HOW TO BEAT THE AGRIBUSINESS CYCLE AND WIN BIG

Hog raisers should know how to cope with the agribusiness cycle to stay profitable

WHY is it that some people make money in farming while others lose their pants?

THE GAVE UP – hat we tried to find out at the Agri-Kapihan one Saturday morning. An accountant who used to grow 50 pigs as a sideline in 1983 said he gave up his piggery because he figured out that he was losing as much as P5 per kilo of pork that he produced. The feeds were expensive an so were the other items such as medicines and labor. So why bother?

DIDN’T GIVE UP – Another gentleman at the forum disclosed that he was also new in piggery in 1983. He started his project just before the year with about 180 head. Today, he is very prosperous with about 700 breeders producing 14,000 piglets a year.

BAD YEARS – Our successful hog raiser explained that 1983 was really a bad year not only for agribusiness but also for other businesses. That was the year when Benigno Aquino Jr. was assassinated There was so much economic uncertainty that the cost of production spiralled. The banks charged high interest rates and were very strict in their collateral requirements that many could not borrow for their ventures.

PURCHASES ON CASH BASIS – The feed suppliers would demand cash for their products instead of the usual 30 to 60 days credit. The feed millers also suffered from financial problems because their ingredients like corn, fish meal and others had to be purchased on cash basis.

CAUTIOUS – Then, because of the uncertain business conditions, the consumers were also cautious in their purchases The demand for pork, on the other hand, was low. And so the hog producers could not demand a high price for pork although their production cost was high. It was a vicious cycle.

SIX-YEAR CYCLE – Our successful pigman at the Agri-Kapihan explained that there is usually a six-year cycle in the pig business. And every pig raiser should be aware of this so that during the depression year, he could minimize costs to survive the business slump.

It happens all the time, our friend said. In 1983 and 1984, the inefficient hog producers really had to stop production. The ones left were those who knew the business and had money (not borrowed money) to stock up on feeds and other inputs.

THOSE WHO PERSEVERED WON – With the fewer raisers left, meat production decreased but that was not to remain for long. Pork prices eventually fetched higher prices because of the low supply. And so those who were left in the business made more profit. As they realized more profit, they expanded their hog operations. Word spread around that there’s money in piggery and so new investors also entered the fray. When production reached more than what the market could absorb, pork prices would tumble down again.

MOST AFFECTED – As usual, when there is a glut in production and the prices nosedive. Those who are most adversely affected are those who borrowed a lot of money at a high interest rate. Those who are inefficient and don’t have regular marketing outlets also suffer. Usually, the victims are the small raisers who don’t have much capital to prop them up when the going is tough.

And the natural thinning out of the inefficient producers sets in again beginning from the bottom.

COUP DID IT –  The depressed period for the hog industry came once more in late 1989 and throughout the whole of 1990. That was largely triggered by the coup d’etat in December 1989 when people deferred Christmas celebration and decided not to spend unnecessarily on food.

Before the coup, the animal raisers had anticipated a lot of spending for the Christmas holidays so they increased their their animal population But alas, the coup came and they were left with their pigs and chickens with few buyers.

EFFICIENT RAISERS WIN– And so once again there were the big losers. Many gave up their agribusiness projects. But as usual, there were also efficient animal raisers who knew what to do during such adverse times. They know that there are such cycles in agribusiness and so they are always prepared for the worst. That’s their secret in surviving uncertain times.

pixel.pngH

Related Posts Plugin for WordPress, Blogger...

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.