DB-Lancaster Farming, Saturday, July 8, 1995 STATE OF THE SWINE INDUSTRY 10 OBSERVATIONS 1. Operations Are Getting Fewer And Larger The number of swine operations has dropped from 661,700 in 1975 to 208,780 in 1994. In 1988, only 3 percent of operations had 1,000 hogs or more, and they accounted for about 36 percent of the national inventory. By 1994, the number of operations with at least 1,000 hogs doubled, now accounting for 55 percent of the inventory. 2. Production Is Going Up, Price Is Going Down About a year ago, the National Pork Producers Council predicted a “mountain of meat” for 1995, which corresponds to the 1995 projections here. However, the price disaster in the fall of 1994 seemed to catch everyone off guard. If this production trend con tinues, low market prices may become a way of life. Slaughter Year (millions) 1990 85.1 1991 88.2 1992 94.9 1993 93.1 1994 95.6 1995* 97.0 • Projected. Grimes and Plain, 1995. 3. Producer/Packer Price Contracts Are Becoming A Reality Many of the major U.S. packers are engaged in price arrangements with producers: Farmland Foods Serious and open about contracting efforts. Monfort (Con Agra) Not dis cussed openly, but reportedly price varies with location and carcass quality. Hatfield Quality Meats Available to some producers depending on quality and numbers. Excel (Cargill) Some con tracting, volume uncertain. IBP—Ties to producers but not to price. 4. The Retail- To-Farm Price Spread Is Increasing The Morgan Research Group (Garnett, Kan.) has calculated var ious indexes relating to marketing trends. Using 198 S as the base year for comparison, they set the live hog demand index and the retail demand index at 100. Since that time, the retail demand index has fallen slightly to 95, while the live hog index has dropped to 85. This indicates consumers are willing to pay nearly, as much for pork, but live hog prices have not remained as strong. This phenomenon frus trated many producers this past fall who were selling hogs at $25/cwt while retail prices remained rela tively unchanged. 5. North Carolina Is A Force To Be Reckoned With North Carolina, as a state, now ranks number two in hog produc tion just behind lowa. In the table below, note that North Carolina’s inventory has more than doubled in just four years. Its inventory is half as large as that of lowa’s, but there are only one fourth as many producers. The state has probably letFthe nation in the adoption of new production practices, includ ing large-scale facilities, multiple site production, and the use of arti ficial insemination. Iowa: 14.2 million hogs in Mar ’95 (13.5 million in *9l) 29,000 producers Breeding herd inventory was down 18 percent in Dec. ’94, and dropped another 9 percent by Mar ’95 Price $/cwt 54.48 48.88 42.30 45.44 39.53 39-41 North Carolina: 7.2 million hogs in Mar ’95 (2.9 million in ’9l) 7,000 producers 82 percent of production contracted Cash receipts for hogs now roughly equals that of tobacco. 6. If IBP Locates A Plant In The Carolinas, Changes Will Be Felt lowa Beef Processors (IBP) has been reportedly considering the construction of new packing plant for processing hogs somewhere in the Southeast. The increased slaughter capacity it would bring to the region would hopefully boost the market price base for the entire East Coast. But there are producers who fear that other packers may not be able to compete, leading to consolida tion or even an eventual loss in kill capacity. 7. There Is Little Profit In $4O Hogs Using a hypothetical 1000-sow farrow to finish operation, com at $2.75/bushel and productivity at 18 pigs/sow/year, the current bot tom line with $4O hogs is about minus $7,500. Increase sow pro ductivity to 20 pigs/sow/year and the profit jumps to $79,000. Shave 25 cents off the price of com, and profit increases another $58,000. Add SS/cwt onto the price of hogs, and net income jumps by another $230,000 to $367,000. These numbers simply tell us that, in order to make money in the hog business, things must go right.! Minor changes in productivity, the cost of inputs, or price of hogs have an incredible influence on income. 8. The Industry Is Beating A Path To Integration Here are six of the top-ten hog producers and their ties to packing plants. National Rank Name No. Sows 1 Murphy’s 200,000 2 Carroll’s 110,000 3 Tyson 97,000 4 Premium Std Firms 96,800 6 Cargill 9. AU That Glitters Is Not Gold As fast as the industry seems to be expanding, and as immune as the “big” producers appear to be to price squeezes, there are signs that the armor is cracking: • Recently it was reported that Premium Standard Farm’s (PSF) plans for sow expansion 20,000 to 80,000 sows in Hereford, Texas are on hold. Plans to build a pack ing plant in the same area to com pliment the sow operation are also on the back burner. • The Hunter/Fitch Bill is being debated in the North Carolina legislature that would affect hog operations statewide. Provisions of the bill would institute permits, setbacks, inspections, and quarter ly inventory reports. • An April 1 rally in Putnam County, Mo. was recently staged RISA Announces Field Days (Continued from P«fl* 06) •September 12,10 a.m.-12 p.m. Managing Milkhouse Waste Water with Jet Pulse Irrigation, Lane and Judy Sollenberger Dairy, Fayetteville, Franklin County. For information: Carrie Clark or Lantz Soubier, (717) 264-3480 Fading Spring Environmental Services Inc. Field day will host speakers and demonstration of this equipment Lane, a fourth generation farmer on the farm, is PA DHIA Presi dent. The farm features 3 x/day milkings, 170 registered Holstein cows, and 130 head of replace ments. With limited manure stor age and proximity to streams, new ways to manage dilute milkhouse wastes is a concern. Irrigation instead of storage is being consid ered. A nutrient management plan is in place. Sponsored by Ridge & Valley Network, Falling Spring Environ mental Services Inc., PA Crop Management Association, Dairy Network Partnership, and PASA. •September 21, 10 a.m.-2 p.m. Considerations for Late Season Dairy Grazing, Titus Martin Farm and Curtis Knepper Farm near Fayetteville, Franklin County. For information: Titus Martin, (717) 352-3740 or PASA. These two dairy operations will host pasture walks and speakers to discuss the nuts and bolts of plan ning for this fall and next spring’s grazing. Features Knepper’s 65 cow Holstein/Guemsey herd in their first year as graziers and Mar- against PSF’s plans for construc tion of swine facilities. PSF claimed that a Missouri township passed zoning ordinances after sites were procured, and the com pany was asking the court for near ly $8 million in damages. PSF later dropped the request after the intervention of Jesse Jackson. 10. Anything That Can Go Wrong Usually Does The major problem in the hog industry has been the low market price. Not far behind is a swelling concern for the environment Pro- Packer Connection Owns 3% of Smithfield Packing Owns 13% of Smithfield Packing Owns a nackine slant Owns a picking plant, building another? Owna Excel Smithfield Owns two packing plants 77,000 70,500 ducers can handle nutrients safely and effectively, but because the pig retains less than half of what we teed him, there are a lot of nutrients to handle. This issue is solvable, within certain con straints, not the least of which is manure volume. Bel there are few solutions to the odor problem. The best technology so far is maximiz ing distance from the farm to the neighbor. If there were (as so many companies claim) a material avail able to render manure nearly odor less, everyone would be using it But there isn’t and the potential for environmental problems increases with the siz£ of the operation. The demand equation is ever changing. Competition from poul try continues to mount in the form of more pounds and more creative products. So far, pork has taken tin’s 90 cow Holstein herd in their third full year. Farmers will share ideas on how to get started in graz ing, and equipment, nutritional programs and information that they have found useful and eco nomical. Lunch will be provided. Sponsored by Ridge and Valley Network, Franklin County Gra ziers, Dairy Network Partnership, and PASA •September 23,1 p.m.-4:30p.m. Community Composting Field Day, Barbara and Kerry Sullivan. Kimberton CSA, David Griffith, Seven Stars Dairy, Kimberton Waldorf School, Kimberton, Chester County. For information: Cary Oshins (610) 683-1415. Four different composting tech nologies. all involving community waste resources, will be high lighted. These composting sys tems will be relevant for consum ers, farmers, students, and munici pal leaders. The Sullivans operate one of the oldest community sup ported agriculture farms in the U.S. using biodynamic methods. They compost wastes generated from their vegetable and fruit oper ation. Seven Stars, a biodynamic/ organic dairy, is composting its dairy manures. The Waldorf school composts its lunch food wastes. Municipal leaves from Phoenixville are composted and utilized on the farming operations. The PAWS system (passively aer ated windrow) of composting will be featured. Sponsored by RISA and the Biodynamic Association. minimal hits from the drug residue/hormone debate. Will that change if and when PST u approved? As if there weren’t enough challenges already, enter the Porcine Reproductive and Respiratory Syndrome virus. This new virus is taking its toll across the nation (including Pennsylvania a) in the form of reduced sow pro ductivity and major respiratory problems in the growing pig. Con trol measures continue to evolve, but an effective solution has not yet been developed. Summary Changes in the swine industry are inevitable. Depressed prices over the past eight months have created negative cash flows for even the best of producers. Many have rushed to establish ties with packers and the situation has hastened the trend toward total vertical integration. In Pennsylvania, many good producers have been forced to liq uidate. Source* Anon. 1995. From the powerhouie to the packinghouse. Successful Farming, March pp. 16-20. Anon. 1995. Hogs spotlighted in North Carolina legislature. Pork'9s. June. pp.SS, 87. 89. Fleming, Bill. 1995. Packer contracu grow as producers seek security. Nations! Hog Fanner. May IS. pp. 24-30. Grimes, Glenn and Ron Plain. 1995. Summer price slippage expected. Nations! Hog Fanner. April IS. p. 40. Matbery, Steve. 1995. Mega-poric critics score publicity coup against PSF. Feed stuffs, Apr 10. pp. 3,7. Matbery, Steve. 1995. PSF delay tied to hog price. Feedstuff*, May IS. p. 18. McMahan, Karen. 1995. The pork pow ers. lowa and North Carolina. National Hog Fanner. May 15. p. 14. Morgan, Tom. 1995. State of the pork industry. Hogs Today. March, pp. 14-IS. Smith, Rod. 1995. Consolidation in pork sector far from smooth, but continuing Feedstuff*. April 24. pp. 13, 70. •October 26,10 a.m.-2 p.m. Using Small Grains/Brassicas to Extend the Grazing Season. Nevin and Audrey Mast Dairy Farm, Oley, Berks County. For informa tion: Jonda Crosby (610) 378-1135. The Mast Farm is a dairy crop farm of SO cows and 120 acres, using minimum chemicals in the crop production system. About SO acres is used for intensive grazing. The field day will look at use of small grains and brassicas as a strategy for extending the grazing season. This trial will provide gra ziers with an opportunity to evalu ate acceptance, palatability, growth and preference of small grain and brassica species for Oct./Nov. grazing. Presentation by Penn State dairy specialists. Refreshments provided. There will be a charge for lunch. Sponsored by RISA. •Coming in September or October Environmentally Sound Milk House Waste Water Management, Leonard and David Crooke, Crooked Acres Dairy, New Hope, Bucks County. For information: Jim Bamui. (215) 322-0200. Field day will look at low-cost technology to utilize milkhouse waste water to irrigate pasture and divert from stream. System fea tures automatic distribution cycle, no pumping or energy costs, ter raced diversion. Pasture will be harvested for bedding and possibly feed. Sponsored by RISA.
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