Strategic financial management trumps biology in today's competitive pork production environment

Pork producers must be as comfortable in the banker's office as they are in the pig barn to stand the best opportunity for success in today's competitive pork production environment.

That was the message delivered by three experts on financial management approaches for the pork industry, in a session on managing pig debt at the Banff Pork Seminar. The three-day seminar, Jan. 17-19, attracts more than 800 pork producers, researchers, extension and education specialists, as well as agribusiness service and supply representatives.

"Don't allow yourself the luxury of looking only at biological end points," says Dr. Gary Dial of Greenleaf Agribusiness, LLC. "It is easy to be dazed and confused by financial information. But the understanding you have in terms of production is actually much more sophisticated than financial information generated by your farm. It's just a matter of expanding your focus to conquer financial data."

Learning the fundamentals of strong business plans and financial management approaches for today's pork market can help producers improve their success in re-negotiating debt with banks, says Claude Bilodeau of National Bank of Canada. It can also strengthen overall experiences working with lenders, partners and investors. Perhaps most important, it provides a foundation for identifying and attaining goals for long-term success.

"A strong business plan and approaches will help your business thrive during good times, prepare for poor times and helps keep your banker and investors confident throughout," says Bilodeau. "Even today with all the unfavourable events affecting producers' earnings, we remain confident that our best clients will overcome this situation and come back stronger."

Low periods in price cycles and other challenges underscore the importance of continually re-evaluating and updating plans and approaches to meet evolving needs, says Lori Lane of Farm Credit Canada.

"Back in 2004, the focus for producers was 'How do I fund the growth,'" says Lane. "Today, although the reasons may be varied, expansion in the form of increasing the scale of operations is not in the forefront of producers' minds. Rather, producers are placing more emphasis on how they can 'hold their own' at least through 2007."

Based on cross-country producer feedback gathered by Farm Credit Canada account managers, the general consensus is this core business objective can be achieved if producers can meet several specific goals. These include withstanding tightening margins, re-tooling or enhancing existing operations to find finishing space, stabilizing herd health and finding and retaining good employees.

Whatever the goals or considerations, it's essential producers communicate those clearly not only in business plans but directly through those plans to all lenders, investors and partners, says Dial. "This will increase confidence in your business plans and make your business more likely to achieve its long-term potential."

In the long run, operating smarter, not necessarily larger or more integrated is what will create the success stories in pork production, says Dial. More than ever, that means ramping-up sophistication in financial teamwork and strategy to match expertise in raising swine.

"If you think large integration automatically makes you a more cost competitive producer you're wrong," Dial told the mainly producer audience at the session. "There are small producers that are more competitive on a cost standpoint because they have the right planning, teamwork and systems in place for sound financial management to meet their business goals."

The Banff Pork Seminar, held annually since 1972, is one of the premier pork seminars in North America. The Seminar is coordinated by the Department of Agricultural, Food and Nutritional Sciences, University of Alberta, in cooperation with Alberta Pork, Alberta Agriculture and Food and other pork industry representatives from across Canada. Full program and proceedings of the 2007 Banff Pork Seminar are available on the Seminar Web site, www.banffpork.ca.

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