It seems almost impossible, with the glut of pigs expected to reach market weight this month, but there's a good chance some grow-out barns have sat empty this spring. And, there were reports of concrete being poured for finishing barns without a ready supply of pigs.
Nowhere were these situations more apparent than in Iowa, say industry observers. The demand for feeder pigs continues to grow. Grain producers, trying to make up for depressed crop prices, have put up finishing barns to squeeze more revenue out of their land base. A slew of sow herds have been hard-hit by PRRS (porcine reproductive and respiratory syndrome), forcing producers to tap other sources to fill pig spaces.
Meanwhile, the sow exodus continues in Iowa. Industry analysts like Randy Geyerman of the management firm Pork Pro Associates in Cherokee, IA, say it intensified a couple of years ago when producers liquidated herds because they felt they couldn't compete.
Others are selling off sows now because they are tired of dealing with reproductive problems fueled by PRRS. Still others can't hire adequate help, or are tired of the grind of breeding and farrowing and are switching to just feeding out pigs, reports veterinarian Duane Seehusen of Sheldon, IA.
Scott Tapper has run a 350-sow, farrow-to-finish operation near Webster City, IA, for 20 years. It's a modified, two-site operation — one site with gestation-breeding-farrowing, and the other with nursery-finishing facilities and attached gilt pool area.
That's expected to end when he forges a long-term contract to buy Canadian pigs.
There are two main reasons he's considering the change. First, he's had employee labor issues. “I went through four farrowing house guys in six months and couldn't hire the caliber of people that I wanted.
“The problem with a 350-sow farm is that you can't pay what you need to in order to get several good employees. You can afford one good person when you really need two for this size operation.”
Tapper, vice president of resources for the Iowa Pork Producers Association, says the second reason is PRRS in Iowa. “Everybody you talk to here in hog-dense Hamilton County has got PRRS infections in their operations,” he declares.
“Pig density has really affected herd health in central Iowa,” he continues. In the past, his herd has achieved 24 pigs/sow/year. PRRS has dropped farrowing rates as low as 50% and production down to 17 pigs/sow/year.
Tapper has been buying segregated early weaning (SEW) gilts and growing them out. Herd replacements were selected from those groups at finishing weights and placed in the gilt pool for acclimation. But PRRS has hit hogs at 140-150 lb., circumventing his program.
“At almost 45 years of age, I've decided I don't want to invest a couple hundred-thousand dollars to do a total depopulation-repopulation and build a gilt grow-out barn,” he observes.
Tapper's plan is to convert farrowing and breeding barns to nursery space and use the existing nursery-finishing site to feed out Canadian pigs. He decided he has the best chance of securing PRRS-free pigs in Canada.
Other pluses of the prospective deal include his ability to produce cheap grain and a land base of almost 1,000 acres to apply manure.
Paul Cook and his father-in-law own a 750-sow, farrow-to-finish operation in Hubbard, IA.
The operation had grown to over 1,000 sows, all in outside lots except for farrowing, he recalls. Then in 1998, Iowa stepped up pseudorabies eradication efforts. The partners blood-tested sows and ended up culling nearly 35% of the sow herd. Harsh winters in 1999 and 2000 further cut into sow numbers.
That forced them to buy feeder pigs locally every seven weeks to fill empty pig spaces. But Cook says they weren't able to fill all seven, 1,000-head barns, so they buy feeder pigs on the open market from as far away as North Carolina, Utah or Canada.
Paul Cook has no preference. He finds Canadian-sourced pigs are no different than U.S.-sourced pigs, in health or in price.
He has rejected an occasional group of pigs from both U.S. and Canadian sources for health reasons or for being too heavy. He uses “vet-to-vet” health checks before he commits to a purchase. And, when sourcing Canadian pigs, he requires known genetic sources.
Whereas U.S. pigs are identified with tattoos for interstate movement, Canadian-born pigs must be identified by metal ear tags at the border — a drawback, says Cook, because it is a good place for a strep infection to start.
Both his U.S. and Canadian pigs are sourced by M&F Livestock (www.farms.com ), which has access to larger numbers of pigs.
Cook stresses he won't be a long-term client for M&F. He and his father-in-law completed construction of a new breeding-gestation barn about six months ago. They expect to build their breeding herd back to about 900 sows, ending their pig-buying days.
Elma, IA, producer Max Schmidt says his 1,250-sow, farrow-to-finish operation has virtually always been PRRS-positive. Last October PRRS struck hard. He says it seems like every three months or so a different strain hits.
Like the Cooks, Schmidt and his partners have purchased Canadian pigs a few times “when we had some holes in our production.” He bought two, 600-head batches of 13-lb., 19-day-old SEW pigs through a broker and has been very pleased.
“It is just astounding how well those little pigs take that travel,” says Schmidt, Iowa's representative to the National Pork Board. “They come in tremendously healthy.”
To keep them healthy, they need to be segregated from U.S. hogs. “We've got so many diseases in the U.S. that we've got our hogs immunized against, and these pigs come in pretty much naïve to everything,” he notes.
Ed Wiederstein's main source of pigs to finish is from a feeder pig cooperative of which he has been a member for 27 years.
But he also buys pigs on the open market from some major U.S. suppliers like Tyson's, Land O' Lakes and sometimes from Canada. He buys 500-head bunches of 45-50-pounders to be fed out in four custom-fed hoop barns.
Purchases are arranged by his feed supplier. A few days after the pigs arrive, the feed supplier checks the groups. If there are any ruptures, broken legs or other injuries that occurred during transport, the purchase price is adjusted accordingly.
Before making a purchase, try to ensure the deal pencils out, urges Wiederstein, immediate past president of the Iowa Farm Bureau Federation. Because of the strong demand for Canadian pigs, some reportedly have been selling for a premium, which may limit their ability to turn a profit, he says.
Wiederstein acknowledges the impact of his buying decisions. “I know there are a lot of Canadian pigs coming across the border. And in the big picture, it is adding to the tonnage here in the United States, reducing packer capacity and probably having an impact on market price. But I am one little guy out here just trying to make a go of it in pork production.”
For the last eight years, Forest River, ND, producer Craig Jarolimek has been contract buying 40-lb. feeder pigs to fill 1,600 finishing spaces. He has sourced pigs from the U.S. and Canada.
He says two fallacies exist. The first is that Canadian pigs will be cheaper because of the exchange rate, when in fact pigs are priced about the same. The second myth is that Canadian genetics are superior. U.S. stock has gained ground the last half a dozen years.
The advantage with Canada is ready access to large numbers of single-source, healthy pigs — fueling the growing trade to the U.S.
Minnesotans Invest in Canadian Sow Complex
Four southwest Minnesota partners have invested in a Canadian sow complex to guarantee their group a ready source of pigs to feed out.
Wynland Pork is made up of three Luverne, MN, area pork producers: brothers Dave and Roger Wynia and Mike Hoiland, as well as a silent investor. Kevin Barnhart, their Land O' Lakes swine consultant, coordinated development of the venture.
Each of the three producers independently manages their own contract finishing sites for Wynland Pork.
Wynland Pork started a few years back when the group began purchasing pigs from an Iowa operation that are fed out by Dave Wynia.
The other two producer-members, impressed with the success of that arrangement, decided they wanted to expand the hog feeding part of the operation.
Barnhart says the group asked him to help them find a source of pigs. They searched all over Iowa, Minnesota and South Dakota without any luck. “As a last resort, we ended up looking in Canada,” he says.
The more they looked north, the more they liked what they saw. They would be able to obtain a steady supply of healthy pigs. But they admit the pigs' health would be challenged by the concentration of PRRS (porcine reproductive and respiratory syndrome) outbreaks in the area. “We'd like to at least start with a healthy pig, realizing that in this hog-dense area around here, we will probably still have challenges,” observes Barnhart.
Also, the group was able to buy shares in the limited liability partnership that in turn owns shares in two, 2,500-sow complexes being built in southern Manitoba. The arrangement guarantees Wynland Pork a consistent supply of single-source pigs, with 1,000, 12-lb. weaned pigs coming every four weeks, says Dave Wynia. Genetics are a combination Monsanto Choice Genetics and Shamrock Genetics.
Under the agreement, when the pigs arrive at Wynland Pork, the partners own the pigs, provide feed and veterinary services and pay for all trucking services. But, pigs do have to meet some quality criteria, says Barnhart.
There will be discounts for imperfections such as off-weight pigs, ruptures, lame pigs and poor-doing pigs. Sows in Canada will be vaccinated for parvovirus-leptospirosis-erysipelas. The pigs are expected to be PRRS-negative and mycoplasma-negative. The plan is to vaccinate pigs in late nursery for mycoplasma.
The first pigs from the Canadian sow complex are expected to be delivered to Wynland Pork in September. In the interim, they are being supplied with pigs from another source, explains Barnhart.
The group's pricing mechanism for the Canadian pigs provides for some flexibility. It is based off a Kansas State University matrix in which the price of pigs fluctuates as the price of corn and soybean meal goes up and down, explains Barnhart. The matrix also takes into account the Chicago futures price, providing a base value for that pig, then adjusting that base according to the corn and soybean meal prices.
Wynland Pork also receives market price protection through three different marketing contracts. “Another thing that we were looking for when we got pigs was that we also wanted to be protected on the other end,” emphasizes Dave Wynia.
An additional reason Wynland Pork was won over by the Canadian arrangement was the availability of other investors. As such, there are preferred shares of stock which Wynland Pork members have purchased. Dividends will be paid out to investors on the profits earned.
Risk Management Model
Wynland Pork developed a risk management model to protect their investment against disease and financial risks, according to Barnhart. Each producer-partner has his own separate finishing site, located several miles apart from the other two partners. And, each producer-partner has a different packer contract to balance out the price risk for Wynland Pork.
The risk management model has three parts:
In the first model, the partnership buys pigs from an Iowa sow unit and the weaners go to an Iowa contract nursery. From there the feeders go to Dave Wynia's three-barn finishing site. Market hogs are all sold to Swift at Worthington, MN, on the first marketing contract.
The second model involves purchasing weaner pigs from the first sow unit in Canada. These pigs go to a contract nursery at Roger Wynia's farm; feeders move to Roger's two-barn finishing site and later are sold to John Morrell's in Sioux Falls, SD, on a second marketing contract.
In the third model, purchased weaner pigs from the second sow unit in Canada go to a contract nursery at Mike Hoiland's farm. Feeders move to Hoiland's two-barn finishing site and are marketed to Morrell's on a third marketing contract.
Wynland Pork has 7,000 head of finishing space. Turning their barns an average of 2.65 times/year, they expect to market nearly 18,000 head/year, says Barnhart.