Facing Change in Agriculture
Farm Business Management Update, June/July 2004
By Tom Stanley
Over the past 20 years, each region of Virginia can point to some particular change that has dramatically altered the size and make-up of its agricultural sector. The purpose of this article is to remind us of some fundamental points that farm owners and operators need to keep in mind when market forces suddenly change for the worse.
Southwest and Central Virginia have seen farms impacted by changes in the tobacco industry. Southside Virginia farms have seen drastic changes in how they do business brought about by vertically integrated swine and poultry industries and, more recently, changes to the peanut program. In Northern Virginia, it has been the tremendous pressure of growth from major metropolitan areas. Now, it appears the Shenandoah Valley is going to have its turn.
On April 23, 2004, Pilgrims Pride Incorporated announced its intention to sell or close the Hinton, Virginia turkey complex. At this writing, the hope is still that the Hinton turkey complex may be purchased and kept open under new management.
The complex employs 1,300 people and encompasses the processing plant in Hinton, the feed mill on the northern end of Harrisonburg, and two company owned breeding/hatchery operations. In addition, the complex is supported by some 165 independent contract growers who are an important share of the Shenandoah Valley's family farms. Approximately 75 of these farms are in Rockingham, 42 in Augusta, 16 in Shenandoah, 12 in Highland, 8 in Page, 5 in Rockbridge (please note that these are approximate numbers and are meant only to reflect the relative impact on different localities). The rest of the farms are in the Virginia counties of Warren, Green, Madison, Orange, Louisa, and also in West Virginia.
It is difficult to understate the direct impacts and underlying implications of this event for the Shenandoah Valley. Jim Pease, extension economist in the Department of Agricultural and Applied Economics, estimates that direct economic losses to the region will total at least $200 million. Wider impacts will be seen on Valley farms. For the past 40 years, the Shenandoah Valley has been a haven for small (less than 150 acres) family farms. These small farms have remained economically viable thanks largely to the presence of the poultry industry in the Shenandoah Valley. Vertically integrated poultry production in the Shenandoah Valley got its start with locally-owned companies that were only recently acquired by larger agri-business conglomerates. Pilgrims Pride is a Texas based firm that purchased the local Wampler-Longacre-Rockingham, Inc. in 2000. Cargill purchased locally owned Rocco, Inc. in the same year. The Valley is also home for divisions of Tyson, Inc. and Perdue Farms, Inc.
Pilgrims Pride plans to keep its broiler chicken complex in the Shenandoah Valley operational. The Cargill Turkey complex, Georges broiler chickens (a division of Cargill), Tyson chickens, and Perdue Farms have all stated their intention to continue operations as normal.
In order for Pilgrims Pride to schedule an October 1, 2004 shut-down, the company began slowing production in May. Many of the Pilgrims Pride turkey growers have seen their last flock. The company's last poults were placed around May 24.
For many of the 165 affected Pilgrims Pride Turkey growers, their poultry houses are their primary source of income. The following list would be a good starting place for any farmer facing sudden and dramatic changes to his/her farm.
1) Avoid quick decisions. When it comes to farm financial matters, quick decisions at a time of market crisis rarely pay-off. An old saying goes "Chance favors the prepared mind." If your farm financial records are kept in order and the management team for your operation is continually assessing the farm's financial position, only then is it likely that your farm is in a position to take advantage of opportunities that demand a quick decision.
2) Be cautious when considering alternative farm or business enterprises. If resources are limited, a difficult situation can be made worse by committing all the reserves to a new enterprise. By definition, most alternative enterprises require new investment and time to learn about a new product or business. Plan carefully and work with a team involving your family and trusted advisors.
3) Have complete, up-to-date financial information. Complete and timely information will allow you to make an informed decision about alternatives. This information will also help prove to creditors that you are working in good faith to maintain or achieve a sound financial position.
4) Do not hesitate to seek help. Spiritual and emotional support can come in many different forms and can be the best kind of help in difficult circumstances.
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