrative suggests now is the time to be brave. Create or extend a lead over competitors, by investing in new technologies which can improve efficiencies, systems, and processes to be more accurate and more responsive to customers real needs. The prevailing sentiment, expounded by hundreds of doom and gloom articles, is that disaster is just ahead. The contrarian view is that rather than “the sky is falling” the fable of the third pig who built a stronger house is a better model for leaders in the swine sector.
Tough times are when leadership really counts, so this may be exactly the time for throwing out the traditional playbooks and adjusting the strategic focus to build a robust and resilient business. To that end, I offer three suggestions:
- Digitize everything.
Why do we take so long to invest in labor-saving devices? We might not like the answers, but accurate, real-time measurements gives producers the power to do things better. Identifying technology that do tasks better, leaving humans to do what we do best, transforms the nature of work, so that what farm workers do is more satisfying. Many producers say the barrier is financial: “I won’t invest unless I get a 3:1 return” or “we need a payback in 18 months.”
In changing times, it is important to re-assess your decision metrics, to be sure that they are appropriate and relevant. Money is still at relatively cheap, and this represents an opportunity to out-innovate the competition, perhaps the time to adjust a payback or ROI.
There are many examples of this. In Europe, the Danish Cloudfarms now claim swine customers in 40 countries. Barn Tools customized IOT platform for livestock has gained rapid traction with U.S. swine producers. EveryPig platform allows integrators to review logistics of pig flow, for example, to avoid delivering the pigs to the wrong farm. It allows producers, management and veterinarians to avail of cost savings and telemedicine through data and photographs. I have identified 16 companies worldwide now providing cameras in barns to record pig health and performance, with FarmSee being a leader. In a tight labor market, a time of changing markets, making it easier for customers to do business with you, increases resilience might be worth deciding you should “just do it.”
- Reinvent your supply chain with AI.
Artificial intelligence (AI) has few greater opportunities than to reinvent supply chains. No human, paper trails or spreadsheet can manage the flow of goods in a system as effectively as AI. Knowing what goods need to be delivered from one depot to another, that inventory is being used at a rate faster than expected, that a supplier has a delay can all be monitored in real time. Supply chain improvements yield fast results, and their impact on profitably are swift. An example of this is Swarm Engineering who have been working with leading U.S. swine integrators to optimize their supply chains. The value in the supply chain of feed, grains, animals on the farm, pork, water, and even energy, are all important.
- Double down on talent, especial leaders with tech expertise.
The world is awash in capital, but there is a war for human talent. Cutbacks in the tech sector offer the food industry an opportunity to hire top-level tech talent, the type of talent required for full digital transformation of your business and the effective application of AI. One leader in the food business commented she didn’t see the need for leaders who knew how to (program) code. This may be true today but not if the leader continues to lead 5 and 10 years from now. As a Wired article said, “If one has personal experience with coding, it helps with time management for the entire team, because they know exactly what to expect from their employees.”
This knowledge can also bring a laser-sharp focus to what needs to be done to improve your pig businesses. Talent is the key to sustainable competitive advantage in the short and medium term, yet as Kincannon & Reed recently noted in Forbes, it is currently taking 20% longer to get new leaders in place with 30% more compensation than in the past. We talk a lot about the value of leadership, but are we investing in it?
Today’s times require visionary, inspired pork CEO’s, not timid retrenchment. Are you, your farm, your organization ready?
Opinions expressed in this column are the opinions of Aidan Connolly and do not necessarily represent the opinions of Farm Journal’s PORK.
More from Farm Journal’s PORK:
Don’t Let Technology on the Farm Paralyze You
Pulsed Light Technology Effectively Kills Harmful Pathogens in New Study
Wake-Up Call: Pigs Contract Senecavirus A Through Imported Feed
