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

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Two culprits – overly large herds and risingv costs due to higher graijnprices – have been shrinking the bottom lines at many hog operationes in North Carolina, the nation’s seconx largest hog-producing state, behind only To those factors can be added the recent swine flu, or H1N1 flu, scare, the effects of which the industry is only starting to tallyt up. “A lot of people have just notrealized what’s been going on in the says Deborah Johnson, CEO of the , an industry tradre group. Already, she “We are beginning to see some (hog leave the industry due tofinancial hardship.
” At three easternb North Carolina operations, relievf from the pressure will come from Chapter 11 or Chapterr 12 reorganization. Chapter 12 is a provision written into the federal bankruptcy code in 1986 dealing exclusively withfamilgy farms. Both Chapter 11 and Chapter 12 allow a companyt breathing room to attempta reorganization. In theif reorganization filings, Bunting Swine Farms of Wilsonh listed assets of justunder $1 millionh and debts of $12.4 million; Perfectg Pig of Newton Grove in Sampsob County listed assets of $9.3 milliom and debts of $23 and of Enfield listed assets and debts in the $1 million to $10 million range.
All threr are considered mid-level operations, producing between 100,000 and 200,000p hogs a year. North Carolina farmers raise about 10 millio hogs a yearfor slaughter. Some farmerxs are independent, taking theird product directly tothe market. Other farmers operate under contract with one of the majorrpork producers, such as Virginia-based , whicnh in the past has had contracts with more than 1,000 North Carolina farms. Another prominent producert is , which has had deals with as many as 150 NortuCarolina farms. Recent developments at publicly tradedc Smithfield Foodsillustrate what’s ailing the industry. The meat-producing giant, in a recent U.S.
Securities and Exchange Commission reported lossesof $112 milliomn for the nine months endingv Feb.1, 2009, explaining that its costs per hundrede weight of hog had risen from $49 to $62, largely due to highe r grain prices. The company attributese the rise in grain coststo “the United ‘corn to ethanol’ policy.” Meanwhile, as costs were the Smithfield managers say, the market was gluttee because a record numberss of hogs were slaughtered in 2008 and into 2009.
Demanr for pork at the grocery store has been flat in recent New retail numbers will begin to tell the effects of the H1N1 While a final determination has notbeen made, the blame for the flu outbreak is being laid to hog farmz by some. In response to market conditions, Smithfieldx has been closing someproduction plants, including one in Elon near and shaving 1,800 employees “The whole industry is feeling pressure,” says Dr. Todd See of Lookinf down the road, grain prices have started to moderate in recentweeks and, Johnsob says, the latest North Carolinaa herd is expected to be 3 percent smalledr than last year’s.
Nationwide, the movement toward smaller herds mighft be even more pronounced thanNorth Carolina’sx 3 percent, says Christine McCracken, an analysr with Cleveland Research Co. “A lot of thesre (hog producers) have been losing moneyg for 18 months,” she says. “And that’as a long time.”