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Articles from 2001 In January


Evaluating Risk Management

We Europeans have been examining risk management closely - though it is not a new subject. Risk equates to the fear factor or the possibility of the outcome being different or worse than that expected.

Our number one threat is the increasing amount of price risk in pig production. Price volatility here is worsening, doubling every five years.

Risk management is a shock absorber. We need a risk management "tool-box."

First, examine your attitude toward risk. How much are you prepared to gamble? How much depends on how many tools you employ, how you use them, and how hard you work at risk management.

Risk Management Tool Box 1. Information is vital. How are you following the market?

- Market information;

- Herd size and growth;

- Price cycle/price trends;

- Supply and demand shocks

- Competitors' behavior; and

- Action you take on the market.

Action: Work much harder in knowing your market, your immediate purchaser's market, his buyer's market and the world market. You are much less likely to be exploited by people you sell to and buy from, even if many events are outside your control.

2. Diversify.

- Land-based diversification has costs, but it pleases lenders.

- There are higher capital costs; income is fudged; there is dilution of your specialization skills; new areas need time and experience.

- Non-farm diversification can involve the whole family. Whole family income will matter more to the medium-sized family farmer.

Action: Can you spread your sources of income? Surf the Internet for ideas. Franchising is taking off rapidly in Europe and a few hog producers are really making extra money from it.

Negative aspects are: - It is technically difficult to be good at everything you take on.

- The farm can suffer if a franchise grabs too much of your time.

- Other farmers diversifying into your specialty (pigs) also come in and out and destabilize your local market.

3. Coordinate, cooperate and integrate.

- Needs a degree of selflessness. Are you a "sharer"? You need to be.

- Relationships are more important than transactions. You need to talk, negotiate and cooperate. Think of the positives as well as the problems.

Action: Who are you talking to already? No one? You could be missing the bus.

In the U.S., sale by contracting is becoming accepted. In two years, it will be essential.

4. Consider contracts.

- Study various contract price formulas. Work at it. Become knowledgeable about other buyers' contracts.

- Consider production costs and long-term margin sharing with the packer.

- A contract is give and take. Be wary of contracts where the other side is cagey - they'll be tempted to let you down.

Action: Talk, talk, talk. Work at it. Start early on; spend more time negotiating. Once you've contracted, start looking at other options to use as ammunition to change.

5. Reduce your costs as an insurance "cushion."

Besides the usual cost cutting advice, think laterally; think more radically.

Do you have to: - Buy feed from a feed manufacturer?

- Buy breeding stock (except artificial insemination and boars) from a breeding company?

- Buy housing and equipment from the manufacturer or retailer?

- Buy rather than lease or hire?

- Explore buying some products on the Internet?

Major savings have been achieved in Europe. Suggestions are: - Enter the feed raw material market; buy for yourself and others. Independent nutritionists exist.

- Consider using an independent geneticist to design your own females; do the breeding yourself.

- Many products are as much as 40% cheaper on the Internet in Europe; the same products, too, as are available locally.

- Build or subcontract your own housing using local skills.

- Some of this may cost a little more, but it eases cash flow.

Remember, all of the above entities profit from you. Think about recapturing some of it.

Action: Do I have to continue buying from...? Explore alternatives. It will mean more time spent on buying and selling, but this can be a very useful cushion.

Broken Needles: `One Is Too Many'

The National Pork Producers Council is launching a comprehensive educational awareness campaign to advise producers on ways to avoid broken needles.

One Is Too Many" is a food safety awareness campaign designed to reinforce with pork producers that even one broken needle in any pork product is too many.

Broken needles do end up in hog carcasses and a few find their way into retail pork products, says Paul Sundberg, DVM, assistant vice-president of veterinary issues for the National Pork Producers Council (NPPC). How often is unknown.

Campaign Launch This month NPPC is launching an informational effort to combat the problem. Materials will be in brochures, check stuffers, laminated barn posters, pens and small calendars.

It will largely be the job of veterinarians and packers to get the message out to producers, Sundberg says. The materials also will be available at annual state pork producer meetings. Producers also can order a video on proper needle injection techniques from NPPC. For details, contact Sundberg at (515) 223-2600 or e-mail sundberp@nppc.org.

Producers need to take responsibility. Bent needles should never be straightened and reused. Replace them with a new needle, Sundberg urges.

Packers need to reinforce the importance of this issue with producers, and do a good job of detection.

Veterinarians need to advise their clients to follow standard operating procedures.

Needle Research Meanwhile, work on needles continues at Iowa State University. Research into needle strength has just been completed by agricultural engineer Steve Hoff. Now he is expanding his research using funding from the National Pork Board.

Hoff will test needle detectability by metal detectors, like those used in packing plants. He also will test how long needles retain sharpness.

Results are expected to be released sometime this spring, says Sundberg.

For their part, needle manufacturers need to provide stronger and more detectable needles for use in livestock, Sundberg states.

"Up to now, the primary needles which have been used in agriculture are human-use needles," says Sundberg. "We have worked hard with needle manufacturers to make them understand that we need needles that have characteristics that meet the demands of animal use." Two companies are working on stronger needles that are 100% detectable.

The National Pork Producers Council (NPPC) has issued considerations for needle breakage standard operating procedures (SOPs).

Producers should talk to their packer about a needle breakage policy, asserts NPPC's Paul Sundberg. Find out their payment policies for at-risk animals, identification schemes and notification procedures. Producers should work at prevention and write needle-use guidelines specific for their operations. Consider the following when writing on-farm SOPs.

Prevention should include:

- Ensuring proper animal restraint;

- Identifying proper site for injections;

- Selecting the proper needle length and gauge for the pig's age, injection site and medication characteristics;

- Changing needles as needed between barns, pens and pigs and to maintain cleanliness and sharpness;

- Retrieving dropped needles;

- Changing bent needles, and

- Monitoring needle use and considering the number of needles required to do the job.

Identification of at-risk animals is the second step. Stop injections and attempt to remove the needle, temporarily identify the pig, then permanently identify the pig based on packer guidelines.

Step three is notification. Follow packer recommendations about notification before or upon delivery of at-risk animals.

Step four, train farm employees who give injections on farm policy and procedures.

Sow Prolificacy Analysis Extended to Six Parities

Maternal Line Program (MLP) data shows sows from some genetic lines will farrow nearly 50% more live pigs in their productive lifetime.

Fertility and prolificacy serve as the productivity yardsticks by which sow herd output is measured.

Seedstock suppliers have made some effort to improve prolificacy traits such as pigs born and litter weaning weights. Both traits are easily measured by suppliers and the commercial producers using their genetic lines.

However, low heritabilities for these traits and joint selection for growth and carcass traits have kept genetic improvement of prolificacy traits at a relatively slow rate.

Fertility traits, such as age to puberty and farrowing rate, have been given less attention by genetic suppliers because of the great difficulty in getting reliable data. Still, these traits greatly influence the length of time groups of gilts will remain productive in the sow herd. These groups are commonly called "cohorts."

More precisely, a cohort is defined in the National Pork Producers Council's (NPPC) Production and Financial Standards as "a group of animals that shares a common event within a defined period of time."

The advantage of cohort comparisons is it allows us to target groups of gilts as they enter the sow herd and follow them through multiple parities. This approach requires close accounting of all gilts entered into the herd. In the end, longevity is a reflection of a female's fertility traits.

Fertility vs. Prolificacy Comparisons of fertility traits depend on all records whereas many sow recordkeeping programs only account for prolificacy traits. In other words, they only track sows that mate and/or farrow.

Improving the average herd life of breeding females reduces genetic costs and gilt development costs. And, there's the added advantage that sows tend to wean heavier pigs than gilts and have acquired immunity to specific herd diseases. Therefore, sows that remain productive through more parities can increase herd output while reducing cost of production.

The NPPC Maternal Line National Genetic Evaluation Program (MLP) reported the performance of six genetic lines through four parities (see National Hog Farmer Blueprint, "Maternal Line Genetics," April 15, 2000). However, NPPC continued to measure sow performance on the MLP lines after the official test was completed. Data is now compiled and evaluated through their sixth parities.

The 3,283 gilts entering the MLP were grown in a high-health, gilt development program to 165 days of age. Gilts were then placed in two new, 1,600-sow breeding-gestation-farrowing facilities. No gilts were culled for poor growth or backfat.

Matings started when gilts reached 210 days of age and were on their second or later estrus. Gilts that were not successfully mated by 300 days of age or had failed to conceive after three mating periods were slaughtered.

Sows were given 50 days after weaning to conceive. No gilt or sow was culled due to poor litter size or low litter weight.

The 25-female cohorts shown in Table 2 are formed by line-age-facility subclass at 165 days of age, as reported previously through four parities (see National Hog Farmer Blueprint, April 15, 2000,). Large lifetime differences in cohort performance were found between genetic lines, highlighting the opportunity for improved total herd efficiency by selection of sow genetic line.

Ranges in output of the 130 cohorts show the great biological opportunity in production efficiency that is still possible. Table 3 shows the extremes in production from a 25-female cohort. The total possible litters born from a 25-female cohort over six parities now stands at 150. Actual records show a range of 40 litters for the worst cohort group to 127 litters for the best.

The most productive cohort farrowed 1,347 live pigs during its six-parity productive life while the poorest farrowed only 397.

Clearly, measuring and comparing these fertility traits are a truer measure of performance than are prolificacy traits.

Nearly 50% More Pigs The combination of superior sow longevity and superior number of live pigs born/litter gives the Dekalb GEPK347 line female a lifetime live pig born output advantage of 48% more than the average of the other five lines. (This genetic line was originally called Dekalb Monsanto MXP200.) Note that this advantage is due mostly to the superior fertility of GEPK347 gilts in their first and second parities. This line produced 36% more litters through their sixth parity.

After the first two parities, the percentage of sows leaving the herd due to illness, injury, death and infertility is nearly the same in each parity for all genetic lines.

The figures in Table 4 reinforce that an opportunity to improve sow longevity exists by developing gilts with the highest P1 farrowing rate. Simply stated, the gilt must farrow a first litter. Anything done to improve her first parity farrowing rate should indirectly improve sow longevity.

The heritabilities of fertility traits are low to medium, so improving the environment in which gilts are developed should improve farrowing rates.

Economic Considerations The number of live pigs born/day of herd life may give a clue. If preweaning mortality is 10% and the value of a weaned pig is $25, then the daily income/sow for the best line (0.068 pigs/day) is $1.53, for an average line (0.060 pigs/day) is $1.35 and for the poorest line (0.054 pigs/day) is $1.21. The difference is 26% more income from the best line versus the worst line sows.

The first opportunity for improving herd performance is selecting a maternal line with higher fertility. Of course, this is easier said than done given the lack of reliable data available. However, sow longevity may be improved by implementing gilt development programs (i.e. gilt nutrition, boar stimulation, acclimatization) to better prepare gilts for mating success.

Improvement in prolificacy traits, such as pigs weaned/litter, has been remarkable throughout the industry. The results presented here show the great opportunity that still remains for increasing breeding herd output. Greater attention to fertility traits is needed to capture this opportunity.

Producers and accounting professionals have provided new tools for breeding herd evaluation. Programs that use the new NPPC Production and Financial Standards will give producers a true picture of their breeding herd efficiency.

Farrowing Intentions Increase 4%

Near-term increases appear modest, but farrowing intentions cause some concern. The December Hogs & Pigs Report came in very close to the trade estimates and our expectations. The total herd on Dec. 1 was up 1%, the breeding herd was up 1% and the market herd was up 1%.

September-November farrowings were up 1%. December-February farrowing intentions logged in at a 4% increase, and March-May farrowing intentions are for a 1% increase over a year earlier.

The March-May farrowing intentions, if they turn out to be correct, are the good news in the report. However, we are viewing only a 1% increase with skepticism. We are hoping the intentions become reality because it would likely, then, result in a fourth quarter 2001 slaughter that is only up about 4% from the third quarter slaughter.

For the period between 1996-2000, fourth quarter slaughter has averaged 8% larger than the third quarter. In 2000, the fourth quarter was 6.8% more than the third quarter.

If the futures market believes the farrowing intentions for the second quarter and trades the October and December 2001 contracts accordingly, some pricing opportunities for that period likely will be very desirable.

The breeding herd estimate is quite consistent with our gilt and sow slaughter balance sheet estimate. The farrowing intentions of 104% for December-February continues to show productivity growth, but March-May farrowing intentions do not show any productivity growth from a year earlier - another reason for viewing the second quarter farrowing intentions with skepticism.

Demand for pork at the consumer level for much of 2000 has been close to 1999 levels. However, demand for live hogs has shown sharp growth in 2000. Live hog prices at the terminal markets were about 35% higher in 2000. And, 51-52% lean hogs, U.S. basis, were up 31-32% for this time period.

Even with an elasticity of -0.3 at the live level, this is a demand growth of 6-7% for 2000 compared to 1999. With an elasticity of -0.5 at the live level - the elasticity that worked very well for many years before the 1990s - this year's results would suggest a demand growth of 12-13%. This adds evidence to the belief that live hog demand is considerably more inelastic than it was until the late 1980s or early '90s.

If the second quarter pig crop is up only about 2%, as suggested by the second quarter farrowing intentions, and we do not lose a hog slaughter plant between now and then, slaughter capacity will likely be adequate for the fourth quarter 2001 slaughter.

The current information would suggest a terminal market price between $37-$40/cwt. and a 51-52% lean live hog price of $39-$42 for 2001. A corn crop greater than 9.5 billion bushels in 2001 would continue to provide the incentive for some producers to increase their herd size.

The past seven weeks of gilt slaughter data indicate producers may be in a holding pattern with their breeding herds. We hope this continues through 2001. However, average hog prices of $39-$42 at terminal markets or $41-$44 for 51-52% lean hogs, U.S. basis, for the first nine months of 2001 may push the industry back into an expansion mode.

Drug-Resistant Bugs Spawn Greater Concerns

What do recent regulatory and consumer actions portend for the future of existing and new animal antibiotics?

If it weren't so true, antibiotic resistance in livestock would be a great plot for Steven Spielberg's next science fiction thriller. A heroic team of veterinarians and physicians takes on an epidemic of untreatable infections caused by Superbug. Meanwhile, lawyers representing consumer activists, pharmaceutical companies, food suppliers and livestock producers battle it out in court.

Though it's not coming to a theater near you, the real-life drama of antibiotic resistance is being played out on a stage of public perception. Livestock antibiotic use as we know it is being threatened.

At issue is concern that livestock antibiotics are creating antibiotic-resistant pathogens - resulting in the risk that humans could become infected with germs that resist treatment.

Consequently, some people are calling for a ban on some or all antibiotic use in agriculture.

Livestock producers in the U.S. rely on antibiotics to maintain healthy animals and ensure the safety of the nation's food supply. But, there's a growing argument that antibiotic use in livestock is creating a public health threat.

Abigail Salyers, University of Illinois microbiology professor, says the public is realizing that many of the antibiotics widely used in agriculture are the same antibiotics being used to treat humans. Some say this increases the accumulation of drug-resistant germs, which are making once-treatable diseases incurable - especially in children, the elderly and people with weak immune systems. That, she says, makes it difficult to defend unrestricted use of antibiotics in agriculture.

"Like it or not, the use of antibiotics in agriculture is going to come under increasing scrutiny from people who may not have the farmers' best interests at heart," she says.

Despite the Food and Drug Administration's (FDA) stringent requirements on antibiotics, scientific data about antibiotic resistance is sparse. And the risks of using antibiotics in livestock haven't been adequately assessed, says veterinarian John Waddell, Sutton Veterinary Clinic, Sutton, NE.

Representing more than a dozen federal agencies interested in antibiotic resistance, the Interagency Task Force on Antimicrobial Resistance recently drafted a strategy, timetable and budget for addressing the issue. The Draft Action Plan includes 87 action items focusing on surveillance, prevention and control, research, and product development. (You can request a copy of this draft by visiting www.cdc.gov/drugresistance/actionplan/planrequests.htm.)

Part of the task force is the Center for Veterinary Medicine (CVM) - the FDA division that regulates the manufacturing and distribution of food additives and drugs given to animals. The CVM is studying the health risks posed by the use of antibiotics in food-producing animals. It is meeting publicly in January to discuss the establishment of resistance and monitoring thresholds in food-producing animals and to seek scientific input from experts. In addition, the FDA is examining all agricultural antibiotic use.

But, regardless of what scientific resolutions may surface from these efforts, the issue is bound to impact livestock production practices.

What's at Stake? Government and consumer actions put the availability, distribution, regulation, monitoring and uses of existing and new animal antibiotics into question, Waddell says. A shift toward shortening the life span of approved antimicrobials is already under way.

Fluoroquinolones, for example, may soon be off the market. Though the FDA approved these antimicrobials for poultry and cattle in the mid-1990s, in October the administration proposed a ban on fluoroquinolone use in poultry. This proposed ban is the government's first attempt to pull a drug to combat infections that have grown resistant to antibiotics.

Also at stake are subtherapeutic or growth-promotant antibiotics, fixed dose combinations, over-the-counter availability and use under the Animal Medicinal Drug Use Clarification Act, also known as "extra-label" use. The export market and research and development funds for the animal health industry are also on the table, Waddell says.

But is banning antibiotics really the answer? University of Kentucky (UK) swine nutritionist Gary Cromwell contends that a ban won't effectively combat the problem. In a UK study, Cromwell and his colleagues found swine that had no exposure to antibiotics for more than 25 years still had a large proportion (30-70%) of antibiotic-resistant enteric bacteria.

He concludes that animal age, housing system and moving stress affect antibiotic resistance just as much as antibiotic withdrawal does.

Alternatives to a Ban Instead of a ban, one possibility is antibiotics that are completely synthetic, says University of Illinois food science professor Bruce Chassy.

"Those are the antibiotics that probably show the greatest promise for the future because we've just about run out of all the (natural) antibiotics that we have," he says.

Biotechnology could be another option.

"It may help us develop other strategies in disease control - probiotic organisms that are even more effective, more disease-resistant animals, and even - by manipulating the physiology and biochemistry of the animals - more efficient animals," Chassy says.

No matter what might be ahead, Chassy says producers need to better understand antibiotic resistance and what drives consumers.

Likewise, Waddell asks veterinarians and producers to take responsibility and become more aware of issues relating to the proper use of antibiotics.

Given the amount of jargon surrounding antibiotic use - terms like therapeutic use, approved use, rational use, extra-label use, judicious use, production use, prohibited use, prudent use and use under the Animal Medicinal Drug Use Clarification Act - the issue can be confusing.

Whatever you call it, Waddell says, proper use basically means antibiotics should be used "for proven clinical indications, only when indicated, at the appropriate dosage regimen, for as long as necessary and for as short as possible." It also involves proper identification of treated animals and proper storage and handling, he adds.

While producers, regulatory agencies and pharmaceutical companies play a part in the proper use of antibiotics, the veterinarian has ultimate responsibility, Waddell says.

In addition to better understanding judicious use, Waddell urges producers and veterinarians not to concede the use of antibiotics in livestock without demanding good science.

"We cannot let emotionalism and sensationalism replace good science and judgment," he says.

Advocates of a ban on antibiotics in livestock are passionate, and they want zero tolerance of risk, Waddell notes.

"If we don't stand up as producers and as veterinarians," he says, "we're not going to keep back this stampeding herd."

For more on antibiotic use in pork production, visit www.nppc.org/PROD/PQA/pqaI.htm. Or, check out the Animal Health Institute at www.ahi.org.

In case the time comes when antibiotics aren't available, researchers are studying possible alternatives.

With a $600,000 USDA grant, researchers at Iowa State University (ISU) are exploring alternatives to swine antibiotics.

One ISU project looks at probiotics, which encourage the growth of "friendly" bacteria to prevent disease-causing bacteria from getting out of control. Preliminary studies show salmonella was reduced in young pigs fed milk containing Lactobacillus, a bacterium taken from the pigs' intestinal tracts. Researchers plan to repeat the tests in older, market-ready pigs.

"If the results are positive, farmers could decrease salmonella levels in their animals by using the method two to three weeks before the pigs are marketed," says ISU microbiologist Hank Harris.

The focus of another ISU project is bacteriophages - viruses that infect and kill bacteria. Early results show pigs given bacteriophages orally or by injection have less salmonella than other pigs. Researchers say producers might be able to dose pigs with bacteriophages hours before they are processed at the packing plant.

If these alternatives prove promising, ISU will train producers, veterinarians and processors on how to implement them.

Pork producers in the U.S. may need to prepare to discontinue use of growth-promotant antibiotics, says South Dakota State University animal scientist Hans Stein.

He points to the European Union (EU) where all but four growth-promotant antibiotics were banned in 1999. Sweden banned all growth-promotant antibiotics in 1986.

In Denmark and Sweden the ban on growth-promotant antibiotics has meant significant economic losses due to increased mortality rates and decreased daily gains in nursery pigs. For Danish pork producers the cost is more than $1 (U.S.) per pig produced, Stein says.

Discontinued use has decreased the total use of antibiotics, but it has increased therapeutic antibiotic use and the incidence of post-weaning diarrhea. It is a serious problem for nursery pigs - their mortality increased by as much as 60% in Sweden, and their daily gain decreased by 0.665 oz./day in Denmark. So far, though, grow-finish pigs show no significant changes in performance or disease pressure, Stein says.

What led to such dismal results for producers, Stein says, was that policymakers in Europe based their regulatory actions on what's known as the "precautionary principle," which boils down to "when in doubt, don't." U.S. veterinarians and producers prefer science as the arbiter.

Europe's experience, however, shows that "the press can create more decision-making than many scientific experiments," Stein says.

University of Illinois food science professor Bruce Chassy agrees. As an example, he points to how a few well-organized opponents of biotechnology have steered policy decisions.

"If you scare consumers, there is going to be a consensus to change the policy," he says.

It's hard to say how the antibiotic debate might transform production practices in the U.S. But, Stein is certain consumer demand for products from animals not fed growth-promotant antibiotics will grow.

One leading producer in the antibiotic-free niche is du Breton Natural Pork, Quebec, Canada.

Du Breton has developed preventive methods to reduce animal stress and lower the incidence of sickness, says Fresh Ideas Group, a Boulder, CO-based public relations firm that represents du Breton. These preventive methods include:

- allowing more space per animal;

- giving animals more access to fresh air and sunlight; and

- using alternative remedies like homeopathics.

Du Breton acknowledges that preventive medicine alone won't keep all animals completely healthy, so when an animal gets sick, veterinarians quarantine it and care for it with fluids, aspirin and rest. If it needs more intensive attention, it's removed from the herd. If it's then treated with antibiotics, it doesn't return to the farm.

Not surprisingly, these methods are more expensive for the producer. But, du Breton maintains this investment can be profitable in the long-term because of growing consumer interest in antibiotic-free livestock.

New Polls Offer Better, Quicker Counts

Information for the monthly Hogs & Pigs Report is collected at the beginning of each month by officials from state agricultural statistics services.

Each month 3,300 producers in 30 states are polled through telephone or personal interviews.

Then, the USDA's National Agricultural Statistics Services (NASS) compiles the data and releases the monthly report on the last Friday of every month. For example, the data to be released on Jan. 26 were collected in early January and will be for the month of December.

The report focuses only on breeding females and their productivity. The data include:

- Number of sows and gilts for breeding (breeding females and prospective breeding females) owned by the operation on the first of the month;

- Number of sows and gilts mated during the previous month;

- Number of sows and gilts that farrowed during the previous month;

- Number of pigs from those litters still owned by the operation on the first of the month; and

- Number of pigs from those litters sold before the first of the month.

The number of producers surveyed per state is proportional to the number of hogs raised in that state.

For example, in Minnesota, nearly 400 producers are surveyed for the monthly report, according to Mike Hunst, state statistician. By comparison, approximately 1,500 Minnesota producers are surveyed for the quarterly Hogs & Pigs Report, which will remain unchanged for now.

The monthly report is part of the 1999 mandatory price reporting law. The National Pork Producers Council advocated the report as a way to more quickly inform producers about industry supply changes.

The monthly reports should help producers avoid disastrous prices similar to those of 1998, according to University of Missouri ag economist Ron Plain.

"These reports, by being more frequent, should allow producers to make better use of futures and options to hedge against low hog prices and to better plan breeding decisions," Plain says.

The more timely information will help industry economists more precisely project prices and the number of hogs coming to slaughter in the next year.

Research: Practically Speaking

The research reports coming from the University of Nebraska the past few years does an animal scientist's heart good. Particularly animal scientists with a high regard for the hard work of doing the more traditional, multi-discipline research for which "animal breeders" are best known.

In these days of high-tech, biotech, gene modification and cloning, it's a pure pleasure to report that 20 years of a well-designed genetic selection program has shown substantial payback potential. In this case, we're talking gilts that reach puberty earlier, farrow 1-1 11/42 more pigs/litter and recycle quicker and more consistently. And, it was all accomplished the "natural" way - through methodical measurement and selection of a genetic line.

Why, some folks have been so bold as to say the Nebraska work mirrors the development and introduction of hybrid seed corn in the '30s, which increased output/acre by 30-40% in its initial years. (See "The Pigs/Litter Bar Has Been Raised".)

Groundbreaking production practices are often rooted in the practical side of our land grant college animal science departments.

University of Illinois researchers were instrumental in identifying the essential amino acids back in 1938, for example.

The early work of Hazel and Kline at Iowa State University in 1953 introduced the use of a cheap, metal ruler as a simple tool to measure backfat. This simple procedure jump-started all efforts to develop genetic selection programs for the modern, meat-type hog.

In the '70s Lauren Christian identified a recessive gene as the culprit causing porcine stress syndrome (PSS) in pigs. Christian, also at Iowa State, went on to champion the halothane-screening procedure to identify stress-gene-carrying pigs. Collectively, his work was applied to simpler blood-screening procedures that led the charge to eliminate the stress gene and the poor pork quality to which it is linked.

Purdue University's research work with medicated early weaning programs and Kansas State's nutritional research aimed at developing better, more palatable diets for those early weaned pigs have had wide application.

There are more - many more - broad-based research initiatives that have contributed to the efficiencies captured in the pork industry.

The Nebraska work, spearheaded by Dr. Rodger Johnson, is a good, solid project requiring long-term commitment by him and by the university. Johnson's work was undertaken the good, old-fashioned way - through classic genetic selection methods. But it's also important to note that other scientists for physiology, nutrition, and gene-mapping research used these selection lines. These multi-discipline applications of unique genetic populations add considerable value to the research effort, and commercial producers are the benefactors.

I raise this point because I am increasingly concerned about the difficulty in getting research funding for any animal science-based project unless there's a biotechnology tag hanging on it. Producers need to know more about the production changes associated with genetic improvements, not just the gene frequencies.

I recognize the value of developing chemical- and disease-resistant corn and soybean varieties. I understand their value to conservation-conscious farmers, to reduce soil erosion, cut fuel costs and reduce chemical applications. But, lest we forget, our domestic and international customers are increasingly concerned about genetic manipulation.

The jury is still out on the safety of StarLink corn. Still, the ultimate jury is the "public jury," the one that accepts or rejects produce influenced by our arsenal of new technologies.

Several years ago we brought over samples of Chinese genetic lines in hopes of better understanding the genetic linkage to litter size. We've learned from that sample, certainly, but it was a bit of crapshoot because their selection history was generally unknown. The selection history of the Nebraska line is known, plus the "control" line serves as a reference point.

Molecular genetics will help us understand gene expression and how the genes influence hormonal regulation of reproduction. There is no magic here. No gene manipulation.

I am increasingly concerned about recent trends at our major land grant institutions. I've seen it time and again - a prominent livestock geneticist leaves or retires, and the position is either held open or eliminated in lieu of yet another addition to a growing biotechnology department. Leading universities have closed animal breeding and plant breeding research farms in favor of less costly campus laboratories.

I believe the long-term, multi-discipline research that leads to large leaps in productivity - like 1 11/42 more pigs/litter - must be encouraged and funded, especially in this biotech-skeptical era in which we live.

News Update

Tyson Merges with IBP: Chicken giant Tyson Foods has outbid rival Smithfield Foods for the rights to merge with IBP Inc., the nation's largest meat packer.

The purchase agreement ended a year-ending bidding war between the two suitors. Tyson came out on top with an offer of $30/share of IBP common stock. The deal is valued at about $4.7 billion, 50.1% in cash and the rest in Tyson Class A common stock. Smithfield had upped its ante to $32/share. But the Smithfield, VA, top pork producer and packer faced a long road of antitrust scrutiny, and its bid represented stock only.

A special committee of IBP's board agreed to accept the Tyson's offer, which includes assuming about $1.5 billion in IBP debt.

"We are extremely pleased that IBP has accepted our proposal," says John Tyson, chairman, president and chief executive officer, "which we believe creates tremendous value for the shareholders, team members and customers of both companies. By combining the number one poultry company with the leader in beef and pork, we are creating a unique company that has a major global presence."

The transaction, which is currently under antitrust review by law, is expected to close in the first quarter of this year. Farm state lawmakers and some farm groups have expressed concerns that this merger could increase the level of concentration in the meatpacking industry and result in lower prices paid to independent farmers. Groups charge that Tyson's retail presence could force consumers to pay more for meat products.

For his part, Ron Plain, University of Missouri agricultural economist, disagrees that the pending merger will have negative consequences. He says this could be a good mix for the beef and pork industries for two reasons.

First, Tyson has been very successful in new product development with chicken. Putting this same effort forward could be very good news for beef and pork segments.

Second, Tyson has the ability to service large retailers and could provide front-line expertise in managing the grocery meat case.

This realignment could help reduce the ever-widening, farm-to-retail price spread and return a bigger share of the consumer dollar to the producer, Plain suggests.

This prospective merger also is positive in that it doesn't really reduce the number of meat buyers since Tyson and IBP don't overlap in the species they slaughter and process.

Colorado Hog Farm Closes: National Hog Farms, the largest hog farm in Colorado, has closed its doors. National owned 34,000 sows in operations in Colorado and Nebraska.

The farm at Kersey, CO, was closed in a mutual agreement between National Farms and the state of Colorado, says company president Bill Haw. It probably will be reopened.

National Hog Farms is the only hog farm in Colorado that does not have lagoons to store hog manure. Used were two, 1.2-mill.-gal. steel tanks.

Farmland Sets New Course: Farmland Industries is changing its direction following a year in which the Kansas City-based farmer cooperative absorbed a net-after-tax loss of $29.25 million.

A major focus will be in expansion of food brands. Farmland's strategy in the meats area "is to build our brand and not through company investment in more sows," reports Jerry Leeper, vice president, Livestock Group.

"We are looking for innovative ways to convert to and expand our coordinated production system, with the emphasis being on producer participation," he says. In correcting widely publicized remarks, Leeper explains the goal is not to sell off Farmland's sows, but rather to seek ways to transfer sow ownership to contract producer-owners. Farmland has reduced sow numbers from 81,000 last year to just more than 50,000 sows today. The process of transferring sows in the contract production system could take four to seven years, he projects.

"Our long-term strategy is to expand our coordinated production system by including more producers and leveraging management, not by capital investment by Farmland," he stresses.

One of the major changes to improve profits is expansion of branded food product sales nationwide. This past year saw the introduction of a complete line of case-ready pork products and Farmland pre-cooked bacon. An all-natural, branded pork product is in the works, he says.

Mandatory Price Reporting: USDA's Agricultural Marketing Service will offer education and outreach sessions to producers and others affected by mandatory price reporting.

Under the new law, all pork packers that process more than 100,000 head/year are required to report prices and contracts to USDA. The agency will then publish the information to the public.

Sessions will be 1-5 p.m. Jan. 16 at the Hampton Inn Airport, Indianapolis, IN; 1-5 p.m. Jan. 23 at the Scheman Building, Iowa State University, Ames, IA; 2-3:30 p.m. Jan. 24 at Iowa Pork Congress, Veterans Auditorium, Des Moines, IA; and 1-5 p.m. Jan. 25 at the Best Western Ramkota Hotel, Sioux Falls, SD.

For more details, visit www.ams.usda.gov/news/338-00.htm.

Getting a Handle on Sow Herd Dropout Rates

Sow herd culling and mortality rates have been creeping higher in recent years. Prioritizing these profit-robbers offers good payback opportunities.

The development of multi-site production systems has the sow herd segregated from the nursery and finishing facilities of many hog operations. The capital requirements for new pork operations have contributed to this type of segmentation, too.

As the sizes of pork operations have grown larger, portions of the farrow-to-finish production chain are contracted off to other producers. In doing so, some level of profit must be built into the contracts if each participant is to remain viable. This spreading of profits means the management of each phase gets only a portion of the total margin attributed to each market hog produced.

For example, it is important that a breed-to-wean operation that is selling weanling pigs on a contractual basis keep a close watch on costs and production parameters. These operations are particularly sensitive to costs related to the sow herd, particularly sow fallout rates and the resultant need for replacements.

Several of the major recordkeeping entities have reported that breeding herd death loss has been increasing the past several years and now averages approximately 7%. It appears sows are exiting the herd earlier than ever.

The 1999 PigCHAMP summary report shows the average parity of culled sows in the U.S. was 3.1. Combined culling rate (44.6%) and death loss (6.9%), plus a few gilts that fail to conceive or possible sow herd expansion during the period, pushes the PigCHAMP average replacement rate to 56.9% in 1999. This rate reflects likely factors in a higher rate.

PigCHAMP also reported that the best 10% of herds have an average replacement rate of 30% (culling 25.5% and 2.7% death loss) reinforcing that replacement rates can be improved.

The culling, death and replacement rates can play a pivotal role in the profitability of a breed-to-wean operation in several ways. Many sows never reach their most productive parities (third through fifth). Additionally, the introduction of breeding animals from an outside source carries a certain disease risk. More replacements equals more risk.

The optimum tenure of a sow in a breed-to-wean operation is a complex question to answer.

One approach is to look at a replacement gilt as a capital budgeting item similar to the purchase of equipment or land. Such an approach takes into consideration the number of parities a gilt will be in the herd. In other words, consider the initial cost of the gilt, followed by periods of expenses and income, spread over her productive parities.

A spreadsheet has been developed at the University of Tennessee that helps determine how long a sow must remain in the breeding herd of a farrow-to-finish or a breed-to-wean operation before she is paid for. The analyses are based on discounted cash flows, which calculate net present value (NPV).

For this article, average reported values were used for most of the items listed in Table 1.

The results of the NPV analysis, using average values, are demonstrated in Table 2 and 3. These tables illustrate inputs that can have the largest impact on the parity in which a sow reaches a positive NPV or has paid for herself.

If you follow the rows corresponding to 10.1 pigs born alive (Table 2) and $32 price received/weaner pig (Table 3), you will notice that a positive NPV is not reached until the fourth parity, given the assumptions used in this analysis.

However, holding all other assumptions equal, you will notice that a 0.25 improvement in pigs born alive or $2 improvement in price received lowers the point at which a positive NPV is reached to parity 3. The improvements needed to lower the parity in which a positive NPV is reached under this scenario include a 2.5% improvement in number born alive (NBA) and a 5.8% change in price received for the weaners.

These relatively small changes could be accomplished easily by sharpening management skills or negotiating a slightly higher price. Incentives such as heavier pig weights or fewer defects could be bargaining points.

Many pork producers realize increased sow longevity can result in reduced direct costs associated with gilt isolation and acclimation. Long-term improvements in sow longevity also can cut facilities costs by reducing the space required for isolation/ acclimation and for housing replacement gilts. So, annual depreciation, interest and repair expenses would be lowered.

The space "reclaimed" through increased sow longevity can then be redirected to other productive uses, such as sow gestation and breeding pens. The cost reduction or redirected facility use can reduce up-front cost and hence improve cash flow. This may be particularly important in a startup.

But, when examining the impact of lowering facility costs over the life of a building and the total number of replacements housed during this period, the cost savings on a per-sow basis is nominal and has little effect on the parity at which a positive NPV is reached.

Labor requirements are reduced as the productive lives of sows increase. Less time is spent obtaining, developing and breeding replacement gilts.

However, the cost savings on a per-replacement basis are relatively small and have little impact on the parity in which a positive NPV is reached.

The disease risk associated with bringing in replacement gilts is more difficult to quantify. This risk likely has different production and economic values depending on the diseases and the impact on the breeding herd, nursery and grow-finish animals.

Scientists estimate that an outbreak of porcine reproductive and respiratory syndrome (PRRS ) could reduce profits by more than $200/inventoried sow through poorer farrowing rates, fewer pigs born alive and increased preweaning mortality. And, this does not include the negative effects PRRS has on nursery and grow-finish pigs.

Improving longevity can help a producer reduce such a risk. However, these risks and the costs associated with them are complicated to model simply because the probability of introducing a disease through replacements is difficult to determine.

It is a common belief that older sows have fewer substandard pigs (weighing less than 8 lb.) at weaning. Therefore, older sows would increase the number of pigs sold at full value.

The National Pork Producers Council’s Maternal Line National Genetic Evaluation Program shows that the percentage of substandard pigs does vary by parity and genetic line, converse to what many commonly believe. This should reinforce that continuous, accurate monitoring of birth and weaning weights is important when making management decisions.

Improving Development

Having the right management program helps producers effectively increase output of gilts.

Gilts have a major impact on the cost and productivity of a breeding herd. Their replacement rate (culls, mortality) has a profound impact on herd profitability.

On the productivity side, gilts usually have lower farrowing rates and fewer born alive, compared to sows in their middle parities.

More importantly, however, data indicates that gilts that produce large litters at first parity will continue to produce large litters over their lifetime. The cost side of the equation is related to cost of gilts and replacement rate (culling plus mortality).

Historical Focus Historically, commercial producers have concentrated gilt development activities on health control, isolation and acclimation, not on selection, growth, conditioning and nutrition. Factors such as minimal weight at service (260 lb.), age at first service (210 days) and mating on second or third estrus have been emphasized.

However, the real focus should be on gilt development to maximize lifetime production. Increased square footage, small group size, diet programs to control growth while meeting targeted backfat, genetic selection and facility improvements have considerably modified gilts that are destined for reproduction.

Gilts reach 200 lb. at an earlier age and are very lean (less than 0.72 in. backfat). So, they may have lower body reserves for lifetime production.

One benefit of herds converting from farrow-to-finish to farrow-to-wean is that producers usually have excess space for gilt development and at a lower cost. This has allowed maturing gilts to grow rapidly with improved health and develop into maternal-looking females.

A second benefit is time for proper development because producers frequently bring in gilts as weaners or feeders for disease management strategies. Producers who gain in productivity also bear the costs.

Recommendations Gilts should be allowed 10 sq. ft./head from 100-150 days of age, 12 sq. ft./head from 150 days of age, and 15 sq. ft./head from 200 days of age. Pen flooring should be smooth and nonabrasive.

Gilt developer barns should use self-feeders similar to a typical finishing barn. If gilts reach 180 lb. in less than 140 days of age, implement a restricted diet followed by a flushing program to improve longevity.

Records Evaluation Accounting and sow recordkeeping systems have done a poor job of identifying the outcome of employing such strategies as increasing square footage for gilt growth.

By applying the National Pork Producers Council's (NPPC) chart of accounts and using existing sow record systems, these interventions can be evaluated properly.

The Carthage Veterinary Clinic uses PigCHAMP to track all reasons for gilt removal. This is most easily done if you label a herd as a gilt herd. Include all animals in the gilt herd during the development phase as a separate herd. By doing this, all history of that individual gilt or group is transferred to the permanent record. At the same time, by cost accounting developing gilts separately, various financial programs will track the net expense.

Figure 1 illustrates the replacement gilt price on the cost/weaned pig. If you increase the space/gilt in the staged program as outlined, the cost/developing gilt increases by $7.75/head ($36/7.6 sq. ft. standard contract). With a weaned pig price of $30/head, a herd needs to increase lifetime production by only 0.26 pigs to pay the gilt development facility cost.

Table 1 illustrates the effect of replacement rate on cost/weaned pig.

Data is accumulating, evaluating the results of improved gilt development. Table 2 summarizes the gilt productivity changes in a designed program.