The past two years have been challenging for pig farmers, but 2025 brings reasons for optimism. With hedging strategies, profit margins of approximately $20 per pig have been achievable. Now is the time for producers to strategically reinvest these profits to ensure long-term success.
Key investment areas include:
- Addressing deferred facility maintenance
- Strengthening balance sheets
- Implementing operational improvements to enhance production performance
1. Address Deferred Maintenance
During recent financial hardships, many producers could only afford essential repairs, leading to accumulating maintenance issues. However, proactive reinvestment in facility upkeep is critical to long-term success.
- Why it matters: Deferred maintenance increases inefficiencies, repair costs and facility deterioration.
- Solution: Prioritize repairs for roofs, gates, feeders, slats and ventilation systems to extend facility lifespan and maintain operational efficiency.
- The bottom line: Investing in maintenance now prevents premature rebuilding costs and safeguards long-term profitability.
2. Strengthen Balance Sheets Through Debt Reduction
The financial strain of the recent loss cycle has weakened industry balance sheets. According to the Compeer Pork Producer Financial Index, the average equity-to-asset ratio stood at 60% in September 2022, with working capital just over $1,400 per sow. However, as we look at the net differences of 2024, prolonged losses have resulted in a roughly 10% decrease in equity and a $650 per sow decline in working capital.
- Why it matters: Rising interest rates (currently 3-4% higher than the post-2008 recession to COVID era low-rate environment) have doubled combined operating and term interest expenses to $5-$6 per pig.
- Solution: Strategically pay down debt to lower interest expenses and restore borrowing capacity.
- The bottom line: A healthier balance sheet provides greater financial stability and flexibility to withstand market fluctuations.
3. Enhance Operational Performance with Upgrades and Strategic Adjustments
To maximize 2025’s profit cycle, producers should focus on facility upgrades and biosecurity enhancements to improve production efficiency and herd health.
The impact of PRRS, particularly the 1-4-4 L1-C5 strain, has prompted many to reevaluate herd management strategies.
- Why it matters: Many 1990s and early 2000s sow facilities need reinvestment. Without upgrades, production performance and pig livability may decline, affecting profitability.
- Solution:
- Invest in facility improvements to extend the lifespan of existing structures or build new ones for better efficiency.
- If relocating sows from swine-dense regions isn’t feasible, upgrade filtration, back-draft protection and entry protocols to reduce disease risks.
- Improve grain handling, feed mills and truck washes to enhance efficiency and biosecurity beyond the swine facilities.
- The bottom line: Investing in the right upgrades will position farms for success in future profit cycles.
Building Resilience for the Future
Looking ahead, strategic reinvestment will be key to strengthening operations and preparing for future industry fluctuations. By addressing deferred maintenance, debt reduction and facility upgrades, pig farmers can build a more profitable and resilient business.
Market volatility remains a constant, making a disciplined hedging strategy essential for locking in future profits. Intentional financial decisions now—paying down debt, upgrading facilities and enhancing biosecurity—will shape a sustainable, competitive future.
Take Action Today
Position your farm for long-term success by focusing on risk management, operational efficiencies and financial health. Connect with Compeer Financial’s team of swine industry experts for insights and customized financing solutions.
