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Wednesday, November 9, 2011

David Stender
Swine Industry Update

This fall I've had the opportunity to attend a of couple swine conferences to hear about the latest issues impacting the swine industry. There is plenty happening in the swine industry these days.

Feed waste is an important issue when the price of feed is high. With high feed prices, a typical feeder will deliver about $12,000 worth of feed per year. Every one percent feed waste will cost the operation $120 per year. If a feeder lasts five years, then a 1% improvement in feed wastage will pay for a $600 investment in a more efficient feeder.

Producers are spending more time adjusting feeders to get that $600 return for every one percent improvement. Some producers report 10% less feed wastage with more intensive feeder adjustment. The other common practice used to improve feed conversion is to grind the feed finer. Every 100 microns finer grind saves 1.2% more feed.

Porcine respiratory reproductive syndrome (PRRS) is a consistent topic at swine production seminars. It is a disease that only impacts pigs and causes no human health concern.

A new study estimated the annual cost of the disease at $664 million. Researchers are actively developing new ideas to manage this disease and possibly eradicate PRRS.

Other conference topics included a report on the carbon footprint of swine production (there has been a carbon footprint calculator developed), the safety of using antibiotics in swine production, taking precautions with flu, the comparison of individual sow housing and pen housing systems, the effectiveness of euthanasia methods, and water quality's impact on pig performance.

The biggest challenge for pork producers, however, has been the recent financial roller coaster ride. Historically, feed input costs were stable and swine producers were able to develop a typical budget and cash flow.

For example, market hogs sold between January 2001 and January 2007 earned $12.57 profit per head. From February 2007 through December 2009, producers experienced staggering losses and financial instability. Swine producers lost $15.89 per head during this period of time.

There was a response to these significant financial losses. From January 2010 through June 2011, the market pork prices averaged $156.28 per head, up by $28.47/head. This increase came about because the previous two-year financial stress reduced the number of producers. However, because corn prices had averaged $4.44/bushel and increased the feed cost per head, the average profit only reached $7.57/head for this period.

Now the situation changed again. Ending corn stocks have been drawn down, leaving only pipeline supplies, a positive corn basis and a corn price of up to $7 per bushel. Pork producers made money when corn was $4.44/bushel and a pig sold for $156.28 per head.

Now we have $7/bushel corn and summer hogs selling for over $200/head. Retail pork prices are finally impacted as the average retail price for pork is close to $3.50/pound. Historically, pork prices have averaged closer to $3 per pound.

This coming year will be interesting. Pork producers need the high pork prices to cover the cost of production. Yet, will the consumer be able to purchase as much pork at these new higher price levels?

There are many issues in the swine industry that are actively being addressed. We are thankful that the swine industry in Iowa is responding to the challenges with new and innovative ideas.