A26—Lancaster Farming, Saturday, May 22,1982
Contract hog network features incentive bonus
BY DICK ANGLESTEIN
LITITZ David H. Wenger, of
Latitz, has had a lot of experience
with raising contract hogs.
He’s been raising them under
various contract arrangements
ever since he came to the 80-acre
farm located just west of the
northern Lancaster County
borough more than a quarter
century ago.
But the present contract
arrangement he recently entered
with Delmarva Farms, Inc., of
Baltimore, Md., has three specific
features that he really likes.
Fust, all of the pigs he receives
are supposed to be Number 1
feeders and he has the option to
reject any he doesn’t like.
Second, the feeders come
directly from Delmarva facilities
and theu stress is limited to a few
hours of truck travel as compared
to a couple of days or more if they
came through an auction.
And third is the financial
arrangement which, in addition to
a basic guaranteed amount per
head, features a feed conversion
efficiency bonus. This bonus can
add significantly to the per head
payment he receives when the
finished hogs go to market.
“My previous contract included
a flat amount per pig and then a
percentage of profits, if there were
profits,” he explained.
“Now, the higher flat amount m
the contract with Delmarva, plus
the feed conversion bonus, is an
unproved arrangement.
“If I do a good job in raising the
pigs, it’s to their benefit and mine,
too.”
Under the contract, the incentive
bonus can add up to $2.00 per head,
depending on the final feed con-
Squeeze more pork per production
WASHINGTON, D.C. - Despite
concerns that productivity gams
may be leveling off in much of the
U.S. farm sector, hog producers
might produce significantly more
pork at essentially the same level
of inputs given the right
economic incentives
For instance, many could
decrease feed use by as much as 20
percent by simply improving
average feeding efficiency to
levels already attained by the
better producers, says Richard
Grom, chief of the animal products
brancy of USDA’s Economic
Research Service.
Pork productivity, m simple
terms, is the amount of meat
produced per unit of input
Grom outlines several areas
which offer hog growers and
researchers the potential for
smgificant productivity gams by
improving application of existing
technology and management
More Efficient Hog Feeding Boosts Profits and Productivity
Feed
Conversion
Ratio
3 5-1
Very Efficient
ffr +
4 4-1
A/erage
fHr +
5 0-1
Less Efficient
’Based on (arrow-to-fimsh operation
2 Based on February 1982 feed prices
version rate that’s achieved with a
batch of pigs.
The basic guarantee payment
per head is paid at a 4.0 feed
conversion rate - four pounds of
feed for every pound of gain.
Then, for every tenth-of-a-pound
improvement in the feed con
version rate below the 4 0 level,
there’s added a 20-cent per head
bonus.
Thus, up to a $2.00 per head
bonus can be earned if a feed
conversion rate of 3.0 or better is
achieved.
Wenger is waiting to see how the
bonus works out on his first batch
of pigs he’s raised for Delmarva.
Approximately half of the 845 pigs
in the initial batch have been
moved out and the others will go
within the next couple of weeks. He
just began the arrangement with
the Baltimore firm on Feb. 1.
“I like the direct shipment of the
feeder pigs from them, too,”
Wenger said.
“They seemed to gain so much
better and were not stressed as
much as other pigs I‘ve raised.
“I didn’t see them go backwards
at first; they just took right off.”
The feeders spend only about 5 to
8 hours on a truck as compared to a
couple of days of stress when they
move through regular auction
channels.
The Delmarva Farms, Inc.
network includes some 18 farms -
three facilities that are owned by
the corporation and 15 owner
operator farms on which the pigs
are finished under contract.
Ten of the contract farms, such
as that of Wenger, are loacated in
the York, Lancaster and Berks
counties area.
“We really like to work with the
practices. While some areas still
need research, many are now
available to producers for adop
tion.
For the time being, most
producers aren’t interested in
increasing productivity if it
requires borrowing money at
today’s high interest rates and
tight economic conditions In
March, farm prices were only
about $ll per hundredweight over
cash costs a small margin on
which to cover labor, general farm
overhead and other noncash ex
penses. Nevertheless, producers
may be more interested than ever
in ways to cut production costs
through better management
practices so long as more cash
outlays aren’t required.
According to Grom, better
feeding practices may be a prune
area for productivity gains,
without new investments in most
cases.
Total Feed Used to Produce
100 Lbs. Liveweight'
fit.
feed
%A
Feed
%7a
%/A
350 Lbs
Feed
Feed
fy/fr/h
440 Lbs
Feed
Feed
%/A,/
?///„
500 Lbs
%////,
'///Jit
Jay Wenger, 14, son of Mr. and Mrs. David which are finished on contract for Delmarva
H. Wenger, Lititz, helps in caring for hogs, Farms, Inc., of Baltimore.
farmers in this area because of the
good facilities they have and the
excellent way they take care of the
stock,” explained Bruce Lantz,
general operations manager for
Delmarva.
In Wenger’s initial batch of 845
pigs, he experienced a mortality of
just eight. He attributes the low
rate to the reduced stress and his
right to reject any pigs that he
wishes.
Wenger receives his feed from
Master Mix facilities at Camp Hill.
Delmarva has purchased a feed
The average feed conversion
ratio the amount of feed used to
produce a pound of pork is about
4.4 to 1. This means it takes 4.4
pounds of feed for each pound of
pork produced.
However, better producers are
achieving a 3.5 to 1 ratio. This is
about a 25-percent gap which could
be closed by most of today’s
producers, researchers note. How?
By better genetics and cross
breeding, improved disease
control, and better protection from
temperature extremes that cause
weight loss.
Genetic research has already
provided at least part of the an
swer to another productivity need:
Scientists have developed hogs
than can produce larger litters
more frequently, with higher live
birth rates. Although research is
continuing, many producers
haven’t yet looked into the new
strains already available.
Total Feed Cost per
100 Lbs. Liveweight 2
m 7.
fy/fz/'
mill m Maryland, which will
supply operators in that state and
Delaware.
The three facilities owned by
Delmarva include a farrow to
finish operation and two finishing
operations. The corporation has
been in operation for about the past
year and started with a 1500-sow
operation at Dorchester, Md.
The Delmarva network now
includes some 3500 sows overall
and markets 45,000 to 50,000 hogs a
year. The firm also has its own
'breeding stock, including a 150-sow
Improved litter performance
would allow hog farmers to
maintain smaller breeding herds
that would require less feed.
The number of pigs produced
can also be increased by im
mediate rebreeding to produce
more Utters per sow per year.
Many hog farmers wait longer
than necessary.
Still another potential savings in
breeding herd maintenance is for
producers to send cull sows to
market at lighter weights and not
waste feed.
Genetic research might yield
still other dividends by improving
boar characteristics. Boars
achieve slaughter weights at
earlier ages than sows, thus of
fering a major advantage
However, sexually mature boars
may have an undesirable taste.
Breeders can seek to develop a
boar which achieves sexual
maturity at a relatively late age,
but which retains a fast growth
rate.
A final area which Grom cites for
improvement is to breed larger
framed hogs for the heaviest
possible slaughter weight and still
achieve the U.S. No. 1 grade. 1
Heavier, larger hogs would
mcrease the yield of lean cuts by a
small amount, and would still
attain premium prices, if the U.S.
No. 1 grade could be maintained.
While most hog farmers can
benefit from better breeding and
management, some potential
$2l 26
$26 73
$3O 38
purbred Yorkshire herd.
Owners are Gerald Klein, of
Baltimore, and Robert Gibbs, of
Red Hook, N.J. Advisor is Dr.
Raymond T. Murphy, West Min
ster, Md.
In addition to the contract hog
operation, Wenger also feeds some
200 head of steers. Due to the
sizable hog manure and the limited
acres, he double crops, such as
barley followed by silage corn.
(Pobacco and alfalfa as cash
crops also fit into the cropping
schedule.
dollar
efficiencies are open only to larger
operators.
Large units those farrowing
about 2,500 to 5,000 or more hogs
have an economy of scale ad
vantage of about $7 per hundred
weight over small-scale producers
This doesn’t include the cost ad
vantage of large-volume inputs
purchases.
Large operations are usually
closed-confinement systems which
require a huge initial investment
but offer lower labor costs and
longrun savings. Currently, such
investments may need to be
forestalled until interest rates
drop.
However, such systems must
continuously operate near
capacity to spread the high
overhead costs, such as debt
servicing. Thus, large operators
can’t easily vary production ac
cording to market prices.
‘‘As more large systems
predominate,” Crora says, “the
change in structure may tend to
even out the hog cycle. ”
Small producers can achieve
some economies of scale by joining
with other farmers in cooperative
buying of inputs, and in
cooperative sales with grading and
sorting of hogs.
The bottom line, Crom notes, is
that the pork industry has con
siderable capacity to turn out
much more meat with little ad
ditional investment if the price
is right.
coMe *n yc»v auv*. r**ve ovsa/
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