Corn's ties to volatile oil prices will keep operators chasing profit instead of making it
Los Angeles, CA (PRWEB) May 19, 2013
Following its 1598 debut in modern-day Canada, the Hog and Pig Farming industry has come a long way from providing the most popular meat of early settlers to becoming a struggling venture. The recession and outbreak of swine flu devastated hog farmers, with revenue plummeting 7.1% and 6.6% in 2008 and 2009, respectively. Recent volatility in oil prices has also hindered the industry's progress. Prices for corn, a key input into livestock feed, are linked to oil prices due to the crop's input into ethanol; thus, changes in oil prices dictate cost of feed. Mixed with strong competition from alternative sources of protein, these factors have limited industry growth, says IBISWorld industry analyst Agiimaa Kruchkin. Stemming from recent challenges, IBISWorld expects industry revenue to grow at a moderate annualized rate of 1.9% during the five years to 2013 to total $3.8 billion. In 2013, revenue is expected to drop 3.7% due to slimming pork consumption.
Skyrocketing feed costs and rising ethanol demand are hitting the industry hard. In addition, a severe drought decimated US crops, leading to even higher costs for feed. Coupled with waning demand for pork from downstream processors, high feed costs have slashed industry profit during the period, continues Kruchkin. Consequently, in 2012, industry leader Big Sky Farms was pushed into receivership. Concentration in the Hog and Pig Farming industry is low due to the significant number of family owned operations. However, concentration has been rising, with company numbers expected to decline over the five years to 2013. Lower profitability due to higher feed prices has accelerated consolidation in the industry. Declining farm numbers coupled with relatively large herd counts illustrate the industry's shift toward larger hog farms. Over time, competitive pressures usually force smaller farmers to close as the industry moves toward specialized, large-scale production. These larger businesses typically have lower costs due to economies of scale and are characterized by intensive breeding and feeding operations. IBISWorld expects industry concentration will continue to rise in the years to come.
This trend will likely be a positive turn for the industry because larger operators have access to high-tech machinery that reduces per-unit input costs. Still, the major players that function under such economies of scale account for only about one-tenth of total hog and pig operations, leaving the majority flailing in the face of input cost volatility and fluctuating demand. Corn's strong ties to oil and the volatility that can arise from such a link will continue to keep operators chasing profit instead of making it. Also, competition from other meat sources in light of perceived health issues will hinder pork's popularity. For more information, visit IBISWorld’s Hog and Pig Farming in Canada industry report page.
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IBISWorld industry Report Key Topics
Establishments in this industry primarily farm hogs and pigs in farrow-to-finish operations that include breeding, farrowing, weaning and raising feeder pigs or market-size hogs. The term pig usually refers to the domestic mammal when it is young or small, while hog is the name typically given to domesticated pigs that weigh more than 120 pounds. While hog feedlots are included in the industry, the transportation of the livestock is excluded.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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