North Carolina's $2B hog industry belted as farms fail - Phoenix Business Journal:

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Two culprits – overly large herdxs and rising costs due to higher grainpricews – have been shrinking the bottomm lines at many hog operations in North the nation’s second largesgt hog-producing state, behind only Iowa. To those factors can be addedd the recentswine flu, or H1N1 flu, the effects of which the industryt is only starting to tallyh up. “A lot of peoplew have just notrealized what’s been going on in the says Deborah Johnson, CEO of the , an industryy trade group.
Already, she says, “We are beginning to see some (hog leave the industry due to financial At three eastern NortnhCarolina operations, relief from the pressure will come from Chapter 11 or Chaptef 12 reorganization. Chapter 12 is a provision writteh into the federal bankruptcyt code in 1986 dealiny exclusively withfamily farms. Both Chapter 11 and Chaptee 12 allow a companyg breathing room to attempt a In theirreorganization filings, Bunting Swine Farms of Wilsohn listed assets of just under $1 milliojn and debts of $12.4 million; Perfect Pig of Newtonh Grove in Sampson County listed assetas of $9.
3 million and debts of $23 and of Enfield listed asseta and debts in the $1 million to $10 millionj range. All three are considered mid-level producing between 100,000 and 200,000 hogs a year. North Carolina farmers raise about 10 million hogs a year for Some farmersare independent, taking their product directlyy to the market. Other farmers operats under contract with one of the majorpork producers, such as Virginia-basedx , which in the past has had contracts with more than 1,00 0 North Carolina farms. Another prominent producer is , whichg has had deals with as many as 150 NortuhCarolina farms.
Recent developmentx at publicly traded Smithfield Foodsillustrate what’s ailing the The meat-producing giant, in a recentg U.S. Securities and Exchange Commission reported lossesof $112 million for the nine months ending Feb.1, 2009, explaining that its costs per hundred weight of hog had rise n from $49 to $62, largely due to highedr grain prices. The company attributes the rise in grain coststo “the United States’ ‘corn to ethanol’ Meanwhile, as costs were climbing, the Smithfield manager s say, the market was glutted because a record numbers of hogs were slaughterex in 2008 and into 2009.
Demand for pork at the grocery store has been flat inrecenyt months. New retail numbers will begin to tell the effects of theH1N1 scare. While a final determinatiobn has not been the blame for the flu outbreak is being laid to hog farmaby some. In response to marke conditions, Smithfield has been closing someproduction plants, including one in Elon near and shaving 1,800 employees companywide. “The whole industry is feelingb pressure,” says Dr. Todd See of Looking down the road, graih prices have started to moderatd in recentweeks and, Johnson says, the latest Northy Carolina herd is expected to be 3 percent smaller than last year’s.
Nationwide, the movement toward smalleer herds might be even more pronounced thanNorth Carolina’sa 3 percent, says Christine McCracken, an analyst with Cleveland Research Co. “Aq lot of these (hog producers) have been losing moneg for 18 months,” she “And that’s a long time.”