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High feed costs push Big Sky into receivership

Canada’s second-biggest hog producer, Big Sky Farms, has entered receivership as the North American hog industry struggles under the bruising costs of animal feed.

Big Sky Farms, based at Humboldt, Sask., produces roughly one million pigs annually and accounts for 40 per cent of Saskatchewan’s total hog production.

Under receivership, an outside party controls a company until it can restructure its debt or be sold, said Neil Ketilson, general manager of Sask Pork, an industry group run by hog farmers.

Ketilson said he had spoken with Big Sky CEO Casey Smit on Monday, and the company would operate for now with no plans to lay off staff or liquidate its pig inventory. He said the receiver would ensure that there was money to feed the pigs.

A severe drought in the U.S. has decimated crops, which has led to higher costs for feed grains.

Smit could not be reached for comment. In an interview with the Manitoba Farm Journal, however, he was quoted at saying that because of the drought driving up feed costs, Big Sky was losing C$40 to C$50 on every hog it sends to market.

"It really leaves the company with very few options," he said.

Corn, barley and wheat prices are leading many North American hog farmers to liquidate their herds and send more pigs to slaughter, resulting in lower U.S. hog prices, Ketilson said.

"It’s all about the drought in the U.S.," he said. "If it hadn’t been for that, I think the guys would have been just fine."

If Big Sky, established in 1995, were to liquidate its herd, the broader western Canadian hog industry would be hit hard, including feed mills, truckers and hog processors.

Big Sky is one of the suppliers for packing plants owned by Maple Leaf Foods and Olymel. Canada is the world’s third-largest pork exporter.

Big Sky, which bills itself as "one of the pioneers of the multi-site production model now in use throughout North America," filed for bankruptcy protection in 2009 after a similar run-up in feed costs and restructured its business.

— Rod Nickel writes for Reuters from Winnipeg.

Related story:
Big Sky creditors vote to take proposed deal, Feb. 10, 2010


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