December, 1998 . Volume 21, Number 11 
NCSU Extension Swine Husbandry
December, 1998 . Volume 21, Number 11
1998 is a year of financial losses for the United States swine
industry. North Carolina swine producers have suffered greater
losses than many due to the lack of packing capacity on the east
coast and the resulting exports of very low priced feeder pigs
and weaned pigs from the state.
Figure 1 illustrates
the farm value, the wholesale (carcass cut-out) value, and retail
value of pork over the last few years. 1998 is characterized by
very large wholesale to retail margins, very low farm value, and
farm to wholesale (packer) margins that have widened noticeably
since June. Demand for pork is apparently very strong as most
of the 9% increase in pork supply in 1998 is being consumed domestically
with little change in retail pork price and with very large supplies
of chicken and beef.
Export volume is up 40% through May while the value of pork exports
is up 15% and average price is down 15% (USDA). The largest percentage
increases in exports are observed in low valued products being
sold to Mexico and Russia.
Figure 2 illustrates
the Iowa Southern Minnesota hog price and the benchmark "breakeven"
cost of production for a North central farrow to finish farm (USDA).
"Breakeven" costs are cash costs and exclude capitol
replacement costs (depreciation) and the value of owner's labor.
Hog prices have been below break even cost since December, 1997
and are predicted to remain below costs through April or May,
1999 or longer. As of October 21, 1998, the futures market offers
no hog prices above $55 per 100 lbs. of carcass ($40/cwt. live
hog) through April, 2000. Lower grain prices have reduced the
breakeven costs low through spring, 1999.
A severe shortage of packing capacity exists on the east coast.
North Carolina produced a pig crop of 18.1 million head in 1997
and slaughtered 9.3 million hogs (USDA). North Carolina, South
Carolina, Georgia, and Virginia produced 20.6 million pigs and
slaughtered an estimated 14.5 million head in 1997 (USDA). Allowing
for breeding herd mortality and pre-market mortality of 7% to
10% of the pig crop, 7 to 7.5 million pigs were exported from
North Carolina in 1997. Checkoff data shows 5 million slaughter
hogs being exported from North Carolina in 1997. State veterinarian's
data shows 2.1 million weaned pigs and feeder pigs leaving the
state last year. Similarly, allowing for 7% to 10% mortality,
NC, SC, GA, and VA exported 4 to 4.66 million pigs in 1997. The
North Carolina pig crop is estimated at 19.1 million pigs in 1998;
an increase of 1 million pigs from 1997. Approximately 4.5 million
hogs per year are required to supply a plant processing 16,000
head per day.
Consequences of inadequate packing capacity may include reduced
local prices for market hogs and increased dependence on sales
of feeder pigs and weaned pigs. Preliminary analysis of hog price
data and anecdotal evidence from a wide array of hog producers
indicates that east coast prices may be 4% to 5% below prices
paid for identical hogs in Iowa Southern Minnesota region. Exact
differences are difficult to measure without price data from individual
packers across the country over some period of time. Price differences
may arise from the standard yield coefficient in pricing formulas,
from the "zero discount" range of backfat depth in the
pricing grid, and from differences in the premiums and discounts
for specific combinations of backfat and carcass weight in the
grid. Some examples follow.
Conclusion
1998 is a very difficult year for all swine producers
in North Carolina. Many of the most skilled independent swine
farmers in the state have liquidated their herds or switched to
contract production. Preliminary data suggest that the cumulative
effect of lower prices paid for hogs on the east coast region
may have exacerbated losses being incurred by swine producers
across the country and contributed to the failure of otherwise
sound swine enterprises. Lack of packing capacity and resulting
lack of competition in the packing sector can cause lower prices.
In my opinion, this situation is directly attributable to policies
and political actions taken in North Carolina over the past few
years. The long-run viability of many east coast swine farms may
depend on added packing capacity. Current conditions are accelerating
consolidation in the region.
Kelly Zering
The most common way for new biological contaminants to enter production
units is through new breeding stock. No unit can be a totally
closed system i.e., no germplasm introduction. Germplasm can be
introduced via live animals, artificial insemination, or embryo
transfer. The risk with each decreases in the order listed.
A successful live animal introduction program will focus on age
of the animals at entry, quarantine, and acclimatization. Because
of problems associated with Porcine Reproductive and Respiratory
Syndrome virus (PRRSV), introduction of new animals has recently
received greater attention by veterinarians and producers.
Age at entry is dependent on the health status of incoming animals
as compared to the health status of the recipient herd. Some veterinarians
are recommending entry as early weaned pigs. This decreases the
likelihood of introducing new disease and allows ample time for
the pigs to become acclimated to the recipient herd diseases.
Farms with isolation facilities have tended toward more traditional
age at entry (60 days prior to breeding). The first thirty days
of the holding period, the animals are observed and tested for
potential pathogens which the new stock may be bringing from the
donor farm. The last thirty days are used as an acclimatization
period in which the incoming animals are exposed to cull sows.
This allows incoming animals to an opportunity build immunity
against recipient herd diseases. A successful isolation/acclimatization
program does not allow disease to get from the isolation unit
to the recipient herd. Separate boots and coveralls should be
used at the isolation barn. Isolation/acclimatization units should
be operated on an all in / all out basis.
Adequate space is critical to any successful acclimatization program. Developing
gilts within the herd requires space which is normally not available
in older units. Many farms which have adopted artificial insemination
are now using space allocated for boars as space for additional
gilt development. Breeding barn managers should avoid the temptation
to breed gilts before they have completed the designated development
period.
The sources of incoming breeding stock should be limited. The health
status of the donor herd should be scrutinized and compared closely
with that of the recipient herd. Herds should match as closely
as possible in health status. Monitor health status of incoming
breeding stock as recommended by your veterinarian, paying particular
attention to serologic status for diseases such as Pseudorabies,
Brucellosis, PRRSV, and TGE. Administer vaccines and strategic
medications as indicated by the recipient herd. Limit the use
of antibiotics during the isolation/acclimatization period so
as not to mask potential pathogens. Develop a close and cooperative
working relationship with seedstock suppliers.
Semen is another potential source of pathogens. It is will documented
that PRRSV can be transmitted in semen as can Pseudorabies. Recipient
farm managers, along with their veterinarians should know the
isolation/acclimatization procedures of the boar studs from which
they receive semen. The procedures for boar studs should be as
strict as those for any production unit.
David E. Reeves, DVM (Adapted by Todd See)
Why are the Risk Management Seminars Important?
As a pork producer in a rapidly changing industry, you are increasingly
challenged by all phases of production. Gone are the days when
price risk protection was a sufficient risk management strategy.
New risks are emerging. These range from production issues such
as network and contract arrangements to pork quality and food
safety issues. As these new issues emerge, they represent not
only challenges that must be addressed but opportunities to enable
producers to remain economically competitive.
These new risk factors must be addressed, mitigated and/or transferred.
Yet, you cannot overlook the traditional risk management tools
of hedging, options and insurance.
Why You Should Attend
Risk Management in Pork Production is designed as a three-part
seminar series. Each seminar will address specific areas of risk
in pork production and provide tools to address these risks. By
attending, producers will receive take-home material and tools
that will provide them with the opportunity to assess and manage
risk in their operations. Each of the presenters is recognized
not only for his risk management skills, but also as a dynamic
and entertaining speaker.
Kinston Seminar
Part I of this seminar series will be presented at the Hampton
Inn, 1382 Hwy. 258 South, Kinston, NC 28501 on December 17, 1998.
Registration for this seminar is $25.00. Sponsored by the National
Pork Producers Council in cooperation with the National Pork Board,
this series should provide much valuable information. Parts II
and III are scheduled for the spring and fall of 1999. For further
information contact your local agricultural extension agent or
Todd See at 919-515-8797.
Todd See
