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Articles from 1998 In February

Should We Add A Voluntary Checkoff?

What is the biggest issue facing the pork industry today? Odor control? Manure management? PRRS? Hog prices?

Good answers; all wrong. Realistically, I think the biggest issues facing the pork industry today are legal, regulatory and environmental.

Justified or not, we are embroiled in a period of environmental and regulatory awareness. The decisions made in your county courthouse, the state capitol and in Washington, DC, will affect this generation of pork producers and all that follow.

The message is clear - the pork industry has a window of opportunity, probably 3-5 years, to help establish the legislative and regulatory rules within which hogs will be raised.

And, as always, there's a critical shortage of funds. The legal counsel and lobbying expertise needed to have an impact on the policy-makers is expensive.

Where will the dollars come from? Not the current checkoff, that's for sure. Those funds are earmarked "for pork promotion, research and producer education only."

That leaves the pork industry with the critical challenge of generating non-checkoff dollars - often referred to as "unrestricted funds."

The fundraising issue has been raised at several state pork producer annual meetings this winter. Industry leaders are pushing for positive action by the National Pork Producers Council (NPPC) delegate body in early March. Those delegates urgently need your input.

But first, let's pinpoint the real issues. NPPC Executive Vice President Al Tank lists these:

* Legal issues - Precedent-setting cases are on court dockets that will affect every pork producer - regardless of size. "Every pork producer and allied industry person needs to understand that there are a whole group of people that do not want the pork industry to be successful. They are very active, very aggressive, and they are professionals."

* Legislative and regulatory component - As the EPA proceeds to draft effluent guidelines, for example, realize those guidelines will tell every state regulator what they shall do to regulate the pork industry. The ability to manage that guideline-setting process is critical.

* The use of checkoff dollars is being narrowed, not broadened. The demand for unrestricted funds is growing.

So, what are we talking here in terms of dollars needed? Tank, with his considerable experience in Washington, DC, takes a shot. Assuming any fundraising effort would have a provision to return an equitable portion to the states for their legal and lobbying efforts, $3 to 3.5 million would be needed to cover the 44 member states. Another $1.5 million is needed to be truly effective in Washington. "If you really want to do it right, shoot for $7 million," says the NPPC CEO.

That's not chicken feed!

But, of course, it's relative. The total hog slaughter this year will approach 100,000,000 head. A penny apiece would generate a million bucks. A dime apiece would put $10 million in the pot. Sounds like another checkoff.

Oh, if it were only that easy. Remember, checkoff funds cannot be used for this political, policy-setting work.

What if it was a voluntary checkoff? A good question. It's been posed to AMS (Agricultural Marketing Service), the overseers of commodity checkoff programs. No answer yet.

We could reduce the current mandatory checkoff from .45"percent" of market value/hog to .44"percent", then pick up the .01"percent" difference as a voluntary contribution. Similar to the penny-a-pig approach, this would generate about $1 million. Roll the .45"percent" checkoff back to .35"percent" and you could add about a dime/hog to the unrestricted coffers.

Again, the legality of that approach has not been ruled on by the AMS.

If the "voluntary" option is acceptable, could producers request a refund, as was the case before the legislative checkoff passed? AMS is studying it.

Then there's the much bigger issue. Would checkoff managers be subjected to threats of a refund request to gain leverage for a cause?

Or, try this: Establish an industry war chest or pool of funds. Draw in all members of the pork production chain. Logically, all with a vested interest in maintaining a viable pork industry should be willing to contribute. Fees could be allocated; shares sold; an industry bond - call it the pork "war bonds" - could be established. A board or oversight group would guide the activities associated with these funds.

Tank admits, "Some will see this as a money grab by NPPC." His response: "I would give up some of the checkoff money if I could have more money to do the right thing. We could always use the 'other' money as (we do) checkoff money, but we can't use checkoff money to do what we need to do." Is there a better way to get the whole pork chain involved? Some new thoughts, new answers are needed. I've always marveled at the thoughtfulness, innovation pork producers have, time and time again, brought to the table to meet and solve such challenges.

This is a time for more unselfish, innovative thinking. Please share your ideas with your delegates to the annual meeting (March 5-6). Time's a-wastin'.

Solutions To Five Manure Problems

These days, pork producers know that being a top manager means handling manure in an environmentally and economically sound manner. Sometimes, even the best producers find their manure management plans don't work quite right.

What problems make the best plans go awry?

Doug Hamilton, extension waste management specialist at Oklahoma State University (OSU), recently identified five common problems pork producers encounter when managing manure. These problems range from poor design to inadequate equipment.

Hamilton has worked on manure management at OSU since 1994. Before that, he helped Tennessee producers with manure problems while on the staff at the University of Tennessee.

He lists five common manure management problems:

1. Inadequate Design

Producers in business for many years add buildings and manure storage as needed. This leads to a haphazard design that can hamper good manure management, according to Hamilton.

"You may have half the buildings with a pull-plug system and some with a flush or open lots," he says. "You don't have a good central collection system. Manure from one building may go straight to a lagoon while another flushes into a different barn. Producers haven't looked at the whole farm and tried to tie everything together."

A common problem is increasing farm size without increasing manure handling capacity. For instance, a producer increases the number of finishing buildings entering his existing lagoon. Now the lagoon is overloaded and smells bad.

Hamilton says the producer should have understood the design of the lagoon and known overloading would cause problems. Good information ahead of time would have solved the problem before it occurred, he adds.

He suggests producers seek information about a system before installing it. Information can come from the Extension Service, universities, the MidWest Plan Service and professional engineers.

In fact, Hamilton recommends hiring an engineer to head off early design problems. He suggests finding an engineer with a professional engineer (PE) license. The engineer should have an agricultural or biosystems degree or a civil engineering degree with a strong background in agriculture.

"Ask them a few questions to find out if they understand your systems," he says. "Ask them: 'If I change my feed, how will it affect my lagoon?' Then see how they respond. Make sure they understand your entire farm. And, you have to be firm with a professional person. They are doing this for you and nobody understands your farm better than you do."

Hamilton says producers should consider keeping an engineer on a retainer. "But most farmers consider themselves engineers and generally don't go to somebody unless they already have a problem," he relates.

Hamilton encountered a problem on one hog farm that could have been prevented with early engineering expertise. The producer discovered his new building was lower in elevation than the lagoon. So he had to build another lagoon at a lower elevation.

"If he had conducted a proper site survey, they would have realized what the elevations were," he adds. The extra engineering would have saved the producer $40,000-50,000 spent on the second lagoon.

Engineering help is especially crucial on unstable soils or hillsides, he adds. Fixing earthwork problems becomes very expensive.

2. Poor Liquid Planning

The failure to know how much, and when, liquid goes into the lagoon or storage facility can cause big problems.

"The problem some have is when they want to apply in May or June, they don't have enough lagoon effluent," Hamilton says. "But come November, the lagoon is full and that becomes a problem.

"Most people don't have an idea of how much volume is going into their (manure storage)," he adds. "That is pretty easy to figure out with some water meters and tables of expected production values and rainfall."

All producers should know and keep visible the "action levels" on their lagoons or storage basins, Hamilton says. On lagoons, these levels show the minimum water level to maintain treatment volume and maximum water level to maintain stormwater freeboard. Producers who don't know these should be able to find them on their manure management plans.

Producers like those in Oklahoma who use lagoon effluent for irrigating need to plan ahead. Hamilton says generally they need to start collecting water in October. In March, evaporation takes over so they must carefully manage the liquid so there is enough to irrigate. By October, the stores should be at the minimum level again.

Producers with all types of manure systems should always know how much water is used on the farm, Hamilton stresses. Water meter readings should be checked. If water meters are not available, worksheets are available to estimate the water. Hamilton says the worksheets take into account the size of pits, frequency of flushing, numbers of washdowns, etc.

Volume levels in the manure storage also should be recorded on a regular basis. This takes measuring the depth of a pit. Or in storage basins or lagoons, producers should have a depth-storage curve drawn at construction or have one drawn from constructed dimensions. The curve plus a depth gauge will give volume.

"Then look for some trends," he says. "You may find that every year in February, the manure is getting close to the top. When you start to see those trends, go back and see what your water use is and can you manage it better.

"This is kind of like counting calories or doing your taxes," he adds. "Nobody likes doing it. But it will pay off. Most people can manipulate their system to get the effluent they want when they need it."

3. Poor Nutrition Planning

Manure application should be matched to the land. Unfortunately, this simple rule often is forgotten. Producers often do not know the nutrient content of the manure. And then manure application is not matched to the crop needs.

Hamilton suggests producers first check their nutrient management plans to get an idea of the manure's nutrient content. Then he recommends investing in manure nutrient tests from each storage facility to obtain accurate analysis. This is the only way to make accurate manure applications.

Soil samples must also be conducted on a regular basis.

Producers should use realistic expectations for crop yields when applying the manure. This prevents over application of manure.

"Just because you want to grow 10 tons/acre of bermudagrass doesn't mean your land can do that," he says. "If a soil survey says you can expect 3 tons/acre, then base your application rate on that.

"Sampling doesn't need to be a chore," he adds. "But you really have to know what you are doing to get a good representative sample. And sampling is cheap. People will balk at going to a commercial lab to spend $36 to see what the nutrient content is. But you can save yourself $2,000 based on that $36 investment."

4. Inadequate Equipment

Often, producers just don't have the right equipment to handle their manure efficiently, Hamilton contends.

"You've got to have large enough or small enough equipment to get manure put on at a rate you want," he says. "I see over and over again, if a farmer can't apply manure in one week, it won't get done," he says.

"Hog farmers have so much to worry about, the last thing they think about is manure management. So if you don't have adequate equipment to keep up with the manure, then you're not going to do it properly."

That's the point where Hamilton suggests getting larger equipment. But, he cautions, don't buy larger than you need or the the price may outweigh the benefit of the manure.

He offers this example: A producer who needs 100 gal./min. irrigation does not need to spend the extra money to buy a 600 gal./min. gun.

"Basically, you're trying to do land application to match your cropping schedule," he says. "Look at the cost of applying manure in both cost of handling and from the cropping standpoint. How is this going to help me get better yields or reduce my costs? Then buy your equipment accordingly. Also, make sure the equipment you are using is matched to the material moved."

Adequate equipment holds true in other manure handling equipment, too. Hamilton says someone who wants to flush more frequently should be sure their well or recirculation pump can handle the additional flow.

5. Understanding A Building

Hamilton finds some producers do not understand the proper way to manage a building's manure system. Instead of following recommended procedures, producers will put off flushing or pulling a plug. Then problems begin with odors.

Here's an example of mismanagement with pit-recharge buildings flushing with recycled lagoon effluent. The recommendation is to pull the plug every seven days. For less odor, the plug may be pulled every three days.

"What happens is some producers have a small pump and they feel like they can't keep up (with the recharge water in the pit)," he says. "So they put it off for three weeks. Then they take their irrigation pump, put it in the lagoon, and flush all their buildings at one time. They just overloaded their lagoon and now have a problem with odor.

"They need to look at flushing or pulling the plug on a rotation through the farm," Hamilton suggests. "Today, pull the plugs in one building, tomorrow the second. Look at the size of the pits and find the pump that will do the job. You'll find this is a lot easier than taking a whole day to fill up pits and pulling people off things they should be doing."

Producers should know the proper flushing or pull rates of their buildings, he emphasizes. For example, flushing under a slotted floor should be done 4-6 times/day. Open-gutter flush buildings should be flushed every 15-30 min.

"Also remember that anything you do in the building, you're also doing in your storage system," he says. "If originally you were filling pits with fresh water every seven days and now you want to double the rate, you're going to put twice as much water in the lagoon."

Playing The Odds

Using statistics to recognize if a management change offers the highest payback.

The extra nickels and dimes you save (or spend) with everyday management decisions could easily be the difference between red or black ink at the bottom of your accounting ledger in 1998.

If you made a management decision today that improved daily gain by .10 lb./pig/day, what would it mean to your bottom line?

If you trimmed your feed cost/lb. of gain by $.015, but the change also caused a .05 lb./pig/day slippage in daily gain, how would that affect your bottom line?

Or, perhaps, you invest a dime per pig in a product that boosts daily gains by .02 lb./day - does the payback justify your investment?

Producers and their advisors make similar decisions every day, often without a thought about how the decision could affect their marketing strategy and/or the price they receive from a packer when pigs are sold.

Extension Swine Specialist Mike Brumm has researched the effects of some management changes, then considered how the resultant shifts in pig performance might affect the price received under various packer buying programs.

The University of Nebraska researcher admits such a distinction was often difficult to make in the past. Continuous-flow operations where pigs were constantly removed to market and more pigs brought into the system made it nearly impossible to define groups. As pigs reached desired weights or more space was needed for the next group coming in, pigs were often moved and mixed making it almost impossible to keep track of ages, origin or other pertinent inputs. Commonly applied statistical tools that could help understand the impact of management changes simply do not apply.

But much of that changed as producers increasingly embraced all-in, all-out (AIAO) production methods. With AIAO, facilities are stocked, groups are identified and remain constant from the start of the growing period until they leave finishing facilities for market.

"At the time of stocking, pigs are often from one to three farrowing sources, of common genetics, and often within two weeks of age of each other," Brumm notes. Barrows and gilts are often penned separately in grow-finish buildings. In larger operations, entire buildings may be stocked by gender.

"The clear defining of a population - by room, barn, farm, etc. - means that producers and their advisors can now employ common statistical methods to describe each population of pigs," Brumm notes.

Statistical methods! Yikes! Don't let the reference to "statistics" spook you, says Brumm. Much of the mathematics is already done and, he adds, there is a payoff.

Here's Brumm's bottom line: If your records can supply the information needed to drive modern day "what if" models, time-tested statistics can shed new light on the impact and the profit potential of your management decisions. It's not necessary to understand the statistical methods and formulas precisely, only their application.

Understanding The Bell Curve Most people have been exposed to something called "the bell curve," which simply reflects the normal distribution of a trait or measurable component in a population. In general terms, the curve shows how a population is distributed. Examples might be the distribution of height among men in your hometown. Or, the weight of all third parity sows in your gestation barn. Or, the range of daily gains recorded on a group of nursery pigs.

If you recorded the weights of all pigs in an AIAO facility, barring any unusual management orhealth problems that could cause unusual shifts in the population's distribution, Brumm notes that the distribution of weights over the curve will follow the pattern shown in Figure 1 - the bell curve.

The distribution of points along the curve is commonly described by two statistical terms - "mean" and "standard deviation."

The "mean" - often called the "average" - identifies the peak or center of the distribution curve.

"Standard deviation" simply reflects the variation along the curve - defining the shape of the curve. Deviations affect how flat (wide) or peaked (narrow) the shape of the curve will be.

Keep The Faith If you're not a statistician, read the next couple of paragraphs on faith - a practical example will follow.

Brumm explains: "The mathematical formulas used to calculate standard deviation for a normally distributed population result in 68.26"percent" of the population being +1 standard deviation of the mean. Two standard deviations from the mean includes 95.4"percent" of the population."

The Nebraska extension specialist explains that years of tracking and defining "normal" distribution curves have given rise to something statisticians call "Z" tables. About all you really have to understand about these tables is that they help determine the number of samples meeting criteria for a population defined by a mean and standard deviation.

In everyday terms, this example using grow-finish pigs should help: We have a grow-finish unit, operated AIAO, stocked with 100 pigs/room. The mean (average) weight of the pigs is 210 lb. The standard deviation is 21 lb. Now, through the use of the Z table, we can accurately describe the distribution of the weights of the 100 pigs across the bell curve.

Brumm starts with the simplified Z table (Table 1, page 24). The Z values listed provide the multiplier of the standard deviation. So, with Z=1, for the 100 pigs in the room with a mean weight of 210 lb., a +1 standard deviation (21 lb.) would have pigs weighing in at 231 lb. (210+21). Now, the value associated with Z=1 in Table 1 is .3413. This means that 34.13"percent" of the 100 pigs would weigh between 210 and 231 lb. Rounding off, we can put 34 pigs in that range. Likewise, since the normal population curve (the bell curve) is distributed equally on both sides of the mean (center), there would also be 34 pigs (34.13"percent") between 189 and 210 lb. (210-21). We now know that 68 of the pigs weigh between 189 and 231 lb.

If we extend to two standard deviations from the mean (2x21=42), we have defined the weight range at 210 to 252 lb. (210+42) and 168 to 210 (210-42). In other words, 47.72"percent" (from the Table 1, take .4472 x 100 pigs) of the pigs will fall to the left of the median on the bell curve and 47.72"percent" to the right. That leaves only 4.6"percent" of the pigs in this room (approximately 5 pigs) weighing less than 168 lb. or more than 252 lb.

Okay, so we now have a better idea of the weight range of the pigs in the barn. But, there's one more statistical linkage that needs to be made before we get to the payoff. Hang in there.

Brumm reinforces that describing a pig population using these common statistical terms has merit for producers and their advisors. Still, he acknowledges, few have the knowledge base needed to understand how typical pig populations vary in weight over a growout period.

Research work at many universities and company research farms reinforces that as mean weights increase, standard deviation likewise increases. Both measures are expressed in pounds, and therefore tend to change together. That means that a description of how a pig population varies requires both the mean and the standard deviation be given. It is meaningless to list the standard deviation of a group unless you know the mean or average it "deviates" from.

Brumm offers this final mathematical twist to solving the link between the standard deviation and the mean. This measure - called the coefficient of variation or "CV" for short - is often used to describe the variation in a population. Simply stated, CV is the standard deviation divided by the mean. The result is expressed as a percentage.

So, a CV of 10"percent" says the standard deviation is 10"percent" of the mean value. "Another way of stating this is that approximately 21/43 (68.3"percent") of the pigs have weights that are + 10"percent" of the average weight for all of the pigs."

Brumm's work with actual groups of pigs has shown that CV values in growing/finishing populations tend to be relatively stable - particularly toward the end of the finishing period. Therefore, the CV can be a useful indicator of how much weights vary in a finishing pen, room or barn.

What is normal CV? "Based on my experience at Concord (Experiment Station), I typically tell producers and their advisors to start with the 10"percent" or 11"percent" CVs in the table. Then as they gain experience, they can make adjustments up and down. An 8 (CV) would be very rare, but 12-14 might be common in some systems," he says Brumm also reminds us that disease challenges can have an impact on CV values. "These tables and the underlying math are based on normally distributed populations. They probably don't apply if a disease or management situation caused a lot of knotheads - which will skew the curve," he adds.

The Payoff The stage is now set to use Table 2. Using the population statistics we've just reviewed, we can now estimate pig weights within a normal distribution in the grow-finish population. Our starting point is at the 50th percentile column where the average weight is listed.

Brumm offers this example: Using experience, judgement or other means, a producer or consultant determines the CV for a group is 10"percent" and the average weight of all pigs is 220 lb. Brumm has done the math, thus generating Table 2, converting CVs to percentile distributions for the various CVs and average weights.

Looking at Table 2, you'll note that a group of pigs with an average weight of 220 lb. and a CV of 10"percent" has 20"percent" of the pigs weighing 201 lb. or less (20th percentile) and 20"percent" weighing 239 lb. or more (80th percentile).

Now that we have an estimate of how pig weights are distributed over the group, we can apply those weight distributions to a packer's payment matrix. Table 3 offers the payment matrix for IBP and Hormel & Co. as of Aug. 1, 1997.

You're now ready to measure the financial impact of how a management decision might affect your bottom line. "Knowing the weight distribution, producers and advisors can calculate packer discounts for sort loss when a variety of market options are considered," says Brumm. "With an estimate of sort loss versus fixed and variable costs associated with each additional 'pig day' in a facility, the financial consequences of various marketing decisions can be estimated."

Possibilities might include whether to "top off" pens in a finishing barn to capture a packer's premium and reduce crowding in the finishing pens. Brumm offers this scenario: 20"percent" of the heavier pigs in a finishing barn are sold with the next sale planned two weeks later. "If I know the average weight of the top 20"percent" and have some estimate of the CV, I can use the table to estimate the average weight of all pigs in the barn. Then I can do a rough feed/gain, cost of gain to date, etc. calculation. I can also use average daily gain projections and calculate how many discounted pigs I would have if I sold the remainder at various time intervals on various packer grids.

"This lets me balance facility costs vs. packer discounts for pigs not meeting the requirement," Brumm explains.

There are always tradeoffs. Topping off finishing pens means the hierarchy of the pen will have to be re-established, which has implications on growth and efficiency. The compromise might be to establish the weight distribution of the pen and, if warranted, match lighter hogs to one packer's payment matrix, heavies to the other so the barn can be emptied, cleaned and restocked.

Brumm also reinforces that the tables can be used to more accurately describe the impact of a management change on a pig population. "Rather than saying the use of a vaccine, feed additive, drip cooling system, etc. decreased the variation, it is more meaningful to say - 'the use of XYZ reduced the CV at marketing from 11 to 10. This number can now be used in conjunction with Table 2 to model the financial impact of that change on price received, barn flow, etc."

There is no doubt that the application of these common statistical methods to describe populations of grow-finish pigs nudges producers to the next level of precision when making management decisions, Brumm notes. These methods will help producers more clearly estimate the payback potential of a management or herd health change. And, these techniques shed new light on how a marketing decision and packer payment matrices interact with performance shifts caused by changes in management.

Ileitis Stalks High-Health Herds

As more herds strive to achieve higher herd health status in order to improve efficiencies and profits, certain "high health" diseases, like ileitis, become more prevalent.

This disease entity has been around for years. The use of new technologies such as multiple-site production, enhanced biosecurity systems and improved vaccination protocols led to eradication of several major diseases. This allowed some secondary diseases to gain in importance and become primary classic problems. Ileitis is one of the easier of these diseases to control, especially if you can predict outbreaks.

Ileitis is known by several different names. It is called Porcine Necroproliferative Enteropathy (PNE) in academic circles. It is perhaps more familiarly referred to as "garden hose gut." Ileitis is caused by an organism called Lawsonia intracellularis. The organism lives inside the cells closely associated with the intestinal tract. Clinical signs vary dramatically and often depend on the age of the affected pigs.

The chronic form of this disease often goes undiagnosed. Producers do not notice the diarrhea in a small percentage (5"percent"-10"percent") of the pigs. This form usually occurs in grower pigs 1-2 weeks after arriving at grow-finish facilities. Performance suffers and affected pigs exhibit a watery, dark diarrhea that may or may not show blood. These pigs become what I call "razorbacks" because, if not treated, they will suffer substantial weight loss.

The cost to the producer is high due to very poor feed efficiency and negative daily gains.

The acute form of ileitis is rapidly becoming the most prevalent. Both finisher pigs and replacement breeding stock die suddenly. New gilts and boars in isolation units will often suffer sudden death from ileitis. Again, this is particularly true in well-managed, high- health herds. Necropsy is crucial in order to differentiate this disease from other enteric diseases. Diagnostic tools also include serology and a polymerase chain reaction (PCR) assay on fecal material. Thesetests are limited, but continue to improve.

Severe thickening of the ileum portion of the small intestines along with necrotic tissue inside the lumen of the intestine occurs with chronic ileitis. Acute ileitis displays a hemorrhagic ileum with mucous and small amounts of necrotic tissue present. These pigs often appear pale. The list of differential diagnoses for ileitis includes Hemorrhagic Bowel Syndrome, whipworms, swine dysentery, salmonellosis, gastric ulcers, Colonic Spirochetosis, and Transmissible Gastroenteritis (TGE). The most important steps toward treatment and control of ileitis are sanitation, strict adherence to biosecurity and accurate health records to help predict outbreaks.

Tylan is the only feedgrade antibiotic labeled for prevention and control of ileitis. It works very well, but remember the stressors of the outbreak must be controlled also. Extra-label use of injectables and water medications are often necessary initially in order to have time to add the feed medication. Accurate diagnosis of enteric disease problems is very important in the long-term control program.

Case Study No. 1 We were called to an isolation facility housing replacement gilts for a 1,200-sow unit. The manager reported finding two dead gilts upon arriving at the facility that morning. This facility is a new, double-curtain unit with totally slotted floors, and is being operated all-in, all-out.

This group of gilts had been in the building about 10 days and had been acting fine, according to the manager.

The remainder of these gilts looked normal. Feed consumption appeared normal.

Necropsy of the two gilts showed a slightly thickened ileum with dark mucous and blood present.

Laboratory results revealed a proliferation of the intestinal lining and the Lawsonia intracellularis organisms.

The gilts were placed on Tylan at 100 g/ton of feed for two weeks after the necropsies and tentative diagnosis of acute ileitis was made. There were no other death losses in this group. A control program utilizing feedgrade Tylan on subsequent groups successfully prevented ileitis outbreaks.

Case Study No. 2 Recent groups in a 1,000-head finisher had been experiencing sudden death in a small percentage of pigs. The overall death loss ranged from 1-2"percent" and the majority of these pigs appeared healthy prior to death.

We had not previously necropsied any of these pigs. The producer thought they had died from Streptococcus suis because they were doing well and showed no signs of diarrhea.

The pigs weighed 220 lb., and appeared pale and bloated.

Necropsy results showed the small intestines were very congested and contained a lot of blood and mucous.

The preliminary diagnosis was Hemorrhagic Bowel Syndrome. Laboratory results were negative for Lawsonia organisms. There was no ileum thickening or proliferation.

The preventative protocol involved strategic pulse feed medication and rotation of medications.

Enteric problems seem to exist occasionally in all areas of swine production. The key is getting an accurate diagnosis

An Industry Report Card

Six years of industry changes are covered in the latest survey of the pork industry from USDA's National Animal Health Monitoring System (NAHMS).

NAHMS' "Changes in the U.S. Pork Industry 1990-1995" compares results of the 1990 National Swine Survey and the Swine '95 Study. The 34-page booklet reports changes in industry demographics, health and productivity, and management.

NAHMS officials point out that some of the changes seen during the survey period are magnified by changes in how a few of the questions are phrased.

Demographic Changes The 1990 national survey covered 18 states representing 95"percent" of the U.S. hog population. The Swine '95 Study was conducted in the top 16 hog states representing 91"percent" of the hog population.

In the six years from 1990 through 1995, hog and pig inventory estimates increased about 7"percent". Year-to-year inventories changed only slightly, but the overall trend was upward.

"Breeding inventory made up approximately 12"percent" of total inventory over the 1990-1995 period, but showed a general downward trend indicating a more productive industry," the NAHMS report indicated.

As expected, the number of U.S. hog operations declined by more than 30"percent" during the survey period, showing a steady drop annually, culminating with nearly a 13"percent" decline from 1994 to 1995. The trend is illustrated in Figure 1.

The smallest herds still dominate the industry scene, but they are showing a steady decline. While other, smaller size categories continue to decline in production, the category of 2,000 or more head is grabbing a growing proportion of U.S. hog inventory, at 44"percent" in 1995.

Overall, there were nearly 4 million more hogs and pigs in 1995 than in 1990. Notable increases were seen in Alaska, California, Colorado, Mississippi, Missouri, North Carolina, Oklahoma, Utah and Wyoming. North Carolina, Oklahoma and Wyoming more than doubled their total hog inventory. Only Alaska (from 40 to 50) and New Jersey (from 700 to 750) reported increases in the number of hog operations from 1990 to 1995.

World pork production climbed 8"percent" during the survey period, led by Ireland, Korea, Mexico, China, Taiwan and France, all with production increases of 20"percent" or more. Major production declines were experienced in Germany, Switzerland, several eastern European countries, the former Soviet Union and Japan. The U.S. came in at a 11"percent" increase for the period.

Health, Productivity >From 1990 to 1995, reported stillbirths and mummies per litter plummeted nearly 25"percent", while born alive per litter reportedly decreased 1"percent". "Therefore, though the total pigs born per litter dropped (10.34 to 10.02), the percent born alive per litter increased from 91.59"percent" to 93.51"percent"," the report indicated. Preweaning deaths per litter decreased 20"percent".

There has been a steady increase in the number of pigs saved per litter each year since 1990, going from about 7.9 in 1990 to about 8.3 in 1995.

Crushing or "laid ons" were by far the leading cause of preweaning deaths in the report (Figure 2.) There was a significant drop in piglet deaths traced to scours. A slight rise in preweaning deaths of "unknown origin" was also reported.

There was essentially no difference in the number of nursery pig deaths from 1990 to 1995. In weaned pigs weighing under 40 lb., just under 2.5"percent" died in the nursery phase.

However, the causes of nursery deaths are notable. Scours was identified as the leading cause in 1990 (25.1"percent"), while respiratory problems made up the highest mortality (32.4"percent") in 1995. Starvation and unknown ailments also accounted for a larger percentage of nursery pig deaths in 1995 than in 1990 (Figure 3 on page 34).

In the grow-finish phase, only minor differences were noted between the two NAHMS studies. The percentage of grow-finish hogs that died averaged around 2"percent".

Scours problems increased from 1.9"percent" to 7.1"percent" from 1990 to 1995. Respiratory problems declined from 47.9"percent" in 1990 to 39.5"percent" in 1995, but still remained the leading cause of death in grow-finish pigs. Lameness caused about 8"percent" of deaths in both surveys, while deaths caused by trauma dropped from 8.6"percent" to almost 7"percent". Other known problems and unknown maladies accounted for a large percent of the grow-finish deaths in both surveys, 33.7"percent" in 1990, escalating to 38.6"percent" in 1995.

The percent of operations with animals testing positive for Porcine Reproductive and Respiratory Syndrome (PRRS) increased from 1990 to 1995 to include nearly one-half of all tested operations with at least one sow.

Reported cases of both salmonella and Actinobacillus pleuropneumonia nearly doubled from 1990 to 1995. The cases of Transmissible Gastroenteritis and E. coli were nearly unchanged in the two surveys.

Serotypes responsible for salmonella infections in hogs continue to increase. The three most common serotypes of cholerasuis, derby and typhimurium continue to be the most commonly isolated. But each year, the trio account for a smaller proportion of the total, going from 82"percent" in 1990 down to 58"percent" in 1995.

Management Changes The percentage of operations using artificial insemination doubled over the six-year period, expanding from 3.8"percent" to 7.8"percent". Handmating of sows and gilts accounted for a fourth of the operations studied. Penmating still leads as the most commonly used breeding method, but declined from 67.1"percent" in 1990 to 53.7"percent" by 1995.

There was a noticeable trend of increased use of antibiotics as a prevention practice in both sows and gilts. Use of injectable antibiotics nearly doubled (from 15.9"percent" to 30.3"percent"), while use of antibiotics in water also climbed from 0.8"percent" to 6.6"percent".

Likewise, a trend of increased antibiotic use on boars was also identified. Injectable antibiotics use rose significantly from 1.5"percent" in 1990 to 22.3"percent" in 1995. Feed antibiotic use also rose sharply, from 10.9"percent" in 1990 to 38.4"percent" in 1995.

Half of all farrowing operations practiced all-in, all-out (AIAO) management in both surveys - 48.2"percent" in 1990, 46.2"percent" in 1995. The overall inventory of females managed as AIAO increased from 55.1"percent" to 65.5"percent".

"These results indicate that more, larger operations are using AIAO management in the farrowing phase," the report states.

The overall percentage of nursery pigs managed AIAO climbed more than 16"percent" from 53.5"percent" to 69.8"percent" during 1990 to 1995, while the number of operations practicing AIAO in the nursery remained virtually unchanged at nearly 48"percent".

In grow-finish, the percentage of hogs raised AIAO nearly doubled during the survey period, climbing from 23.9"percent" to 46.3"percent". The percentage of operations using AIAO in grow-finish rose from 30"percent" to 42.4"percent".

AIAO management by stage of operation is illustrated in Figure 3.

The NAHMS report also revealed the following industry changes:

* Overall, in 1995 compared to 1990, the average pig was weaned three days younger, stayed in the nursery 1.7 days longer and experienced about the same length of stay in the grow-finish phase (118 days).

* The vast majority of hog operations continue to be run by independent producers who market their own animals.

* Producers using a recordkeeping system slipped slightly from 92.5% in 1990 to 90.6% in 1995. Hand-held records continue to be used the most. Use of computers increased from 8.0% in 1990 to 13.2% in 1995.

* Vaccination against some common hog diseases has dropped from '90 to '95, including: erysipelas from 69.6% to 56.2%, E. coli scours from 49.9% to 47.4%, parvovirus from 65.6% to 54.1% and leptospirosis from 70.5% to 59.4%.

* Isolation and testing procedures decreased for new breeding stock and rose only slightly for feeder pigs.

* Producers in the survey reported a dramatic drop in the use of veterinarians for regular visits and consultations alike. Overall, use of veterinarians for any purpose declined from 75.4% in 1990 to 49.4% in 1995.

The NAHMS report explained that producers with finishing floors were less likely to use a veterinary consultant than those who farrowed sows. This may explain the large decline.

* On-farm burial or burning still largely dominates carcass disposal, accounting for 84% in 1990, 72.1% in 1995. On-farm composting sprang from virtually nothing in 1990 to 12% in 1995.

* Hog operations remained fairly close geographically. More than 70% are three miles apart or closer. Most reported the nearest known hog market to be more than five miles away. More than 15% of operations were within five miles of the nearest market in both years

Tapping Manure's Rich Resources

Jerry Hatfield takes exception to the view that hogs generate tremendous amounts of toxic wastes. In fact, Hatfield's line of work generally proves hogs generate quite the opposite. He calls animal manure "the most undervalued natural resource that exists."

Hatfield is laboratory director of USDA's National Soil Tilth Laboratory in Ames, IA. He has become a big proponent for capturing manure's high value instead of merely discarding it.

"Our pitch over the last few years is manure is a great source of organic nutrients and inorganic nutrients," he says. "It has a value going on that soil that is much more than just the nitrogen, phosphorus and potassium of manure."

Manure can help improve certain characteristics of soil from water-holding capacity to nutrient cycling capabilities. Hatfield cites research that shows manure will even bring productivity back to eroded land, creating topsoil.

So the popular attitude of viewing manure as waste frustrates Hatfield. "Manure has become a disposal problem, not a utilization problem," he says. "That attitude has pervaded the public. When they look at livestock operations, they envision mountains of toxic waste."These "mountains" don't exist. All solid and liquid swine manure produced in the U.S. can only cover one-eighth of the nitrogen requirements for the U.S. corn crop, according to Hatfield. The U.S. is far from an oversupply of manure.

Toxic Label Misplaced Plus, the toxic waste label should instead be pinned on human waste. The nutrients in animal manure are not hazardous wastes, Hatfield states.

"There is nothing in animal manure that is a toxic substance," he claims. "While animals generate volumes more than humans, human waste is closer to a toxic material. The components of human waste are heavy metals, volatile hydrocarbons, oils and greases. Obviously, these don't all come from human excrement, but they are in the pool of stuff in waste-handling systems."

Manure's bad image today is a far cry from the role and image of manure throughout most of history. "Until the 1940s, manure was the source of nutrients (for crops)," Hatfield says. "A farmer had animals and crops. He moved manure out to the field. The original site-specific management was done with manure."

During those times, Hatfield says farmers possessed a basic understanding of manure management and crops. "Then we got into commercial fertilizers and manure changed from being a resource to a waste," he says.

Undoubtedly, commercial fertilizer was and is much easier to handle than manure. Farmers know exactly how many nutrients are in a tank of anhydrous ammonia compared to what is in a tank of manure. But the extra equipment and time to handle the manure will pay off. "Manure can help sustain our soil resource over time," he says.

Manure Improves Soil Properties Research Hatfield has reviewed shows that applying hog manure will produce similar yields to commercial fertilizer. But over time, the variation of yield from year to year is much less, about half. "Farmers are guaranteed to get that same yield, and they don't go through the extremes," he adds. "It is a much more stable system."

Manure changes soil property in terms of organic matter. "If you look at fields that have long-term manure application, they are much better in terms of their soil structure," Hatfield says. "They are much better in terms of organic carbon content. The soil is much more tilthy, has a much better crumbly structure at the surface so it doesn't crust over. That allows more water to infiltrate, more water to be stored within the profile, and better utilization of nutrients within it."

In fact, manure can rebuild topsoil as found in some recent Canadian research, Hatfield reports. Yields from hog manure applied to plots with no topsoil yielded just as good as plots with topsoil. This effect occurred even the first year of the three-year study. Manure and residue were incorporated into the soil in a one-time application.

Manure can enhance organic matter when combined with a reduced-tillage system. Hatfield says research is showing manure will help reduced-tillage systems restore organic matter in soil faster than intensively cultivated systems.

"There is a whole litany of positive aspects we can bring to bear on this that have just been set aside," he adds. Much literature from years ago exists on this topic, but farmers and scientists seem to have forgotten it.

In a recent paper on manure and cropping research, he writes, "Organic materials contained within manure increase the plant availability of nitrate and phosphorus, increase soil organic matter, decrease the carbon:nitrogen ratio, and increase infiltration rate and soil water-holding capacity through changes in soil organic matter. These changes vary among soils in the absolute degree of change. However, almost all studies show these trends."

Air, Water Quality These benefits extend to less runoff of nutrients in subsurface drainage. Hatfield says drainage water from fields with manure applied as fertilizer tend to have lower nitrate concentrations than fields with commercial fertilizer. This is due to the higher organic matter in the soil and to the slower release of organically bound nitrogen in manure.

Hatfield's goal is to devise the most efficient way to apply nitrogen, both commercial and in manure, for the least impact on water quality. Research projects involving entire watersheds and nitrogen applications are underway.

The other environmental concern facing farmers is air quality, he adds. Already, Hatfield and the center's scientists are conducting research to determine the gases emitted from hog buildings, manure storage and application.

"A watershed is well defined while air sheds are a little different," he says. "Where the air blows is more topographically driven. We're trying to determine what's coming through this imaginary plane."

Some of this research is conducted through the Soil Tilth Laboratory's 17 scientists in the Ames facility. The laboratory cooperates with land-grant universities and other groups to research all types of soil-related topics.

Ten years ago, Hatfield says they rarely looked at manure research. Today, they are heavily involved in manure-related research.

Education Research must also look at the best management tools for working with manure. He believes the pork industry must keep looking at better ways of storing, handling and applying manure to retain valuable nutrients.

Along with the research, he says farmers also need education about manure and good management practices. "Anybody handling manure is going to have to be very aware that if this is your field you're putting manure on, nothing must move through the boundary of the field. Period."

Nutrient plans for all farmers, and not just those applying manure, are vital for this work, Hatfield states.

Results are in from 80 different Iowa farms all recruited to demonstrate odor reduction plans. The demonstrations have been conducted over the past year on all species and sizes of livestock farms.

Iowa State University (ISU) coordinated and managed the demonstrations. Jeff Lorimor, ISU agricultural engineer, recently reported on the results of the demonstration projects. He emphasized that the projects are not research.

Nine different odor-reducing techniques were studied in the aggressive demonstration program. Each technique and results of the demonstrations follow:

1. Pit additives - Eight different pit additives for hog manure were used in the demonstrations. The pit additives were previously tested in labs at ISU.

Cost for the additives ranged from $.25-1.00/pig marketed. Lorimor said the odor tests yielded only variable effectiveness from the additives.

"I see pit additives have some ability to reduce odor a little," he said.

2. Biocovers - Manure storage biocovers made of straw, old hay and cornstalks were tested. The covers were put on manure storage basins, not lagoons or in-building pits.

The cost of the biocovers ranged from $.25-.40/pig. Some producers were concerned with the biocovers at pump out, however. A chopper pump was needed.

Odor panels sniffing the air from the biocovers indicated a well-defined advantage for the simple technique, Lorimor notes.

3. Plastic covers - Plastic covers did even better than biocovers. No odor was detected at 150 ft. from the manure storage by the odor panels.

Cost for the plastic covers ran $.35-.45/pig marketed, based on an 8- to 10-year life.

4. Soil injection - Injecting manure into the soil at time of application was cited as one of the most effective ways of cutting odors during application, Lorimor said.

Cost for the injection method was $.40-.50/pig, or about $.003/gal. Lorimor noted the extra nutrients gained from injection could pay for the process.

During ISU field days last year, farmers attending were asked to evaluate the odor from various manure application methods. Direct injection easily won the odor reduction contest over broadcast methods.

5. Aerobic treatment - Two farms demonstrated aerobic treatments. This treatment involved aeration of the stored manure. It very effectively reduced odors, Lorimor reported.

However, a high price tag was attached to the method. The aeration equipment cost $1.50-3.00/pig and variable costs (energy use, etc.) added another $1.20-1.50/pig.

6. Anaerobic treatment - Another very effective but very expensive method of reducing odor involved digesters. Lorimor estimated the cost between $5-12/pig.

7. Solid separation - Six dairy farms demonstrated solid separation for odor reduction. At a cost of $3/head, separation did show some reduction in odor, Lorimor said. However, proper management was critical for its success. And separation generally does not work with swine manure.

8. Composting - Eight dairy and poultry farms tested composting for cutting odors. It was considered an effective method. The cost ranged from $.20-.40/head marketed. 9. Landscaping - Several farms demonstrated landscaping as one way to reduce odors. Odors were not tested from these farms.

Lorimor says the cost can run from $.15/head on up for landscaping. Most of the landscaping involved trees and shrubs around the buildings and manure storage.

Conclusion "The biocovers, plastic covers and soil injection rose above the rest," Lorimor stated. "But there's not a silver bullet for odor control."

Often, proper site selection will reduce odors. ISU is developing a computer model to help engineers select the best sites for hog facilities. The model will assume an "acceptable" odor level used by the Europeans of neighbors smelling the hogs only 2% of the time. This amounts to seven days/year

Get Tough On PRV Eradication

If the pork industry is going to achieve its goal of eradication of pseudorabies (PRV) by the end of the year 2000, it's going to take some tough action.

And that's just what state agriculture officials and pork producers are calling for. They made that clear in voting overwhelmingly to support a new federal mandate during the PRV committee meeting of the U.S. Animal Health Association annual meeting last fall.

The driving force in the proposed federal program standards for PRV due out April 1 is for mandatory test and removal.

Basically, says Arnold Taft, DVM, coordinator of USDA's National Animal Health Programs for PRV eradication, the test and removal clause applies to all quarantined, PRV-infected herds. It calls for a program of testing all sows before or at the time of farrowing. Those sows testing positive must be removed for slaughter or placed in isolation for slaughter within 15 days of weaning. Boars must be tested quarterly and anything turning up positive for PRV must be shipped or placed in isolation for slaughter within 15 days of testing positive.

The program standards are actually only guidelines, reports PRV committee secretary Paul Anderson, DVM, Minnesota Board of Animal Health.

But major hog states are embracing the new rules, in particular requiring the test and removal clause to be part of mandatory herd cleanup plans.

Indiana's test and removal rule becomes effective Sept. 1. In both Illinois and Iowa, test and removal will become part of cleanup plans effective Jan. 1, 1999. North Carolina and Minnesota are in the process of adding the proposed new rule to cleanup protocols.

"It has become necessary to have this test and removal policy if we are going to finish the PRV program on time," Taft says. "We need to quicken the pace and one way to do it is by test and removal of all positive breeding animals."

Conscientious producers want to finish this eradication program, he adds. They are tired of becoming reinfected from careless or resistant neighbors.

Taft, former state veterinarian in Illinois, says states have made great progress in the past year. Many have cut the number of quarantined herds in half.

The national figure stands at 1,784 quarantined, infected herds as of Jan. 1, 1998. Almost half (844) of those herds are in Iowa. Other noteworthy quarantine numbers are: North Carolina, 445; Indiana, 182 and Minnesota, 165. There are a sprinkling of states with 30 or less quarantined herds. There are 29 PRV-free states, Taft reports.

North Carolina A summit was held last year in early July to discuss actions necessary for North Carolina to meet the national eradication goal. Leaders recommitted to the year 2000 goal.

John K. Atwell, DVM, was named to direct the PRV program at that time. Atwell is also director of the Rollins Animal Diagnostic Lab in Raleigh, NC.

"Most of the changes were in place before. All I have done is put a little more strong organization into it," says Atwell, former deputy administrator in USDA.

Last spring, a program of mass vaccination was agreed to for all herds in the state's three, contiguous, stage 2 (areas with the highest level of infection) counties of Sampson, Duplin and Lenoir. There are nearly 1 million sows there.

"With such dense hog population problems, you get recurrence of the disease regardless of biosecurity," Atwell comments. "Mass vaccination out there on the finishing floors as well as on the breeding farms gives you a little more protection so hopefully you are not carrying the virus back into the operation."

Most operations are three-site including breeding, nursery and finishing. The vaccine plan was to last 14 months, which would end in early summer. But Atwell says it has worked so well in curbing spread that the state's PRV advisory committee has already agreed to renew the program for another year.

The vaccination program is one sign of true commitment from the state's pork industry, because it's all being done with producer dollars and no cost-share funds from state or federal governments, Atwell adds. Laboratory support is being provided by the state.

The federal test and removal program set to go into effect in North Carolina is a second sign of strong industry resolve among even the largest producers.

"The new rules say there can be only one turn of an infected sow in a breeding herd before she's got to go. This means replacement animals in those infected herds will have to go to market much faster than is economical for most operations," Atwell says.

Those two economic factors will further test the industry's resolve in North Carolina. But there's also a big economic reason for finishing PRV cleanup. Large North Carolina producers send a couple million pigs out of state a year to be finished. "We have got to get rid of this disease or we are going to have trouble in the future shipping our pigs because of transportation restrictions from other states," he warns.

North Carolina probably is doing a better job of following cleanup plans than they get credit for. Issue at hand is that some states don't apply quarantines correctly, Atwell charges. "We count every premise in the flow and if one is infected, the rest of the sites get quarantined whether they are infected or not," he says.

Iowa Mandatory herd cleanup for all infected herds statewide became effective last fall, with completion of cleanup by the year 2000. Lawrence Birchmier, DVM, in charge of PRV programs for the Iowa Department of Agriculture, is confident that the nation's most infected state will meet the targeted deadline for program completion.

The state also recently rescinded a controversial rule requiring all stock moving interstate into Iowa to be vaccinated before entry. It was changed to only require vaccination for stock moving into counties with over 3"percent" PRV prevalence.

Indiana According to John Johnston, DVM, director, Swine Division, Indiana Board of Animal Health, the state harbors concerns about potential trade restrictions from neighboring states like Kentucky and Ohio where there is no PRV.

Several actions are being taken. Quarantines issued before Jan. 1, 1997, must be released by Jan. 1, 1999. Those issued after that time must be released within 24 months, he says.

Effective July 1, 1998, a new rule establishes a classification of the "non-complying" herd owner. These herd owners must have a completed form accompany all hog movements. Transport vehicles must be sealed by state or federal officials; hogs can only be marketed at approved destinations. Vehicles must be cleaned and disinfected.

As of July 1, 1999, those non-complying owners may have their herds depopulated by the state of Indiana.

Cooperation Builds Success

Michigan producers expand from production groups to a marketing group.

A group of pork producers nestled into the "thumb" of Michigan have always been just a little ahead of the industry with their cooperative way of production.

Located in a fertile farming area but away from the Hog Belt, this group first formed a sow corporation in 1979. The corporation thrived through the 1980s while other sow co-ops disbanded. A management team including Bob Bloomer, Sebewaing, MI; the Cooperative Elevator Co., Pigeon, MI; and Purina Mills nutritionists kept the group on track.

By the late 1980s, the group had expanded to four corporations, housing about 2,500 sows. Now the group includes three corporations with 3,900 sows. This represents over half of the hog population in Huron County.

Shareholders from the corporations broke more new ground in 1991 when they formed a marketing group. Some 6,100 market hogs were sold in the first four-month finishing cycle. Today, 22,250 hogs are sold in one cycle. The marketing group operates on a unique payment program that averages a cycle's market price. Producers are paid the average price.

The groups of farmers continue to change their production methods as the pork industry changes. They operate commingled, off-site nurseries. Many of the shareholders have their pigs finished on contracts in new facilities. And the feed regimen has kept pace with the industry by using split-sex and phase feeding.

Today, the groups look ahead to joining in one corporation and possible expansion. Maybe they'll have the corporation retain ownership of the pigs, too. Then the shareholders will be the contract finishers.

But whatever happens, they plan to make the changes necessary to stay in business.

Cooperative Mentality Phil Leipprandt of Caseville, MI, is a charter member of the first sow corporation, West Huron Farrowing. That corporation grew gradually from 305 sows in 1979 to 1,750 in 1994.

A crop farmer, Leipprandt says he and his family wanted to spread out their cash flow and market corn through hogs. So they cleaned out an old machine shed and started finishing hogs from the new West Huron group.

"We are from an area that is co-op minded," Leipprandt says. "We always work together no matter what. We're going to market sugar beets, beans, etc. together."

Indeed, this area of Michigan, located near the coast of Lake Huron and two hours north of Detroit, has been cooperative minded. A local cooperative elevator is 85 years old. Farmers here have always banded together, sharing equipment and markets. So the introduction of a sow corporation fit this mentality.

Dan Bates, feed division manager of the Cooperative Elevator, attributes the success of the sow groups and marketing groups to this mentality.

"They are a group who like to work together," Bates says. "They are very business minded. They are open to stepping back and looking at things from a business viewpoint.

"I've also seen them do what may not be in their individual best interest but is for the good of all," he adds.

A strong supporter of the growing sow groups, Leipprandt and his family kept up with the growth. They built a modified, open-front building for 500 head in the early 1980s.

A decade later, they built curtain-sided, tunnel-ventilated buildings to house 1,040 head. Today, they fill their 1,500-head site in one day with hogs from a commingled nursery.

Growth Bob Bloomer, manager of the corporations, oversees the growth and production of the sow corporations including the 1,750-sow West Huron Farrowing.

Pigs R Us was started in the early 1980s and grew to 500 sows. In 1991, it became the multiplier herd for the other three corporations.

Thumb Quality Farrowing started in 1988 and East Huron Enterprise in 1989. Both sow corporations housed 700 sows each and grew to 1,200 sows in 1994.

As production changed, the groups did, too. They wanted to put their pigs in off-site nurseries. So in 1994, a limited liability corporation called Thumb Commingled Company was created for the off-site nurseries. The four sow groups were shareowners.

Two nursery sites, 20 miles apart, with eight, 800-head nursery rooms were constructed. By last year, the nurseries were overcrowded.

Then, one sow corporation, East Huron Enterprise, decided to split from the group and go on their own. The amicable split solved the nursery crowding, Bloomer says. Unfortunately, they had to disband the nurseries' LLC and form a new corporation. Members cannot be removed from a LLC, he explains.

Now Bloomer manages 3,900 sows in the three corporations plus the nursery group. The three sow groups hope to merge into one corporation this year. Bloomer says some of the shareholders are involved in more than one of the corporations. They are tired of attending meetings and going through the hierarchy of four corporations and boards to make decisions.

Slimming down the decision-making process should keep the group efficient and ready for future changes. Bloomer sees the group keeping ownership of the hogs to market in the future. This will allow more negotiating power at the packer and with suppliers.

New Marketing Group The group of enterprising Michigan producers includes still another corporation, and probably the most unique. Michigan Lean Genetics (MLG) was formed in in 1991 to market hogs for the shareholders who wanted to participate.

Today, MLG markets about 76,000 hogs/year. This accounts for 90"percent" of the hogs raised in the three corporations. All the producers are paid the same price for their hogs. The hogs are of the same genetics and the feed programs must be comparable.

The Co-op Elevator handles the recordkeeping and the money for MLG. Bates, with the elevator, says the prices paid through MLG are based on an average price for a cycle. A cycle covers one complete turn of finishing hogs through the buildings, about four months. MLG has completed 20 cycles since it started in 1991.

Once a cycle starts, Bates says the average price for the first few loads becomes the base price. A group of MLG producers and Bates set this price, which usually is fairly conservative.

When producers sell hogs, they are paid the base price. Their hogs are weighed at the nearest scale to eliminate any unfairness over shrinkage. Some hogs are shipped to packers eight hours away and others go three hours away.

At the end of the cycle, any remaining money is paid out on an equal poundage basis, plus interest.

"Let's say the base price is $45," Bloomer says. "If the average for the cycle is $48, you would get the rest of the money at the end of the cycle (plus interest)." This price is minus shrink, commission, trucking and checkoff.

Once in a while, the base price must be changed during a cycle. Leipprandt recalls 1994 when hogs hit $28/cwt. as one of those times. The prices dropped $10/cwt. in one cycle. But overall for that year, the MLG members received $41/cwt. for pounds of pork that left the farm.

Marketing Every Day Averaging out the price over a cycle represents one of the big benefits of this system. "In theory, I fill my floors in one day and I sell them in one day," Bloomer says. "But I'm really marketing my hogs every day of the week."

Bates tracks the prices with other markets. "Our back-to-the-farm price with everything out (like shrink, discounts, trucking, checkoff) in 17 cycles was $0.61/cwt. above the Peoria Tri-State market," he says.

Producers like Leipprandt helped develop this system. "We wanted to market together, but everyone wanted to sell pigs in July," he explains. "Well someone had to sell pigs in December. So we thought about how to even that out." The cycle idea and average prices solved the problem.

Marketing through MLG also helped him market better. Years ago, he used to sell just 30 head/week and suffer a 20"percent" sort loss. Now their hogs go direct to the packer with little or no sort loss.

At the end of each cycle, the Cooperative Elevator gives all the MLG members a complete record of everyone's market hog records. This includes things like weights in and out of barns, average daily gain and mortality. It also includes average weight marketed, average amount received and average price. Bates says this allows the members to compare, learn from each other and improve.

Production Changes Their extensive records helped the group spot the improvements made when production techniques changed.

Probably the biggest change occurred when the groups went to all-in, all-out production from continuous flow in the finishing units in 1991. >From the first cycle to the third, the feed efficiency went from 3.42 to 3.11. Today, feed efficiency runs around 2.90.

The change to AIAO cut days to market by 12 days from the first to third cycle, too.

"Before we went to AIAO, everyone thought they were getting good feed conversions," Bates recalls. "Everyone was shocked at how bad it really was in their own facilities. Since then, we've been very concerned about making sure we have the numbers to know what we're doing."

Switching Nurseries Another big improvement occurred when the group switched to off-site, commingled nurseries. Most of the finishers had been receiving mixed-source pigs. Carcass quality improved when they finished pigs from commingled nurseries.

"We didn't expect to see an improvement in cutability when we went to commingled nurseries," Bates reports. "But we found the pig has more opportunities to lay down lean growth if their immune system is not challenged."

Instead, the immune challenge occurs earlier at weaning and in the nurseries. Pigs are weaned twice a week at 18 days of age or younger. The average weight at weaning is 11.2 lb.

Pigs are split-sex fed with a four-phase program in finishing.

A look at performance in the finishing units also gave the producers another eye-opening fact. Older, totally slotted buildings that are well-managed can perform as well as the new, tunnel-ventilated buildings.

Bates says this leads them to conclude a finisher has more opportunity to improve through management than improving through the age or design of a building.

While the Cooperative Elevator and Purina Mills provide some management services for the corporations, shareholders are not required to buy Purina's feed. Those not buying Purina's feed, are charged a service fee, Bates says.

Genetic Changes The group uses a mix of genetics they've developed over the years of tracking production data. Pigs R Us produces the breeding stock with GIS (Genetic Improvement Services) females, boars from PIC (Pig Improvement Company), and semen from Newsham Hybrids and PIC.

Bloomer says making changes in genetics through the several corporations was a lengthy process. Each corporation's board had to approve the genetic decisions. This is another reason for consolidating the three corporations into one. No doubt, the groups and Bloomer will look at this change and many others to keep their units competitive and profitable.

They will keep this unique area in Michigan hog-friendly and productive for producers

Audited Financial Statements Open Doors

When Jimmy Tosh's lender suggested he spend thousands of dollars just to verify that his financial records are accurate or, perhaps, to discover that they are not, you can imagine he wasn't enthused.

That's changed. Now he's so sold on an annual financial statement audit that he budgets for it every year.

Tosh Farms includes a 5,000-sow, farrow-to-finish operation plus 6,000 acres of row crops near Henry, TN.

"What it really amounts to is having an outside observer come in and review your financial records to make sure everything is reported and that it's accurate," Tosh says. "The auditors also follow Generally Accepted Accounting Practices (GAAP). That makes it possible to compare your operation to other operations and know you're making a true comparison."

Usually, it's a lender who triggers the first audited financial statement. They want an outside accountant to put their seal of approval on the borrower's records to be sure the producer isn't accidentally, or deliberately, embellishing the numbers.

But farmers usually find plenty of benefit for themselves, too. Tosh says he has found enough management benefit from audited financial statements to make it worth more than the cost.

"The biggest change we are making is to use book value on all assets," Tosh says. "Book value rather than market value takes the inflation out of your balance sheet. Then you have a true picture of what you have accomplished from your management ability."

Remember what happened in the pre-farm crisis years, the 1970s. Land values were rising fast. Many farmers put every dollar of that inflation on their balance sheets so they could borrow more money to buy more land.

If a farmer had 1,000 acres of $1,500 land and the value increased by 12"percent", he could add $180,000 to his balance sheet.

The trouble was, profit was disappearing. And, it was inflation, not profit from good management, that was building the bottom line on many balance sheets.

When the bottom fell out of land values, it was the farmers who took the big hit. They couldn't pay back the money those inflated balance sheets and equity-minded lenders allowed them to borrow.

Tosh likes the idea of knowing that his growth is coming from profit. In fact, as a result of the audited financial statements, he plans to produce a monthly profit/loss statement. That will give him a monthly, management check-up rather than waiting for year-end statements. He figures that will help him spot problems quicker.

There's a phrase: "garbage in, garbage out." It applies to research, computerized recordkeeping and farm records. You want numbers that will allow you to do financial analysis and to make good decisions with a high degree of accuracy.

There's nothing wrong with a market value balance sheet, too. It can tell you what your business is worth as you do effective estate planning or if you decide to sell out.

But you can easily have both. It's just a matter of putting market value on the inventory shown on your book value statements.

Does It Really Cost? Dan Peregrin says he's disappointed if he can't show clients how to save enough on their income tax returns to at least pay the cost of an audited financial statement. It doesn't happen every time. But information gleaned from the process often provides income tax savings equal to his fees, and sometimes a lot more.

In a recent case, he found enough tax savings for the client to pay the cost of the audits for 10 years. "Initially, an audit of their financial statements is a nuisance and a seemingly unnecessary cost to the farmer," says Peregrin, a Certified Public Accountant (CPA) and attorney with the Moore Stephens Frost CPA firm in Little Rock, AR. "It's the banker who wants the audit."

Peregrin suggests talking to farmers who have been through the experience, CPAs who have done audits and lenders who want audits to show to the bank examiners. As you hear their stories, the pain of dollars and time spent diminishes.

"The audit, in itself, doesn't create good information," he explains. "It basically tells you if your records are good or not. Then, we tell you what to change to create the good information."

"Hog production is a growing business with individual operations getting a lot bigger," adds Alan Duncan. "What has happened in many cases is that, as these guys grow, the recordkeeping hasn't grown with them. The audit process may help them keep better records for their present needs."

Duncan, also a CPA, and Peregrin work together. Duncan is the auditing specialist and Peregrin is the income tax expert. Their firm specializes in animal agriculture and works with farmers coast-to-coast.

"The big boys in the hog business have used audited financial statements for years," says Duncan. So have other businesses where credit is important.

Three Credit Benefits While it's lenders who often trigger the first audited financial statements, they may also be triggering some competition for themselves.

"We have one client, for example, who has had several banks calling on him, wanting his business," says Duncan. "Once lenders know a producer has audited financial statements, the banker has confidence in his records and that makes him a much safer risk."

Realize that other vendors such as your feed suppliers who extend credit are also going to feel more comfortable when you show them a validated set of financial reports.

There are at least three borrowing benefits producers can harvest with audited financial statements.

* Instant credibility with lenders - "If you meet a producer for the first time and he has audited statements with him, his credibility is clearly in the upper tier automatically," says Lee Fuchs, senior lending officer with AgriBank FCB in St. Paul, MN. "You can take an identical producer with the only difference being that he doesn't have audited statements and there is always that lingering doubt as to whether he is representing his financial position accurately."

Fuchs doesn't expect all his clients to be experts in finance. But he does expect them to know that the financial matters in their business is being handled and reported properly.

* Attract a better lender - Lenders prefer the safe route. Borrowers who run into trouble making payments create extra cost in money and time for the loan officer, not even counting stress, headaches and lost sleep. Therefore, that loan officer is going to look for borrowers who are more likely to be trouble free.

"Borrowers with proven records will be able to attract better, more qualified lenders," says Fuchs. "Those are the lenders with bigger lending limits, more services to offer and who are more knowledgeable about the industry."

* Negotiate better terms - "Audited statements should put you in a better position to negotiate more favorable loan terms," says Fuchs. "That, alone, can offset the cost of the audited financial statements.

"If a producer is borrowing $5 million, for example, a quarter of a percent lower interest can pay most or all the cost of having the financial records audited," he adds.

Getting the best interest rate you can get is good. But being able to get as much money as you need to grow is probably even more important to you.

"We see the results of audited financial statements," Peregrin says. "One of the biggest is that the producer with proven records can get more money with the same amount of collateral. He is allowed to be higher leveraged."

Think about why you borrow money to expand. "Being able to get the money you need to expand is probably worth more than a lower interest rate because it gives you the opportunity to make more money with that additional money," Peregrin adds. "When you know your records are accurate, you know that you can get a bigger return on additional borrowed money than you are paying in interest. That's when you expand."

Just realize that the lender can pull the string that lets you grow. Or, he can tie the knot that keeps you where you are. It may not be your management ability that makes the difference. It may be his comfort level. A set of financial records he knows are accurate is what gives him that comfort level.

To Catch A Thief Nobody really wants to talk about the idea that somebody handling the money could be "skimming a little off the top." We prefer to trust people. But it happens and makes good coffee shop gossip in small towns.

An in-house accountant, for example, was admired by the company owners for all the long hours and weekends he spent on the job without ever taking any vacation. They were so impressed that they bought a cruise vacation for the accountant and his wife.

Finally, he was forced to take time off. That's when his assistant discovered why he came in early, stayed late and never took a vacation. He was afraid somebody might see the books and discover the quarter of a million he had skimmed off for himself over the past four years.

"If somebody other than you is handling the money, you need some safety checks," says Fuchs. "In a 5,000-sow operation marketing about 100,000 hogs a year, there's usually $10 million or more revenue. It wouldn't be too hard to 'lose' a few thousand of that."

Honest money handlers aren't going to be offended by an audit. In fact, they should appreciate the chance to prove they are trustworthy and do quality work.

"We often suggest closer control over who can write and deposit checks and who can approve purchases," Peregrin says. "The main reason you want tight control is to make sure everything gets reported right. If an item is supposed to end up on the balance sheet, you want to be sure it gets there."

Fuchs sees those controls especially important in joint ventures, networks and cooperative projects owned by a variety of people.

"They hire a management team to run the business," he explains. "But the owners are often a fragmented group. Therefore, they need to have a way to assure that the management team is working for the owners and that they aren't taking a little off the top."

Duncan and Peregrin say working with many hog producers can be an advantage for their clients. "We can say, 'This is the way the industry is accounting for inventory,'" Peregrin says. "Or, maybe it's, 'Your insurance is high compared to most producers. Let's look for something cheaper.'"

That's another way Duncan and Peregrin help their clients save some, all or more than the cost of the audit. As Peregrin says, "I like to say we are free. Numbers that are out of whack with the averages jump out at us because we see the numbers from so many operations."

The Cost Not just anybody can validate your records. Your lender, for example, wants to know the CPA is well trained and respected for quality work. You pay for quality. For large hog operations, expect to pay $8,000 and up, says Duncan.

Pressed to put it on a per sow basis, a rough estimate might be $2/sow. But there's no flat fee because every business is different.

"The biggest advantage is that it lets independent observers come in and examine your operation and make sure everything has been handled properly so you know you aren't fooling yourself," adds pork producer Jimmy Tosh.

The annual payment for a $5 million loan over seven years is about $960,350 if the interest rate is 8"percent". But if you can borrow that money for 7.75"percent", the annual payment drops to about $952,150.

While $8,200 may not seem like a lot in a multi-million dollar operation, it may pay for the tool that could get you that lower interest rate. The tool is the audited financial statement. Then, the rest of the benefits will add to your bottom line.

When you borrow big, it doesn't take much of a break on interest rate to add up to a savings of $10,000 or more on your annual loan payment.

Notice that the example above is the annual savings on a seven-year loan. Therefore, over the seven years, the total savings would be about $57,400.

Table 1 shows the annual payment per $1,000 borrowed for different interest rates and lengths of repayment.

If you borrow $5 million, that's 5,000 - $1,000s. Therefore, to get the annual payment for a $5 million loan, multiply the table figure for the interest rate and years of loan repayment by 5,000.

If you can make yourself look good enough to your lender to consistently get a half percent lower rate than you would otherwise, that's worth $3.30 for every $1,000 you borrow if you get 7.75"percent" rather than 8.25"percent" on a 5-year loan (from the table: $252.11 - $248.81 = $3.30).

On a $5 million loan, that difference in interest payment will be worth $16,500 a year ($3.30 x 5,000) - every time you make a payment.

When Lee Fuchs looks at an audit of a client's financial statements, he's watching for clues that might jeopardize the borrower's ability to repay his loans. He doesn't expect to find anything "shady." It's more likely the business might be doing some things inadvertently that could be putting the owners at some risk.

Correcting any problems found in these should also be beneficial to your business.

Fuchs lists 12 things he looks for in an audit of a client's financial statements.

1. Who the owners are, their percentage of ownership and voting power and how much of the profit is being paid out to them in dividends. In a sole proprietorship, that might be how much is being taken out for family living. If too much is going out to the owners, there might not be enough left to make loan payments or to build liquidity.

2. Revenues are being recognized when they should be. If inventory is valued at market value, increases in price can show up as revenue before the inventory is sold. You have a 100 lb. pig that is worth $40. But, then, the market goes up and he's worth $50. A market value balance sheet can result in that $10 increase showing up as revenue even though the pig hasn't been sold.

3. Inventory numbers are accurate. An audit provides for an independent party to validate that the number of animals shown in the records are actually out there. This one is a major point with lenders, says Fuchs.

4 . Costs of operation are being allocated correctly. If costs are allocated to animals when it should be going to overhead or machinery, for example, that's going to make the animals look like they are worth more than they really are on the balance sheet.

5. Depreciation matches the true life of the assets. If the useful life of an asset is 10 years, but the business is showing a 15-year depreciation schedule, the depreciating assets will look like they are worth more than they really are.

6. Control over cash. If there's not a policy that one or two trusted people have control over cash receipts and disbursements, it can be too easy for somebody to "take a little off the top." Sometimes an auditor can make good suggestions for improvements on this one. This is another major one with lenders, says Fuchs.

7. The right amount of insurance is in place at the right cost.

8. The hedging position doesn't become a speculative position.

9. What the income tax consequence would be if the business were sold. As Fuchs puts it, "Accelerated depreciation can be good for tax purposes. But if you sell out, it can catch up with you."

10. The amount of employee benefit obligations. How much money is going to be required to fund pensions, 401(k) retirement plan and employee insurance?

11.The amounts and terms of all loans. It will verify the amounts owed, the length of the loan, interest rates and if the interest is at a fixed or variable rate. When a lender sees those, he will look at it with an eye on beating the terms of existing lenders - a potential savings for your business.

12. Are there contingencies and legal issues? Has the business guaranteed loans for somebody else? Are there any judgments or lawsuits pending? What are the commitments under contracts such as with other businesses who are finishing animals for you?