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Producer-Packer Contracts Viable

Contract market and vertical integration structures rapidly replacing traditional spot markets provide a good alliance for pork producers and packers, and consistent, high-quality products for consumers, according to a study released recently by Purdue University.

The study used 1998-2000 data as a basis for simulating spot market, contract market and vertical integration production systems for a fictitious, small Midwest packing plant. The plant, modeled after an actual packer, purchases 74,000 hogs/week.

“We found that profits for packers and producers weren’t greatly increased by increasing vertical coordination,” says Allan Gray, one of four Purdue agricultural economists who prepared the paper, “Evaluation of Alternative Coordination Systems Between Producers and Packers in the Pork Value Chain.”

But quality of cuts was vastly different. In a spot market, the packer simply takes what the producer has to offer. Quality is superior in a contract market system because the packer can relay back to the producer the kinds of hogs that he needs, Gray says.

Purdue used a model to take out the issue of whether packers are forcing people to move to vertical integration, to determine if all parties still benefit from a coordinated production system.

Gray says both producers and packers gain production efficiency and profitability. Vertical integration maintained a more consistent flow of hogs through the production chain than the spot market. And, contract and vertically integration systems were better than spot markets at delaying the marketing of lighter pigs, which yield fewer pounds of lean meat.

Spot markets offer higher prices when the market is strong. But hog farmers face less price vulnerability when operating by contract or in a vertical integration structure.

Seaboard Links to Missouri Plant

Seaboard Farms Inc., a division of Seaboard Corp., has signed an accord with Triumph Foods, LLC to market all of the pork products produced at a new, state-of-the-art plant that Triumph plans to build in St. Joseph, MO.

Triumph’s processing plant is being designed to process 1,000 head/hour, about the same capacity as Seaboard Farms’ Guymon, OK, plant.

Triumph’s new $130 million plant will produce a line of fresh pork products for retail, foodservice and further processing customers.

Plant construction is expected to start in the spring and pork processing is slated to start in 2005.

Tyson Adds Welfare Post

Kelly Pfalzgraf, DVM, has been named to lead Tyson Food’s new Office of Animal Well-being, overseeing animal treatment and handling at its chicken, beef and pork facilities.

Pfalzgraf has 23 years of experience in food animal veterinary practice and served as a veterinary medical officer for USDA’s Food Safety and Inspection Service in a pork slaughter plant.

Youth Pork Quality Program

The National Pork Board has launched a new Pork Quality Assurance (PQA) program for young pork producers, 9-18 years old.

The program is designed to assure good production practices are followed in raising safe and wholesome pork in 4-H and FFA projects.

“This new program will allow youth to focus on raising high-quality pork in terms they understand,” says Leon Sheets, Ionia, IA, pork producer who chairs the Producer Education Committee.

Youth will need to certify in the new Youth PQA program once their PQA Level III program certification expires. The youth PQA program includes a food continuum puzzle, ear notching exercise, recordkeeping and proper use of animal care products and needles.

Fact sheets cover ethics in youth livestock programs and food safety. The Youth PQA program reviews the same 10 good production practices that have been part of the pork checkoff’s PQA program since 1989.

The new program can be found at www.porkboard.org/youthPQA.