When The Playing Field Isn't Level

Recently I participated in an Iowa "Town Meeting" teleconference. It was transmitted to about 800 pork producers gathered at 80 sites statewide. It was the first Iowa Communication Network interactive conference using fiber optic technology for agricultural purposes.

A panel presented information on many topics - the status of the industry, market forecasts, financial management, working with lenders, stress management, and cooperation among independent producers using networking groups. Some questions involved the lack of a level playing field in the pork industry. Farmers were concerned about mega-hog farm production, vertical integration, outside investors, environmental problems and packer advantages.

Pork took a sharp price drop early last summer and is just now starting to move away from rock bottom. For many farmers the selling price was below the cost of production. Some questions had an edge of frustration and anger. Small family farm producers blamed the rise on mega-hog farms for an oversupply of hogs and consequent price drop.

The economic advantages and disadvantages of farm size was discussed. John Lawrence, Iowa State University extension economist, reported that it takes the equivalent of one full-time worker for every 125 hogs raised. Even the larger operations have to staff their production facilities at that ratio to achieve pork efficiency.

Veteran Dave Farnum said family farmers have some advantages because they use family labor, home-grown feed and low cost facilities. Pork producers operating at this level have low environmental impact and are good for the local economy. Rapid acquisition of livestock, marketing clout, purchasing power and purchase of the "best" genetics are large producer advantages.

Panelists noted the importance of paying attention to consumer and packer requirements. Producers need a consistent, lean product with sufficient numbers to satisfy packer demands. Emphasis was placed on how the pork industry is becoming a quality-driven industry.

Moe Russell from Farm Credit Service suggested that farmers should figure out their break-even costs and present them to their lender. If their particular lender doesn’t appreciate break-evens it means they either aren’t interested, not knowledgeable, or are a balance sheet and collateral lender. If so, producers might be in for an unpleasant surprise in the future.

Russel quoted the president of General Electric’s formula for being competitive in any field:

• Face reality.
• Be candid with everyone.
• Don’t just do things right but do the right things.
• Change before you have to.
• If you don’t have a competitive advantage, don’t compete.
• Control your own destiny.

Allen Lash of Agro-Systems and statewide presenter at Iowa Pork College workshops, emphasized working capital and doing what it takes to be competitive - without worrying about the unfairness of the market. Lash said pork producers can be profitable, despite their size, if working capital is adequate to meet changing circumstances. His formula for success, "Get liquid with good working capital."

Lawrence made an interesting analogy. He contrasted Winter Olympic female athletes Bonnie Blair and Tonya Harding. Blair practiced hard, watched the competition and made sure she was better than anyone else. Harding’s strategy for winning was to "kneecap" the opposition. Lawrence felt attempts to legislate who can and can’t compete may backfire. Know your competition and beat them in the marketplace was his message.

Lash feels farmers with financial stress have five options. 1. Generate more profits. 2. Make liquid fixed assets. 3. Use gifts or inheritance. 4. Restructure current liabilities. 5. Negotiate with the lender for write downs or debt forgiveness. Managing for profitability in difficult times is the preferred choice.

This is how I feel about the fairness issue. If a farmer experiences a genuine threat to his business because of changing circumstances, then his thinking and energy should be directed to the adjustments he make in his (ITALS)own(ITALS) operation. Anger and blame become obstacles when people don’t address their real problem. The real issue is, "What are we going to do about this now?"

Social justice is best addressed by farmers who are not under financial pressure or by public policy interest groups, industry leaders, political advocates and lobbyists. They have time and resources and are relatively stress free to attend to structural problems in larger political and economic arenas.

The individual farmer may have valid concerns about the lack of a level playing field, but his immediate problem is for his business to continue despite poor market conditions. To dwell on things he can’t control may harm his attitude and distract his attention.

The real genius of farmers is their strong problem-solving orientation. If they turn their attention to the reality of their own particular situation - considering options and alternatives - they are fighting the right battle. Flexibility and attitude mean everything during economic difficulties. I can understand the anger and temptation to kneecap the opposition, but it can get in the way.

All the players are on the same field and there’s no referee blowing the whistle on the competition. What do you do? Do you take your beating and refer the matter to the competition committee? Or do you figure out how to beat this thing and stay in the game though the big guys are out there too? The first step is to face reality and meet the competition head on.