Swine Industry Update for March 2009

Déjà vu
As I reflect back to February 2008 it seems like we are in the same place with the swine industry as we are today. The cost to produce a hog is down from a year ago but the fact remains that everyone raising hogs today is losing money. The number of phone calls I receive today is very similar to a year ago when many producers were under financial stress. Everyone is wondering, “When are we going to get in the black again?”

The swine industry on average has not been profitable since October of 2007 – which represents 17 months of losing money. Many producers are searching for a glimmer of hope. Will things be better soon? Only time will tell. My concern remains the same - the swine industry in the U.S. needs to reduce their sow numbers by at least 300,000 to get numbers more in control with demand. I will discuss this later in this column.

Empty finishing barns
A hole coming with pig numbers? It’s interesting to see a number of reports saying they are empty finishing barns in the Midwest. I would you to consider that it might not be less numbers but better pig performance. Last summer many producers pulled fat out of their diet and used a lower energy diet along with alternative feedstuffs that reduced average daily gain. Producers, since fall have went back to a higher energy diet that has increased average daily gain. Lets follow the numbers:

• Improve ADG by .05 on a system wean-to-finish by doing one of two things – selling a 9# heavier pig (180 days to mkt. x .05) or reducing your days to market by at least 5 days (9 lbs / 1.65ADG = 5.45 days)
• Lets say we reduced days to market in the industry by 3 days across the US – we have 60 million pigs on feed – 3 x 60 million = 180 million extra pig days divide that number by 180 days to market you need a million less pig spaces.
• The bottom line on this is for every one day you improve days-to-market by either increasing the sale weight of your pig (which we do not need) or by reducing the number of spaces needed by 300,000 spaces. I think there is some less production out there but I am also very concerned that we are improving productivity. This number concerns me which brings me up to my final point.

The US swine industry must reduce sow numbers
In July of 2008, I began communicating this message and I want to readdress this issue again. Though my message may not be popular, this is something I believe we must consider as an industry to be profitable again. The following are the key points I stressed for the industry to consider:

• The U.S. industry needs to reduce sow numbers by at least 5-10% a reduction of at least another 300,000 sows is needed
• Large systems must lead the way, with the top 30 producers publicly sharing their intentions
• A viable long-term model will emerge – most likely this will be a farrow-to-finish model

The swine industry must take action like the broiler and the dairy industry in order to turn profitable again. These two industries are cutting back and we need to follow their lead. The U.S. pork industry is the best in the world but it cannot sustain with the current economic model.