Corn's ties to volatile oil prices will keep operators chasing profit instead of making it.
New York, NY (PRWEB) May 01, 2014
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. According to IBISWorld Industry Analyst Antal Neville, “A swine flu outbreak devastated downstream demand in 2008 and 2009, leading up to the most recent five-year period.” Coming off this low, the industry has rebounded during the five years to 2014, with revenue growth in the double digits in 2010 and 2011. However, ballooning input prices have also contributed to this growth. Prices for corn and soybeans, key inputs into livestock feed, have risen due to their input into ethanol; thus, changes in fuel prices dictate cost of feed. Industry farmers have passed on some of these cost increases to downstream customers. Nevertheless, this growth has also been mixed with strong competition from alternative sources of protein. Stemming from recent challenges, IBISWorld expects industry revenue to grow an annualized 4.5% during the five years to 2014, to total $4.0 billion. In 2014, revenue is expected to drop 1.5% due to input price stabilization and 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. Consequently, in 2012, industry leader Big Sky Farms was pushed into receivership.
While concentration in the industry is low, the hog and pig farming landscape is shifting toward large, capital-intensive farms. “This trend is likely to positively impact the industry, as larger operators have access to high-tech machinery that reduces per-unit input costs,” says Neville. 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 midst 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. Given these conditions, IBISWorld forecasts industry revenue to grow at a slower pace in the next five years.
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 past five years. 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.
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 the Hog and Pig Farming 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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