Big Sky Disaster – Redux

Three years ago Big Sky Farms of Saskatchewan went into receivership.  The unsecured creditors got 10 cents on the dollar when the dust settled.  Lots of independent businesses suffered from the failure.  After the haircut of the creditors Big Sky re – organized (in concept). Now three years later, Big Sky is in receivership and Ernst and Young the receiver is trying to sell.  Big Sky 42,000 sows approximately – secured debt of about $69 million, unsecured debt of about $11 million.  The total debt is just over $80 million.  That is lots of debt.  Recently in Saskatchewan a 2400 sow unit and 8,000 head nursery was listed with a big ad for $700,000 or about $292 a sow including nursery.  The farm was built at the same time of most of Big Sky’s facilities.  Hopefully for Big Sky’s creditors they get more than $292 a sow for 42,000 sows or about $12 million.  Ouch!  With $80 million debt –a big difference with pig inventory value dropping daily.

Pork Powerhouses – Successful Farming Magazine

            For a number of years Successful Farming has listed what they termed Pork Powerhouses.  We are always being asked by readers why don’t the big guys get hurt in the hog cycle.  Below we show the listings for 1994, 2006, 2011.
RANK 1994 SOWS 2006 SOWS 2011 SOWS  
1 Murphy family farm 18,000 Smithfield Foods 1,200,115 Smithfield Foods 837,951  
2 Caroll Foods 110,000 Triumph 399,800 Triumph 371,000  
3 Premium Standard 96,800 Seaboard 213,600 Seaboard 213,600  
4 Tyson Foods 95,000 Iowa Select 150,000 The Maschoffs 192,000  
5 Cargill 77,000 Prestage Farms 140,000 Prestage Farms 165,000  
6 Prestage Farms 74,000 Pipestone 130,000 Iowa Select 160,000  
7 Smithfield Foods 65,000 The Maschoffs 116,000 Pipestone 140,000  
8 Dekalb Swine 64,973 Cargill 87,000 Cargill 123,431  
9 National Farms 34,000 Maxwell Foods 76,000 The Carthage System 92,000  
10 Goldsboro 30,000 AMVC Management 75,000 AMVC 82,000  
11 Sand Systems 27,150 Tyson 70,000 Maxwell Foods 69,000  
12 Continental Grain 20,000 Progressive 55,200 Hormel 54,000  
13 Louis Dreyfus 20,000 Hormel 51,000 Tyson 52,000  
14 Seaboard 20,000 NEB Pork Partners 45,000 Progressive 50,000  
15 Hastings Pork 18,000 Wakefield 41,000 Hatfield 45,900  
16 Clougherty Packing 17,600 Hadfield 36,100 Wakefield 42,900  
17 Gold Kist 16,500 Whitestone 35,000 Texas Farm 42,500  
18 Farmland 16,000 Texas Farm 33,500 Holden Farms 40,000  
19 Neuhoff 14,000 Holden Farms 32,000 Tri – Oak 35,000  
20 Swine Graphics 13,500 Coharie 31,000

Swartz Farms /             Wilke Farms

30,000  
When we look at the list of 20 from 1994 we count 12 entries that do not exist independently today or are in business.  We count 3 of 20 in the 2006 list in the same boat.  The bottom line is size is not a guarantee.  Big means you can lose money fast and furious just like everyone else.

            1998 was a watershed year in the swine business.  Many have compared this year to 1998 when financial losses were huge.  How the dust settles when this gets corrected is anyone’s guess.  Big Sky 42,000 sows, Puratone Corp 28,000 sows will not be the only big groups hurt in North America this year.

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This post was written by Genesus