Mark Greenwood is vice president of AgriBusiness Capital at AgStar Financial Services in Mankato, Minn. That means he has spent much of the last two years trying to help pork producers to find profits in the company's service area of eastern Minnesota and northwest Wisconsin.
Greenwood's perspective is that of a player in the middle of the field — one of the largest, with $1.4 billion lent out to farmers raising swine. He is impatient with the proclamations of Wall Street investors and others who seem interested in seeing more pork producers go out of business. That's just not how it works, he says.
"From a lender's perspective, the last thing we want to do is put anybody out of business," Greenwood says. "My job is to make sure the clients can somehow stay in business and be successful."
Greenwood talked with Meatingplace about the hog industry and its future.
Q: Are you comfortable with the way the hog production industry is rationalizing in order to bring supply into balance with demand? Is herd liquidation proceeding as you expect?
A: I think investors think the lenders should just foreclose on people and get rid of the sows overnight. Even when a producer is under financial stress, you don't wake up one day and say, 'I'm going to foreclose on this guy.' If you're looking for the lenders to fix your supply problem, that's the wrong answer. The industry has to fix the supply problem.
From our perspective … a more orderly liquidation is in order to maximize profits for the client and preserve some equity, and it's also best for the lender. You have better potential for recapturing some losses.
Q: What percentage of producers do you think will come out of this with an ongoing, viable business?
A: The interesting part is that we've see large production systems go bankrupt, and small production systems with the same issues. I don't think size matters in terms of success. You have to figure out how to do it better.
I think we'll have 3-to-5 percent fewer production systems from where we are right now; 10 percent fewer than we had two years ago.
Through all this … you haven't seen anybody acquire anybody, which is fascinating. I don't know why. In the last two years, people have gone out of business but no one took those systems over. I find that very odd.
Q: You have indicated [in your online analyses] that March 2010 will be a key month. Why March? How much longer before the industry returns to a "new normal"?
A: In March and April, once we get through the Lenten season and Easter, if hog prices are going to rebound that's normally when we see it.
Read the full interview.