Lessons learned from the other side of the aisle

We consume about 40% of the organic production of all products and devote roughly 0.5% of our crop ground to organic production.

Joseph Kerns

March 11, 2019

7 Min Read
Pig snout poking through a wooden fence
Getty Images News/Joern Pollex

Democrats versus Republican. Vikings versus Packers. Ford versus Chevy. Some of the things that polarize us via our identification of “self” need to be challenged every now and then. If you are a Chevy guy, it will not kill you to ride in your buddy’s F-150. If you lean to the right, there may be some merit in what Bernie has to say if you listen long enough. If you are a Packers fan … I will never expect you to cheer for the purple team from Minneapolis.

I bring up these apparent contrasts in our biases to share that I recently had an experience that challenged my personal assumptions. I attended the first-ever organic pork conference held in Waterloo, Iowa. Now let’s set the table on this one just a bit. I have no problem with those who choose to buy and support organic products — I generally don’t choose to pay the premium as I do not believe there is a significant enough difference between organic and conventional items to justify the price spread. This is an economical/cerebral decision. If you are nodding your head to this thought process, we may be kindred spirits who are missing an incredible opportunity via our perspective. I will unfold how that looks in a bit. Here is what I recently learned.

The organic production crowd is a bit emphatic and voracious in their perception that they are “right,” and anything other than organic is somehow sub-standard. A bit of zeal in their opinions and a willingness to share their view of the world from the rolled-down window of their Prius as they cast a shameful look at you being a single passenger in a 4-wheel drive truck becomes quickly evident. Average herd size for the producers in the crowd hovered around the 100 or so mark. The “big” producer in the crowd had 1,500 sows; he was from Denmark.

This is a little slice of society that harkens back to a simpler lifestyle but maybe not an easier life. I have worked in a labor-intensive, 600-sow pasture farrowing operation and can attest to the physical nature of the work and the challenges compared to modern production techniques. We did not know any different in the early 1980s and generally moved with the times as production practices shifted. We will probably never put the genie back in the bottle on large-scale techniques, but the niche market of organic pork production has some lessons for the rest of us and is also opening up possibilities.

The path to organic pork production is not easy. Animals must be fed an all-organic diet which means the land used to produce those inputs must be out of commercial production for 36 months to transition into organic crops. No GMOs, no pesticide, no herbicide, strict rules for cleaning all surfaces used for planting, harvest and transport. You must have a crop rotation plan both for the environmental component as well as weed control. Animal welfare requirements are an ongoing evolution for this sector, no gestation stalls, lots of debate on free-range requirements, most I talked to have some hybrid of pasture farrowing with some adapted barn space for winter farrowing. Productivity is not the primary focus of organic production, having a hardy animal that can sustain the elements is more desirable.

In fact, the previously mentioned farmer from Denmark eschewed his Danbred herd in favor of alternative genetics because the Danbred animals were too productive and were causing troubles given his animal handling system. Once you get past the unstated and sometimes articulated tension of “us versus them” dynamic, I think there are some pointed things to note.

First, organic pork production can likely teach us something in the way of biosecurity. That may sound odd when you envision your positive-pressure, filtered, high-tech sow unit versus a pasture full of huts — but I think there is something fundamental at play. The margin of error for an organic producer is very thin as they have no antibiotic regimen as a crutch in the event something goes awry. Their reliance on innate immunity and tending to a newly born pig is paramount. Getting an animal to suckle within the first six hours of at least six ounces is a key in any production system. Keeping the piglet warm, dry and hydrated is a challenge. The introduction of any germs or disease complicates this process and is a recipe for disaster in organic production. Keeping a breeding herd healthy and disease off the farm is a goal for every producer; it is a binary item separating success from failure in organic production.

Second, organic pork is allowing the definition of the asymptotes of price discovery for all pork producers. Their average selling price over the past five years is $350 per pig. When Steve Meyer displays his charts showing elasticity of demand data, you need observations at different points of price and supply to determine the slope of the line. The higher prices demanded and needed in organic production allows us to peek over the horizon to see just how much folk will pay if we tell them a good enough story.

The organic folk have a good story and have to retell it often. You have a huge advantage in your cost of production and get to keep it as your secret.

Third, the organic folk are teaching all of us what resonates and works in a marketing perspective. They have to be good at this to keep their boat afloat. Purveyors of organic pork treat it akin to a religion — you either believe or you are a heathen, so you probably should be a good believer. There are a lot of emotional triggers that are utilized to identify with their customer base, they must do a good job of maintaining that connection to keep the ball rolling. The intellectually honest in the group will concede that the physical attributes of organic pork are not significantly different than conventional (sometimes referred to in this setting as “industrial farming” or “chemical farming”) practices. They have to rely on craftmanship or artisan attributes or ethics or a carbon footprint argument to justify the price difference. I applaud them when they can execute it and make a profit. The pool of potential consumers is at their doorstep. I am reminded of a line from a song that goes, “don’t go chasing waterfalls, please stick to the rivers and the lakes you are used to.” The United States consumes 40% of the organic production in the world (Germany is second at 10%). We have 5% of the world’s population and 43% of the wealth. If you want to succeed in organic production, you do not need to learn a new language.

The flip side of all of this? Organic pork production is likely a primary and easy vector for the introduction of African swine fever into the United States. I shared that we consume about 40% of the organic production of all products and devote roughly 0.5% of our crop ground to organic production. This means importation of “organic” soybean meal from China, corn from Turkey and sunflower cake from Ukraine. The organic industry seems to be cognizant of this and recognizes it as a problem, though solutions to the issue were not apparent. Seems to me that the first thing we should do is ban the importation or, at minimum, have a required quarantine of potentially infected feedstuffs. I also think Polish bellies imported into the United States is questionable given the threat, but that is a topic for a different forum.

Here is the bottom line: our free enterprise system allows us to engage in commerce and bet with our feet. There is room for commercial and niche production, neither is all good or all bad. Once we stop defending our positions and take an opportunity to learn from others is when we can make better decisions that lead to profits, the goal of any commercial enterprise. Another observation: organic corn has traded at an average of $9 per bushels over the last five years and beans have averaged $18 per bushel. Maybe we need to stop fighting the organic movement and simply use our cropping operations to supply their feed needs. Capitalism and free enterprise meet the left-of-center movement in the engagement of commerce? I like it.

Comments in this column are market commentary and are not to be construed as market advice. Trading is risky and not suitable for all individuals. Joseph Kerns [email protected]

Source: Joseph Kerns, which is solely responsible for the information provided, and wholly owns the information. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.

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