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National Hog Farmer Weekly Preview
January 19, 2010
 
In this issue:
  Costs Still Drive Supply and Demand
  80/20 Rule Applies to Raising Pigs
  Groups Urge EPA to Slow Down on E15
  Pork Exports’ Rise Best Results in 2009

MARKET PREVIEW
Costs Still Drive Supply and Demand
The economics of a cost increase are not terribly complicated. We all need to appreciate what higher costs are doing to all livestock and meat sectors.

Costs are the basis of supply. More specifically, a firm’s marginal cost (the additional cost of each additional unit of output) forms the firm’s supply function. Any rational manager will increase output to the point that the cost of adding one more unit of output is larger than the price that will be received for that unit. This assumes that marginal costs rise with output, a realistic assumption for most farms, I think, where crowding or strapped labor or some factor would cause efficiencies to fall and costs to rise at some point, and to keep rising if the manager tries to push more and more output through a given system.

But time is a big factor as well. In the short-run, hog farms can’t do much about output. We economists say the short run supply function is inelastic, meaning that output cannot be changed much in response to a different price. Dashed lines SSR and S’SR in Figure 1 are short-run supply functions. They indicate, for instance, that the industry’s total slaughter for next week (or even the next 26 weeks since the pigs are already on the ground or 40 weeks since the sows are already bred) cannot be changed by much in response to a price change.

Given time, however, producers can increase or decrease output. A few more sows can be bred to fill in for those that recycle. A few more can be bred and pigs cross fostered to maximize litter size in each crate. Additional labor can be added to raise pigs that otherwise might not make it to market weight. These kinds of changes would move the firm along one of the solid lines SLR and S’LR in Figure 1. Since time allows for changes to be made, the output change for a given price offer can be much larger. The long-run supply function is more elastic.

FULL ARTICLE

FINANCIAL PREVIEW
80/20 Rule Applies to Raising Pigs
This week we are taking a closer look at some common problems we have seen on hog farms. We have broken them down into four areas – 80% of the issues are related to people and 20% to other factors (nutrition, 10%; facilities, 5%, and genetics, 5%):

80% of the issues and challenges associated with raising pigs centers on the “people factor:”
    • January is a good time to calculate your employee turnover rate. Take the number of W-2’s you’ve printed and divide it by the number of full time employees. For example: 12 W-2’s printed divided by 6 full-time employees = 50% employee turnover rate (ETR). It is not uncommon to have an ETR over 50%. If the figure is uncommonly high, it is a good time to evaluate your employee management practices.

    • When you finalizing your year-end financial reports, calculate how many dollars you spent on training the farm employees. Divide the total dollars by the number of full-time employees. Most will find this number is less than $500/employee. When you’re looking at a total investment in the millions of dollars, certainly you can justify spending $2,000+ per employee for the most important part of the operation. It’s an expense that usually generates a good return on investment.

    • PQA Plus+ and TQA certification for all employees will soon be required by most packers. These are very good training sessions to help all employees understand that they are responsible for the pigs’ well-being and for the quality of pork leaving the farm.

    FULL ARTICLE

LEGISLATIVE PREVIEW
Groups Urge EPA to Slow Down on E15
Automakers, petroleum refiners, boat owners, gasoline marketers and others expressed concern that the Environmental Protection Agency (EPA) is ready to approve higher ethanol blends in gasoline without appropriate vetting of the scientific record. The groups’ letter to EPA asked the agency to base its decision on a “complete and sound scientific record and we urge the Department of Energy to help provide this science by spending all of the $15 million targeted for expanding and accelerating mid-level ethanol blends research in the 2010 appropriations bill. Moreover, EPA should reopen the E15 waiver comment period to allow public review of new test data prior to making a final decision on the waiver request.” The groups also urged EPA to base their decision on a complete understanding of the potential impacts that higher ethanol blends would have on all segments of the end-user market. Those signing the letter were: Alliance of Automobile Manufacturers, American Petroleum Institute, Association of International Automobile Manufacturers, Boat Owners Association of the United States, Engine Manufacturers Association, International Snowmobile Manufacturers, Motorcycle Industry Council, National Association of Convenience Stores, National Association of Truck Stop Operators, National Marine Manufacturers Association, National Petrochemical and Refiners Association, Outdoor Power Equipment Institute, Petroleum Marketers Association of America, and Society of Independent Gasoline Marketers of America.

FULL ARTICLE

NEWS FLASH
Pork Exports’ Rise Best Results in 2009
U.S. pork exports continued their rebound in November, reaching their highest levels of 2009, while beef exports also rose above year ago levels, according to the U.S. Meat Export Federation (USMEF).

For the month, total pork (muscle cuts plus variety meat) exports reached 373.8 million pounds, basically even with the volume for November during the record-breaking pace of 2008. The results for November marked the first time monthly pork exports have reached or exceeded 2008 levels since March 2009.

During the first 11 months of 2009, the United States exported 3.7 billion pounds of pork worth nearly $4 billion, down 10% in volume and 13% in value from 2008 statistics.

FULL ARTICLE

PORK INDUSTRY CALENDAR
Jan. 19-22, 2010: Banff Pork Seminar, Banff, Alberta, Canada; contact: http://www.banffpork.ca/prog.

Jan. 20-21, 2010: Minnesota Pork Congress, Minneapolis Convention Center, Minneapolis, MN; contact: (507) 345-8814, mnpork@mnpork.com or go to www.mnpork.com.



Jan. 22-23, 2010: Kentucky Pork Producers Association Annual Meeting, Holiday Inn University Plaza and Sloan Convention Center, Bowling Green, KY; contact: (270) 737-5665 or kypork@bbtel.com.



FULL ARTICLE
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 BLUEPRINT

BIOSECURITY SOLUTIONS
The news reports announcing the discovery of the H1N1 Flu Outbreak Virus on April 24, 2009 increased the urgency for proper biosecurity measures in hog operations. Producers continually face the challenge of managing the biosecurity of pigs, people, packages and pests as they redouble efforts to stave off costly swine diseases and retain their access to pork markets in this age of economic uncertainty. Click here for the complete Blueprint archive.

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 MAGAZINE HIGHLIGHTS

This Month's Focus: Making Solid Business Decisions
Later Weaning Bumps Sow Herd and Pig Performance
Increasing weaning age while reducing breeding herd inventory may help cut losses.
Sensitivity Analysis Projects Impact of Economic Variables on Pork Production Systems
Assessment tool helps prioritize investment and management plans. Sensitivity analysis in the context of this article does not refer to a personality.
Start Pigs Right to Boost Market Value
Iowa swine veterinarian’s program targets 95% full-value pigs. The path to top-notch postweaning pig growth performance begins in the breeding-gestation

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U.S. pork producers must be able to compete in foreign markets without restrictive tariffs or sanitary barriers to trade. NPPC’s mission of gaining and expanding access to markets through free trade agreements is paramount to the continued success of the U.S. pork industry — Click here to learn more.

 POSTERS

FREE SELECTION GUIDES AND MANAGEMENT POSTERS
National Hog Farmer offers 10 posters targeting key production areas, offering guidance in critical areas such as feet and leg soundness and reproduction traits soundness in replacement gilts. Others include pig anatomy, heat detection, sow condition, etc. All posters are in English. Select posters are translated to Spanish, Chinese and Japanese.

 SUBSCRIBER TOOLS

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