Case 3 Bill Thurmond Pig Farm
The pig farm that has been doing well for years is now incurring losses with low prices at market. What needs to be done to keep cash flowing so that the farm can keep open until market prices get better? Situation:
* From 1995 – current 1998 expenses have gone down drastically giving them less overhead. * Generations of farming experience
* They are in a cooperative that pays them to farm.
* They have timber and real estate they can sell to get cash if necessary. * They are on high ground and with Hurricane Floyd coming September of 1999 this could be a big deal. * They have a good quantity of pigs ready for market
* Dwindling pig sales from 1995 – current 1998
* No cash on hand to cover any expenses
* Future expense increases because of environmental requirements * Increased competition from large corporate run pig farms and foreign pig farms that are lowering the price of meat at market By looking at the amount of feed purchased every year it looks as though the herd of pigs has been decreasing each year. If you divide the amount for feed by cost of food per pound per month ($42,440/.36(.03*12)) / 355 average weight = 332 pigs. That can’t be the total number of pigs but according to how much feed they are purchasing that is what it looks like. According to my calculations 28,169 pigs would need to be sold to breakeven in 1998. $300,000 expenses / .03 profit per pound of meat (.08-.05 Transportation costs) = number of pounds needed / 355 pounds average per pig = 28,169. That is over double the number of pigs sold in 1995 and I don’t know for sure but don’t think Thurmond Pig Farm has that many pigs. Looking at the Hog prices per pound received by farmers it looks as though prices were much better earlier in the year in May and June they were at their peak. Why wasn’t Thurmond Pig Farm selling their meat earlier in the year? It appears they are not selling...
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