Recently, all the discussion about trade is causing a lot of anxiety around the swine industry. The fact of the matter is pork producers have always and will always face divisive and controversial issues. The World Pork Expo was held last week and although I thought the event was well attended and offered many opportunities to pick up new ideas and connect with industry leaders, supporters and friends, generally the biggest buzz at the event revolved around the current trade situation.
Granted, it is a huge issue for the industry and important to our future success, but let’s not lose focus of the things we can control. We have a great opportunity to distance ourselves from competitive markets if we continue to do what we have in terms of continual improvement on the farm.
When we think of trade, one of the reasons we have been able to provide such a great story over the past 20 years of increasing net trade from the pork sector is quality. The U.S. pork industry has continued to improve the quality of the pigs produced and the meat processed. It takes the entire industry, from genetics, nutrition, housing, management and health care to make this the best live product in the world. Improvements in the packing/processing sector with better chilling of the carcass and superior processing techniques have enhanced the products. If we are to increase our market share and grow demand, continued improvement of quality is a must.
Compeer Financial has many clients who produce 28 to 30 weaned pigs per sow annually and a few that are consistently above 30. Probably more financially important, is that many are achieving 92% to 94% of those pigs being marketed to their primary packer. As I think about how to improve cost of production, reduce the carbon footprint and become more sustainable; production improvement is one major key.
One of the reasons that we are able to increase our market share domestically and internationally is because our production has improved dramatically over the past two decades, and will likely continue to improve. It will have to! The successful producers today wake up every day thinking about how they can improve productivity with genetics, health, nutrition and management; but it is also about improving pig care and understanding the needs of the individual pig each day. I think our future will rely on employing assets to help us understand this aspect and react sooner to their needs.
Better productivity helps offset costs, but as we think about the assets we use in pig production and the escalating cost of many of those “fixed costs” it’s also important to continuously improve how we utilize them. Those costs are facilities, energy, labor, feed milling, trucking, etc., and they are all increasing at this time. How we manage those asset costs are largely based on throughput.
Costs over the past 12 months have averaged between $62 and $68 for the majority of high-producing farms. Still a fairly wide range, and cost of production has been higher by $2 per hundredweight in the last quarter, but this is being driven by better pig performance for the most part.
Labor has been a focus area recently for good reason. The labor market is as tight as I remember, with low unemployment — particularly in rural areas where we produce and harvest pigs. The focus has to be on both attracting and retaining talent. Labor cost has almost become secondary to finding the best employees and keeping them engaged. It is important to understand the geographic area you are in and the labor situation there. Don’t wait until you lose enough people to an expanding or new business to make sure they are engaged and feel like they are being treated fairly at your organization.
In the end, there are a host of issues that concern us, and we can become frustrated at the lack of control we have over the outcome, short term. We have great organizations that work to help this industry succeed in those areas (National Pork Board, National Pork Producers Council, U.S. Meat Export Federation), and when they ask for your help in the legislative area or your engagement, please consider it strongly. Beyond that, focusing on the areas that we can control will ease some stress in the short term, and move you closer to your goals long term.