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Articles from 2007 In February

Ever-Increasing Costs of Production

Local corn markets in southern Minnesota are currently close to $3.89/bu. Corn in the Southeast is close to $4.80/bu.

The attached graphs outline what happens to cost of production as corn prices escalate from $2.00/bu. to $5.00/bu. The only variable that I changed was the cost of corn.

As you can see, for every $1.00 jump in corn costs, we increase our total cost of production by an estimated $10/head.

When corn costs $2.00/bu., the cost of production on a 270-lb. market hog is $112; when corn costs climb to $4.00/bu., the cost of product approaches $132/head, or a breakeven of nearly $49/live cwt. Looking at the markets so far this month, it appears this will be the second month in a row that we will see losses - following on the heals of 34 straight months of profits.

These higher corn prices will reveal the real differences between efficient and inefficient producers. For every 1/10th pound difference in feed efficiency, from wean to market, the cost difference is currently close to $2.35/head. Higher cost of production will separate the have's from the have not's and drive more consolidation in the industry.

Disease Issues and Death Loss -- After looking at many closeouts over the last 90 days, I've seen a large spike in mortalities across the Midwest. Most are caused by porcine circovirus-associated disease (PCVAD); it is wreaking havoc on many production systems throughout the Midwest.

A veterinarian told me this week that he has never seen health this bad in the country. I agree. I am seeing closeouts on many systems with 14-16% mortality - as an average! I also talked with a large cull-and-light-pig buyer who estimates his firm is buying 70,000 more lightweight pigs per month than a year ago. In the Midwest, today, I would estimate that death losses are up 4%, at least, which is one of the major reasons why slaughter levels are running where they are. I know that the PCVAD vaccines are promising, but there is still a limited supply available. I wonder how many hogs will be coming to market once the vaccines are more readily available. It will be interesting to see what develops.

Changes -- If you were in the swine industry on Oct. 1, 2006, you've seen the following:

  • Corn costs over $1.80/bu. higher and your costs increased $17-$20/head.

  • The Arizona ballot initiative to ban gestation stalls passed, then Smithfield Foods and Maple Leaf Foods announced they will phase out gestation stalls over a 10-year period.

  • Swift announced they hired J.P. Morgan to investigate selling their assets.

  • Smithfield Foods closes the second shift in the Sioux City, IA, plant.

  • Triumph Foods announced they have acquired land to build a second plant.
All I can say is WOW! We are probably seeing some of the most dynamic changes we have ever seen in our industry. I tell my clients to be aware of the changes, but also tell them to keep their eyes focused on the main goal - running their operations at maximum efficiency. If your production is better than the industry average, you will be a long-term player. If you are not, you will need to get more efficient, fast, or exit the industry. I know that is a blunt statement - but I believe it holds truer today than ever.

Click to view graphs.

Mark Greenwood
Swine Industry Consultant
Contact Greenwood at

A Closer Look at GIPSA's Marketing Study

USDA's Grain Inspection, Packers and Stockyards Administration (GIPSA) released its latest effort to gauge the competitive situation in U.S. livestock and meat markets this week. The report, entitled GIPSA Livestock and Meat Marketing Study, can be found at

The study was the result of a 2003 Congressional allocation of about $5 million to investigate the effects of "alternative marketing arrangements" (AMAs) on markets for cattle, hogs, sheep, beef, pork and lamb. An interim report was released in 2005 that provided descriptive information for each species, its marketing system and the AMAs commonly used in those systems. This most recent publication includes economic analysis that attempts to measure the impacts, both positive and negative, that AMAs have on these markets.

Historical Perspective
There is some important history that should be considered here. It mainly impacts the selection of the investigators on this report. Congress funded a similar study of the livestock sectors in 1993. The reason was a suspicion on the part of some farm state legislators that packer consolidation was causing high levels of market power that, in turn, was driving producer prices down and, possibly, consumer prices up.

The Packers and Stockyards Administration (PSA, back before it was merged with the Grains Inspection Service) assembled a team of primarily land-grant university economists who had worked for many years in these industries. PSA separated the project along species and product lines and placed each part in the hands of economists who knew those industries. I know virtually all of the people who worked on the 1993 project, and I believe them to all be very objective researchers who easily set aside their personal biases if data and results indicate those biases are wrong. In addition, many of these economists shared Congress' suspicions about market power and, I think, expected the project to confirm those suspicions.

It did not. There was very little evidence of economically significant impacts on producer or consumer prices. Needless to say, the Senators and Congressmen were not happy that the research did not arrive at the "right" answers and they discredited the results even before they were officially published in 1996.

Fast-forward to 2003. GIPSA decided that they must use researchers this time who weren't "biased" by packer influences. Many of the land-grant university economists who have worked in livestock marketing were basically disqualified from this project. To GIPSA's credit, it chose Research Triangle Institute International (RTI) of North Carolina to manage the project. RTI did include some knowledgeable agricultural economists on each species team, but their roles were smaller than they were in the 1993 project. The lead economists on the beef section were from the Wharton School of Business at the University of Pennsylvania: definitely not a land-grant university and not agricultural economists.

None of that means this is a bad piece of research. It does illustrate, though, that there are some serious political influences when government agencies do these kinds of projects and that economics and politics are still strange bedfellows.

Pork Sector Highlights
Regardless of the history, the results for the hogs and pork section contain something confirming about every viewpoint of the pork market. A few highlights:

  1. AMAs are an integral part of selling and buying systems and current patterns and trends of AMAs lead the researchers to not believe that the hog industry will emulate the industrialization of the poultry sector.

  2. Plants that use a combination of marketing arrangements pay lower prices for their hogs relative to plants that use the cash/spot market only. My thought: Contracts involve less risk for both packers and producers.

  3. A 1% increase in packer ownership or contracted supplies will reduce spot market prices by 0.28% and 0.88%. My thought: I haven't closely studied the methodology yet, but these findings are logical in their direction but much larger than I would have expected.

  4. The researchers found statistically significant market power (i.e. the ability of a packer to push purchase prices down) in the hog procurement market, but could not say with any certainty that AMAs were the source of this power. My thought: The 1993 study found statistically significant market power in cattle markets, but also found that it did not change prices by much at all. The reason is that large numbers of data observations (which both studies have) virtually always lead to statistical significance.

  5. Pork packers apparently operate at throughput levels that are higher than the optimal, least-costs levels. (My thought: That is a very curious result.) However, all combinations of AMAs improved the efficient scale of production for packers relative to using only the spot market.

  6. Higher proportions of hogs purchased using AMAs were associated with higher quality hogs and higher quality pork products.

  7. Different types of marketing arrangements exhibit different price volatilities and, thus, different levels of risk. This allows producers with differing risk preferences to find marketing arrangements that match their preferences. So, " . . . the utility (i.e. well-being) losses associated with forcing producers to market their hogs through channels different from their risk-aversion-preferred marketing arrangement choice are substantial." My thought: Producers aren't idiots. They do what makes sense to them and they will be worse off if someone forces them to do something different.

  8. Restrictions on the use of AMAs would cause hog producers and consumers to lose because of the efficiency losses (primarily at the packer level) from reducing the proportion of hogs sold through contracts or packer-owned channels. The loss in efficiency more than offsets the gain due to reduced market power of packers. Wholesale and retail pork prices increase. Packers would neither gain nor lose in the long run.

Click to view graphs.

Steve R. Meyer, Ph.D.
Paragon Economics, Inc.

Canada's Hog Report Mixed

Statistics Canada released its quarterly estimate of Canadian hog and cattle numbers earlier this week. The reports indicate a continued decline in cattle numbers and mixed data for hog numbers.

The hog report shows that the past year's breeding herd reduction continues with breeding animal numbers 1% smaller than those of Jan. 1, 2006 (see Figure 1). When combined with a larger U.S. breeding herd, this leaves the U.S.-Canadian breeding herd up 0.8% vs. year-ago levels. The industry has the capacity to produce modestly higher pig numbers during 2007 -- probably about enough to keep up with population growth.

Any increase in exports or reductions in carcass weights (both are very likely, in my opinion) will mean that the amount of pork available per capita in the United States and Canada combined will be less than in 2006. That also should be supportive of hog prices.

A caveat to this supply situation is the recovery of Canada's farrowings and pig crop from the relatively low levels of the past year or so. Farrowings for the October-December quarter were down fractionally from 2005, where the previous three quarters had been from 1.7 to 2.8% lower. Since the reduction in farrowings was smaller than that of the breeding herd, it appears that this facet of productivity has once again begun to improve after being flat or dropping for the past year or so.

Canada's fourth-quarter pig crop is estimated to be 0.7% larger than last year. That's the first positive year-over-year number for the pig crop since the 3rd quarter of 2005. Two of the past four quarters had seen crops that were over 2% lower than year-earlier levels.

The major reason for this improved productivity, of course, is that Canadian producers and veterinarians have started to get the health challenges (primarily porcine circovirus-PCVAD associated diseases) that have decimated many herds over the past two years under control. My conversations of the past few months have indicated that the new PCVAD vaccines are very effective. As vaccines become more and more available, their impact will be more widely apparent. In addition, even the farms that have not used vaccine have found ways to manage pig flow, grouping, etc. to minimize the impact of PCVAD. While productivity on these farms is still below pre-PCVAD levels, the output impacts aren't nearly as disastrous as they once were.

We will see some of these same positive impacts in the United States, but they will not be as dramatic since the U.S. industry simply hasn't seen the proportion of negative impacts that have been reported in Canada. I expect this development to have a modest, positive impact on output in 2007, and for that impact to be spread over time, and geography enough that it will be difficult to see in the slaughter data.

Unless we see some major positive impacts on the productivity in the March and April reports, I'm not ready to start increasing 2007 slaughter numbers. Supplies still appear quite manageable for this year, but futures are still offering higher prices than I can comfortably forecast, based on 2006 prices and '06-to-'07 supply changes.

Cowherd Down 5%
On the cattle side, Canadian ranchers continue to reduce the beef cowherd with the Jan. 1, 2007 herd down 5% from one year earlier. This represents a continued push to get cow numbers back toward pre-BSE (bovine spongiform encephalopathy) levels of around 4.5 million head.

Canada had 5.001 million beef cows on Jan. 1. These numbers ballooned after the discovery of BSE in May 2003, as Canada could not ship cull cows to the United States for slaughter and, generally, could not export product from these animals. Combine that with limited cow slaughter capacity and you get a large backlog that is now slowly being worked through. A key to the pace of this reduction will be the current USDA proposal to relax restrictions on imports of beef product from older animals.

Canada's 2006 calf crop was projected at 5.5 million head, 2% smaller than in 2005. When combined with a U.S. crop that was virtually the same as in 2005, this implies that cattle supplies in late 2007 and beyond will be a bit smaller. That should be supportive to hog prices at a time that we may need all the help we can get to pay feed bills.

Packer News
Finally, there was some good news on slaughter capacity from Canada this week. Kevin Grier of the George Morris Centre sent a message on Tuesday that employees at Olymel's Vallee-Jonction plant had voted to accept a government conciliator's recommendation on a new contract. Grier believes that means the plant will not be closed on May 25 as previously announced.

Canada still appears to have excess slaughter capacity and that will keep a lid on packer margins for the foreseeable future, so don't be surprised by news of more of these kind of situations -- at least until that excess capacity is rationalized.

Click to view graphs.

Empower Your Employees

As farms and organizations struggle to improve, the credit or blame for progress achieved is often leveled at the staff. With changes in ownership, increases in herd size and segmentation of production phases, the pork industry has come to rely more on employees than on owners. With that realignment of the workforce comes a challenge to meet or exceed performance requirements.

In a recent column, we discussed the concept of "culture" and its role in the success of an organization. This week, we'll focus on employee "empowerment" as an approach to increasing the commitment of the workforce.

According to A Dictionary of Business and Management, empowerment refers to "the act of giving increased responsibility and a measure of control to employees in their working lives. The concept is based on the view that people need personal satisfaction and fulfillment in their work and that responsibility and control increase (job) satisfaction."

A recent article by Mark Dawson and Mark Jones, of Price-Waterhouse-Coopers, states nearly 75% of all programs for change, fail. The primary reason, they say, is "Employees feel left out of the process and end up lacking the motivation, skills and knowledge to adopt new systems and procedures... Organizations don't adapt to change, their people do."

Dawson and Jones continue: "Contrary to conventional wisdom, people resist change only when it makes them feel out of control -- when change is foisted on them without their consent. The belief that it is human nature to resist change is the wrong starting point, because it creates an adversarial climate. Decisions are made by management behind closed doors without input from the very staff who are expected to change their behavior. People are willing to change if they understand and accept the reasons and have a say in the way their jobs are restructured."

While empowering employees may require the proverbial "leap of faith," it need not be feared. For some organizations, employee empowerment begins with a suggestion box. Ideas for improvement are both welcomed and expected. All suggestions are considered by management and implemented in a timely fashion if they are appropriate. Surprisingly, companies that have implemented such policies report that a high percentage of ideas are accepted, as many address issues of safety and workspace layout.

Consider the management philosophy of Peter Schutz, the former CEO of Porsche. He describes the need to "decide democratically, implement dictatorially."

As we know from government, deciding democratically requires both input and compromise. Although cumbersome, the use of a democratic approach builds support from those whose cooperation is necessary. Implementing a change, however, requires achieving a balance between competing interests. As we struggle to balance the needs of the organization with the needs for employee fulfillment, consider that, in the end, a well implemented, flawed decision usually yields more than a good decision implemented poorly.

Stephanie Rutten, DVM
University of Minnesota
Editor's Note: For all your agricultural news, markets and commentaries, go to

Rethinking the corn-soy diet

Supplementing L-Lysine is about as common in swine diets as supplementing with salt.

A common rule of thumb when formulating swine diets is that 3 lb. of L-Lysine plus 97 lb. of corn can substitute for 100 lb. of soybean meal. This substitution has generally reduced diet costs because of economically priced L-Lysine and $2/bu. ($0.036/lb.) or less for corn.

As the price of corn jumped approximately $1.50/bu. ($0.027/lb.), the cost of a grower-finisher diet increased over $35/ton of complete feed while reducing the opportunity price of L-Lysine.

Before the price increase, swine diet formulation centered on minimum protein (or amino acid) levels and the maximum use of synthetic amino acids — primarily L-Lysine. This thinking needs to be reevaluated with $3.50/bu. ($0.063/lb.) corn, because the higher cost may delete synthetic L-Lysine from the diet in favor of soybean meal.

In Table 1, a typical 0.9% total lysine (0.74% digestible lysine) corn-soybean meal diet containing 3 lb./ton of L-Lysine was used as a base diet to evaluate “what if” comparisons for various corn and soybean meal prices and to determine the resultant opportunity price for L-Lysine. The opportunity price suggests the maximum price one can afford to pay for L-Lysine before being rejected from the formulation in favor of soybean meal.

Cost analysis

At what price does 46% soybean meal become competitive with corn?

The answer is $4/bushel ($0.072/lb.) for corn and $7.21 ($144.20/ton) for 46% soybean meal, when using the same minimum nutrient restrictions used for determining the opportunity price for L-Lysine in Table 1.

If soybean meal would ever become competitive with corn (replacing it in the diet), the resultant diet would contain excess protein and amino acids.

The scenario would necessitate that swine researchers and nutritionists consider maximum nutrient restrictions for protein (and amino acids), in light of higher corn prices and limited supply, with lower soybean meal prices.

If higher soybean meal usage and no synthetic amino acids are used in swine diets, the nitrogen excretion in the manure will increase — a plus for the value of hog manure as fertilizer.

Energy from corn has been a very economical source for swine diets. However, with limited corn supplies and high prices, producers are evaluating alternative sources of energy for swine diets, including other grains, by-products of the feed and food industry, and dried distiller's grains with solubles.

Economics of animal fat

Another alternative would be to increase the energy density of diets by adding supplemental animal fat to improve feed efficiency. Determining the economics of animal fat supplementation for the finisher pig requires a few assumptions:

  • Estimated feed consumption (50 lb. to market) is approximately 400 lb.

  • Improved feed efficiency is the primary benefit of supplemental animal fat in a finisher diet (1% supplemental animal fat improves feed efficiency approximately 2%).

  • Adding 60 lb./ton of animal fat increases metabolizable energy approximately 60 Kcal/lb. of complete feed. Therefore, the amount of feed consumed by a finisher pig (150 lb. to market) would be approximately 376 lb.

  • The same corn, 46% soybean meal and L-Lysine prices as used in Table 1.

In Table 2, nutrient restrictions, ingredient prices and the opportunity price for L-Lysine from Table 1 were used to determine the opportunity price for animal fat.

The opportunity price suggests the maximum price that one can pay for animal fat, based on improved feed efficiency and the assumptions indicated.

Ingredient price relationships have changed, which could result in changes in swine diet composition and nutrient restrictions; this may be different than we have been accustomed to.

Table 1: Opportunity Price/lb. of L-Lysine HCL
Corn 46% Soybean Meal
Cost/bu. Cost/lb. @$8.50/cwt. @$9.50/cwt @$10.50/cwt.
$2.00 $0.036 $1.35 $1.63 $1.92
$2.50 $0.045 $1.11 $1.39 $1.68
$3.00 $0.054 $0.86 $1.15 $1.43
$3.50 $0.063 $0.62 $0.91 $1.19
$4.00 $0.072 $0.38 $0.66 $0.95
Table 2: Opportunity Price/lb. of Animal Fat
Corn 46% Soybean Meal
Cost/bu. Cost/lb. @$8.50/cwt. @$9.50/cwt. @$10.50/cwt.
$2.00 $0.036 $0.140 $0.145 $0.149
$2.50 $0.045 $0.165 $0.169 $0.173
$3.00 $0.054 $0.189 $0.193 $0.197
$3.50 $0.063 $0.212 $0.217 $0.221
$4.00 $0.072 $0.236 $0.241 $0.245

Tips to Cut Your Feed Costs

Extension swine specialists provide action lists to lessen the impact of escalating feed costs.

There is little doubt that the ethanol boom is driving corn prices higher, which will mean permanently higher feed costs for pork producers, declares Mike Tokach, Extension swine specialist at Kansas State University (KSU).

The sudden price hike caught producers a bit off guard. But he says they shouldn't delay exploration of all of the available alternatives.

“There are deals to be found, and people need to be watchful for opportunities. Unfortunately, as you'd expect, as the price of corn goes up, the price of all of the alternatives goes up at the same time,” Tokach says.

Tokach offers four tips to help manage current feeding programs:

  • Properly adjust feeders to minimize wastage. “Of course, proper feeder adjustment becomes much more valuable when you have high-priced corn, so make sure feeders are doing their job. This is also an opportune time to replace any old feeders or feeders that don't adjust properly. If you can't get the feed efficiency your counterparts in the industry are getting, then you certainly want to take a hard look at whether feeders are causing the problem, and if so, consider making a capital investment in new feeders,” he stresses.

  • Check particle size of the diet. Reducing particle size improves feed efficiency because digestive enzymes can access feed particles more easily, enabling pigs to improve growth performance when consuming similar amounts of feed, he explains. Fineness of grind is limited by flowability in the feed system.

    “Some of our grow-finish farms are starting to push that particle size down closer to 600 microns, because going from 700 to 600 microns is worth about 60¢/pig with current corn prices,” Tokach adds. Producers need a roller mill to reduce grain fineness to that level and still have acceptable flowability.

    As corn prices rise, producers will also start taking a hard look at pelleting. “We avoided pelleting diets in most of our Midwestern hog operations up to now, because of concerns over cost and problems with poor pellet quality. But pelleting allows you to get the benefits and feed efficiency of finer particle size, and your feed system can still handle it,” he says.

  • Make sure diets are thoroughly mixed. Poorly mixed diets translate into poor growth performance and feed efficiency due to inadequate utilization of the diet.

    “We certainly have found problems on operations either not allowing long enough mixing time, or still adding feed ingredients during the mixing process. Consequently, there is not enough mixing time from the last ingredient being added until the feed is dumped out of the mixer,” Tokach states.

    Adding alternative ingredients that are higher in fiber (dried distiller's grains with solubles) or lower in energy (fat) requires a lot more feed to be mixed, which results in less time to get the job done. Don't short-circuit the mixing process. Take the time to do it properly.

    Also, don't short-circuit nutrition in late-finishing diets. It is commonly thought that one of the easiest ways to reduce the cost of the diet is to lower the protein levels or the amount of amino acids in late-finishing diets. Tokach says that is a total mistake right now, for two reasons:

    “First, feed efficiency becomes poorer very quickly if you go below the pig's lysine requirements in the late finisher. You will actually increase feed usage considerably when you do that.”

    The second problem with reducing protein content late in finishing is that soybean meal prices have not risen nearly as fast as corn prices. There is not as much savings to be gained as it appears, meaning producers can end up increasing feed usage and cost by reducing amino acids in the diet.

  • Double check to ensure that feed budget targets are being met. Don't overfeed diets. Check feed efficiency to see if it is on target with the feed budget. If not, it often means that previous, more expensive diets have been overfed.

“This has really become an issue with diseases like porcine circovirus-associated disease (PCVAD), when you've got a disease that is causing 8-12% mortality,” Tokach emphasizes. “People set up their feed budgets based on the original number of hogs placed in the barn. With PCVAD, most of those pigs die 4-6 weeks into the finishing phase, resulting in overfeeding the feed budget the rest of the way through finishing.” When that happens, remember to adjust the budget to reflect the actual finishing barn inventory, he suggests.

Story continued on next page >

Sow Feed Management

Overfeeding gestating sows is another common production practice that should be adjusted in these times of higher feed prices, Tokach reminds. Average feed intake of gestating sows on a typical corn-soy diet should range between 4.8 and 5.2 lb.

Plus, be a little careful with some of the new lactation feeders. They are good systems that take some of the labor out of farrowing, but if not managed right, they can end up wasting feed, he cautions.

Feeding Program Review

When reviewing your feeding program for potential areas of improvement, start by focusing on high-impact areas (feed usage) and the most expensive diet cost factors (energy, protein, etc.), before turning to lower-impact solutions, says University of Nebraska Extension swine specialist Duane Reese.

Base results on economics. “Feed cost/ton is the worst measure you can use,” he says, “because it gives no consideration to pig performance or revenue. Better measures are feed cost/pound of gain, feed cost/pig marketed or profit/pig. The best measure is returns/pig space.”

To ensure your feeding program is economically sound, consider implementing some of these 26 tips:

  • Shop around for specific ingredients. For example, you may want to switch from a supplement to a base mix or from corn to wheat midds, fat, milo or dried distiller's grains with solubles. “You may want to replace some soybean meal with meat and bone meal or crystalline amino acids,” Reese advises.

  • Shop with specific standards in mind — dietary lysine, for example. Make valid comparisons.

  • Place a realistic value on convenience and service from feed suppliers as you decide whether to use a complete feed, supplement, base mix or premix as a method of supplying pigs' nutritional needs.

  • Be sure that each feed ingredient meets the pigs' needs, or has consistently improved feed efficiency, average daily gain, reproductive performance or carcass merit. “Some producers still use ingredients in feed that are not necessary, do not consistently improve performance or provide excessive levels of trace minerals and vitamins,” Reese says.

  • Take steps to tailor diets to your pigs under your production situation to cut the odds of underfeeding and overfeeding nutrients. “That means knowing your pigs' rate of fat-free lean gain, feed intake and 21-day litter weight, and adjusting diets accordingly,” he says.

  • Don't overfeed nutrients when pigs reach about 190 lb. During this time, pigs eat about one-third of their total feed needs, and their daily lean gain is decreasing.

  • Be sure to budget feed, switching pigs to the next, lower nutrient-dense diet in the sequence after they have consumed a certain amount of each diet. Don't guess weights and switch diets.

  • Split-sex feed. Provide barrows with a lower amount of amino acids than gilts, especially after they reach about 80 lb.

  • Phase feed by offering at least seven different diets to pigs from weaning to slaughter.

  • Evaluate the use of growth-promoting levels of antibiotics during grow-finish for their economic payback.

  • Offer diets with an average particle size of 650 to 750 microns. Feed efficiency should improve by about 1.2% for each 100-micron reduction in particle size. “A 1.2% change in feed efficiency represents about $0.60/pig, based on a current diet cost of about $150/ton. If six months or more have elapsed since you last sent a feed sample to a laboratory for particle size analysis, do it today,” Reese urges.

  • Use breeding stock that are selected for increased rate of lean growth. The energy cost of producing fat is about four times greater than that of lean growth.

  • Improve the health status of your pigs. All-in, all-out production flow is a key factor in keeping health status high.

  • Establish a euthanasia program for your farm or review the current program with your veterinarian and employees. Very poor-performing pigs consume a large amount of feed and medications, and should be humanely euthanized.

  • Work with other producers to coordinate feed ingredient purchases in large quantities to qualify for volume discounts.

  • Buy ingredients in bulk rather than bagged whenever possible.

  • Evaluate having your feed pelleted if it is toll-milled. “Pelleting a corn- or milo-soybean meal diet improves feed efficiency by 5 to 8%, and is more likely to pay off when feed prices are high,” Reese notes.

  • Set realistic feed targets and know your herd's feed efficiency, average daily gain, feed cost/cwt. of pork produced and return over feed costs. Benchmark performance to identify areas needing improvement.

  • Reduce feed wastage by keeping feeders adjusted. In general, less than 50% of the feeding trough should be covered with feed.

  • Remember that having the lowest feed cost/cwt. of pork produced doesn't always result in the most profit. A more precise approach to nutritional decisions is to use partial budgeting to evaluate cost and revenue figures.

  • Build a relationship with your feed supplier that is more likely to lead to success when questions or problems arise.

  • Consider pricing feed ingredients in advance to help manage input price risk (some form of forward contract).

  • Develop methods of purchasing and delivering feed and feed ingredients to reduce the risk of disease introductions.

  • Use well-designed and carefully selected on-farm research trials to determine feeding strategies.

  • Project total costs associated with on-farm feed manufacturing and compare to a custom rate. “Some producers are better off not manufacturing their own feed on the farm, because it can be done for significantly less expense if toll-milled,” Reese says.

  • Establish a feed quality control program regardless of whether feed or feed ingredients are purchased or grown at home. Monitor key physical and nutritional attributes of the feed ingredients. Obtain more details at the University of Nebraska/South Dakota State University Swine Nutrition Guide:

By-Products Help Trim Feed Costs

Distiller's grains may be getting all the attention, but this 21,000-sow, farrow-to-finish operation has found many useful by-product feeds.

Jimmy Tosh, owner of Tosh Farms, Henry, TN, wasn't worried when he spotted employees nibbling muffin mix bought from a nearby ADM plant and intended for his swine rations.

“It was very good; I was eating it myself,” Tosh quips of the tasty blueberry and strawberry crumbles in the mix. Tosh says at $50/ton, the mix was a good buy, available because it was an overrun or out-of-date batch. The mix went into Tosh' s finishing rations as a corn substitute.

Tosh built the 21,000-sow business from a small feeder pig finishing enterprise he started while a student at the University of Tennessee. After expanding several times, he constructed a commercial-sized feedmill in 1996. That's when he started looking for alternatives to lower diet costs.

His first departure from a traditional corn-soy diet came with the addition of wheat middlings, or “midds,” in gestation rations, where energy requirements are relatively low. Midds are the screenings, bran, germ and flour remnants from a nearby flour mill. Tosh originally used the midds in gestation rations, where energy requirements are relatively low.

Today the farm uses wheat midds in most rations, including up to 12% in finishing rations.

Over the years, 30-40% of Tosh's diets have included alternative feeds. Hominy feed, a by-product from a Jackson, TN, plant that processes corn meal and grits, is a mainstay. Rich in energy, hominy feed consists of the endosperm and hulls from white corn.

“It will almost always price into a ration,” says Tosh, who uses a weekly spreadsheet to compare costs for various diets and ingredients.


In early January 2007, Tosh was in good shape regarding feed costs — $120.96/ton for his primary finishing ration. Ingredients were contracted in 2006 with corn priced at $98.20/ton, soybean meal at $181.86/ton, hominy feeds for $62/ton and wheat midds at $71/ton.

But Tosh was bracing himself for an inevitable feed cost hike. He figured he'd pay more than $100/ton for hominy feeds in his next contract, but says it would still price into the ration. (See Tables 1 and 2 for a cost comparison of Tosh's standard finishing ration with and without hominy. Costs are based on market prices the last week of January.) “By-products seem to become much more attractive when you've got high grain prices,” Tosh says. “When you've got cheap corn, the savings are not anywhere near as great as when you've got high corn prices.”

Tosh's goal is to feed a least-cost ration that takes advantage of inventories already purchased. “We set a minimum and maximum for feeds we have on hand; you can only feed so much of certain items. In a true least-cost ration, you wouldn't set a minimum,” he says.

Pet Food and Other Options

Tosh and his ingredient buyer, Robby Hamilton, consult with nutritionist Matt Steidinger, Swine Nutrition Services, Anchor, IL, to balance diets and evaluate new ingredients. “We are not afraid to change the rations if something comes along,” Tosh says.

A few years back, Steidinger suggested incorporating pet food by-products.

“I thought it was a great idea and started putting costs in — it saved quite a bit of money,” Tosh says. He secured a contract with a Missouri plant, purchasing mostly dog food overruns or products that didn't meet manufacturing specifications. Occasionally, cat food is also used.

Tosh describes the dog food, delivered as a ground, brown meal, as “very good, very high protein and high fat.” Finishing rations contain 6% of the meal. “The thing that makes dog food attractive is price, and the fact that it contains ruminant meat and bone meal, which can't be fed to cattle,” he says.

That gives pork producers good buying power — when it's available, he says. “It runs in cycles and availability has been a problem.”

Tosh and Hamilton are planning to replace the dog food with dried distiller's grains with solubles (DDGS), which Tosh has used in the past. They are working on a contract with an ethanol plant about 100 miles from the mill.

Tosh Farms already has feed trucks headed to the area, so the back haul will minimize trucking costs.

Currently, overhead storage at the farm's mill is being expanded. Until that's complete, they only have room to store three by-product feeds — midds, hominy feeds and one other option, such as dog food or DDGS. Any other alternatives are purchased in smaller quantities and used immediately, he explains.

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All By-Products Not Equal

When a new alternative or supplier is identified, Hamilton requests a sample from a recent shipment the supplier has sold. Nutrient analyses are conducted in an independent laboratory to get a clear picture of nutrient content. This is important, because not all by-products are created equal. It is important to understand what you are buying, he stresses.

“Bakery is the most variable by-product. It could be bread or it could be cookies or cakes — so you've got to know the source and how they blend it,” Tosh says. “One source might be worth significantly more just because of the protein and energy levels.

“With bakery products, you've also got to check for salt. You might not need to add any salt to the ration,” Tosh says.

As every ingredient truck is unloaded, a sample is pulled and filed for a week. The weekly samples are blended together and sent for nutrient analysis once a month. “If you don't know the nutrient profile, you don't know what the value is,” Tosh says.

By-Product Challenges

“The only downside of by-products is flowability,” Tosh says. Because of the high fat content, dog and cat food doesn't always flow off delivery trucks smoothly. “Some loads will unload fine, and some are really a pain to get off,” Tosh says. “Wheat midds and hominy feeds are somewhat bulky and can restrict flow.”

All corn goes through a roller, which creates more uniform particle size and improves flowability through feeders.

Tosh says using by-product feeds can help save in feed processing costs. “There are some energy savings from not having to grind the by-products,” he says.

As an aside, Tosh's feedmill currently pellets about half of the finishing rations. The other half is ground, which can contribute to lower feed efficiency.

Before Tosh buys additional pelleting equipment, he will continue to track finishing performance differences between the two processing methods. To date, he's not convinced it is worth the extra investment.

Not Every Bargain is a Good Deal

Late last year, Hamilton got wind of a large load of bakery by-products sitting on four barges at a dock in New Orleans. The load was valued at about $100,000. Before the farm seriously considered buying, Hamilton flew down to check it out.

“The barges were wet, which causes spontaneous combustion. By the time we got it, we could have had four loads of ash,” explains Hamilton. “We didn't buy it.”

In an era of high grain prices, it pays to consider feedstuff alternatives — so long as you take steps to know what you are buying.

By-Product Buying Tips

Independent nutritionist Matt Steidinger of Swine Nutrition Services, Anchor, IL, provides consulting services to Tosh Farms and about 70 other swine producers. He gives this advice for purchasing by-product feed:

  1. Look for by-product sources within about 50 miles of the farm to minimize trucking expense.

  2. Ask for a delivered price or be sure to figure trucking expenses into the price.

  3. Make sure your mill is set up to handle by-products that may be delivered in bags or totes. Also, make sure your system can handle the product if it is bulky (fluffy) or has flowability issues caused by high fat content or other reasons.

  4. Obtain and test a typical sample of the selected ingredient.

  5. Seek a nutritionist's advice to compare the value of the by-product formulated in your ration compared to a corn-soy diet.

  6. Collect and test samples of by-products as they are delivered.

  7. Keep detailed records of sources, ingredients and test results.

  8. Consider testing rations with and without by-products in side-by-side feeding comparisons.

  9. Set up a protocol for ongoing testing of finished feeds, and keep records (noting ingredient sources) so you can compare feed performance.

For more information, contact Steidinger at (815) 848-3526.

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To demonstrate the value of by-product feeds in lowering his ration costs, Jimmy Tosh compared costs (based on market costs for all ingredients on Jan. 31, 2007) for his finishing diet with and without hominy feeds. In Table 2, with hominy feeds as 20% protein, the diet costs $176.10/ton. The $4.54/ton savings is significant, according to Tosh, who has a 21,000-sow, farrow-to-finish operation in Henry, TN.

View these tables in a new window

Table 1. Standard Least-Cost Finishing Ration
(Batch size - 6,000 lb.; - Date 1/31/2007 - Formula cost: $180.64/ton)
Least-cost formula
Ingredient name Formula, lb. % Min., lb. Max., lb. $/Ton
Soybean meal 1,724.67 28.75 225
Ground corn 2,910.34 48.50 142
Dical 18.5 26.34 0.44 320
Wheat middlings 720.00 12.00 720.0 720.0 110
Sodium selenite 3.00 0.05 3.0 235
Mineral premix 4.50 0.08 4.5 6.0 802
Basic vitamin 2.70 0.05 2.7 2.7 2,710
Salt 15.57 0.26 13.5 30.0 95
Lysine 9.80 0.16 24.0 1,820
Copper sulfate 3.00 0.05 3.0 3.0 2,421
Calcium carbonate 51.31 0.86 35
Dog food 28% 225.00 3.75 225.0 132
Fat, animal & veg. 180.00 3.00 180.0 395
Fat-downstream* 123.48 2.06 395
Phytase-10000 0.30 0.01 0.4 17,760
Table 1. Standard Least-Cost Finishing Ration
Unused ingredient options
Ingredient name     Min., lb. Max., lb. $/Ton
Cookie meal 700.0 132
Meat bone ML 50 400.0 238
DL-methionine 2,538
Threonine 2,900
Hominy feed 1,200.0 110
Nutrient solution
Nutrient name Amount Minimum Maximum
Protein, crude, % 20.47
Fat, crude, % 7.78
Fiber, crude, % 3.31
Calcium, % 0.68 0.68 0.90
Phos., total % 0.62 0.45 0.70
Phos. available, % 0.29 0.29
M. E. swine Kcal/lb. 1,535 1,535
Salt, % 0.30 0.30 0.60
TID lysine**, % 1.10 1.10
TID Meth+Cystine, % 0.60 0.60
TID threonine, % 0.66 0.66
TID tryptophan, % 0.22 0.19
Phytase, FYT/kg 500 500
NDF,** % 11.60
Lysine, % 1.22 1.15
Lysine-available, % 1.08 0.95
Methionine, % 0.34 0.30
Tryptophan, % 0.25 0.18
Threonine, % 0.78 0.60
Meth. + Cystine, % 0.70 0.50

*Fat (downstream) is fat that goes in after the coater.

** TID = True Ideal Digestibility; NDF = Neutral Detergent Fiber

Table 2. Least-Cost Ration with Hominy
(Batch size - 6,000 lb.; - Date 1/31/2007 - Formula cost: $176.10/ton)
Least-cost formula Ingredient name Formula, lb. % Min., lb. Max., lb. $/Ton
Soybean meal 1,706.35 28.44 225
Ground corn 1,677.53 27.96 142
Dical 18.5 24.93 0.42 320
Wheat middlings 720.00 12.00 720.0 720.0 110
Sodium selenite 3.00 0.05 3.0 235
Mineral premix 4.50 0.08 4.5 6.0 802
Basic vitamin 2.70 0.05 2.7 2.7 2,710
Salt 15.57 0.26 13.5 30.0 95
Lysine 9.46 0.16 24.0 1,820
Copper sulfate 3.00 0.05 3.0 3.0 2,421
Calcium carbonate 51.00 0.85 35
Hominy feed 1,200.00 20.00 1,200.0 110
Dog food 28% 225.00 3.75 225.0 132
Fat, animal & veg. 180.00 3.00 180.0 395
Fat-downstream* 176.66 2.94 395
Phytase-10000 0.30 0.01 0.4 17,760
Unused ingredient options
Ingredient name     Min., lb. Max., lb. $/Ton
Cookie meal     700.0 132
Meat bone ML 50     400.0 238
DL-methionine     2,538
Threonine     2,900
Nutrient solution
Nutrient name Amount Minimum Maximum
Protein, crude % 20.66
Fat, crude % 8.74
Fiber, crude % 3.78
Calcium, % 0.68 0.68 0.90
Phos., total % 0.65 0.45 0.70
Phos. available, % 0.29 0.29
M. E. swine Kcal/lb. 1,535 1,535
Salt, % 0.30 0.30 0.60
TID lysine,** % 1.10 1.10
TID Meth.+Cystine, % 0.64 0.60
TID threonine, % 0.66 0.66
TID tryptophan, % 0.22 0.19
Phytase FYT/kg 500 500
NDF,** % 15.20
Lysine, % 1.22 1.15
Lysine-available, % 1.07 0.95
Methionine, % 0.35 0.30
Tryptophan, % 0.26 0.18
Threonine, % 0.78 0.60
Meth. + Cystine, % 0.70 0.50

*Fat (downstream) is fat that goes in after the coater.

** TID = True Ideal Digestibility; NDF = Neutral Detergent Fiber

Next Generation Sow Housing

Henceforth, January 25th, 2007, will serve as a milestone in the U.S. pork industry.

On the second day of the Iowa Pork Congress, the trade show floor was abuzz with talk about Smithfield Foods' announcement that it would phase out gestation stalls in their company-owned sow farms over the next 10 years.

Smithfield CEO Larry Pope acknowledged that extensive research into sow housing alternatives did not favor group housing over stalls. Both “provide for the well-being of pregnant sows and work equally well from a production standpoint,” he stated.

In other words, this was a market-based decision. Whether it was driven by pressures from Wal-Mart, McDonalds, the Humane Society of the United States, European decisions to outlaw sow stalls by 2013, or the successful referendums to ban gestation stalls in Florida and Arizona doesn't really matter at this point.

Naturally, the Humane Society of the United States was quick to jump on Smithfield's announcement, calling the move “perhaps the most monumental advance for animal welfare in the history of modern American agribusiness.”

Monumental? That may be a bit of a stretch, but the move will likely signal a “paradigm shift” for how gestating sows are housed in the future.

Intended or not, when the world's largest pork producer publicly announces a major change in the way they house and care for their million or so sows, a ripple effect will be felt throughout the industry.

In fact, just a week after Smithfield's pledge, Canada's largest producer, Maple Leaf Foods, announced they would follow suit with their 116,000 sows.

Take a Deep Breath

There are valid arguments on both sides of this issue.

If you're solidly on the defensive side, the arguments that gestation stalls optimize individual care and performance ring true. However, from a purely emotional, “the-poor-sows-can't-even-turn around” point of view, the arguments are not so clear-cut.

Now would be a good time for the industry to take a big, collective breath before it heads pell mell into the next generation of group sow housing. It is important to remember, the move to environmentally controlled sow housing was not done hastily. Much research and trial and error carried us through various configurations of pen gestation and eventually to individual sow stalls.

The thermometer at my rural Minnesota farmstead fell to a frigid -24° F this morning. Housing sows in outside lots in these temps is not welfare-friendly for man or beast. When things begin to thaw, trudging through knee-deep mud to feed and care for these animals is not much fun either.

Many have forgotten — or more likely never experienced — these battles with Mother Nature.

Granted, almost no one is suggesting we return to the very challenging outdoor housing methods, but it is important to remember why individual sow housing evolved as an industry standard.

I wonder — isn't there a compromise in there, somewhere?

All or Nothing?

I accept that a 112- to 116-day stint in a 2×7 ft. stall is difficult to defend to the welfare-conscious consumer. However, many have not witnessed the aggression, injury and chaos that ensues when a group of newly weaned sows of various sizes, parities and conditions are mixed. There's a lot of fighting, biting, running, riding and retreating. Sows get hurt.

These battles continue until dominance and social ranking of the group is established.

I've long felt there is a good and humane compromise to this management challenge — shortening the weaned sow's stay in the individual stall to 30-35 days, for example. This would give her time to recover from weaning and allow milk flow to subside. Sows could be given important vaccinations and any health concerns treated, individually.

An abbreviated stay would also allow ample time to manage feed intake — boosting her daily allowance to get her back to good body condition or reducing her feed allowance if she's in danger of becoming obese.

Once bred, the embryos safely implanted and pregnancy confirmed, sows of similar size and parity could be grouped with minimal fighting.

Whether these groups are small (6-8 sows) or large (20 or more) will depend on the management and stockmanship abilities of their caretakers.

Electronic feeding for group-housed sows is one option. Other technologies will surely surface. But, much as the ability to manage sows in stalls had a learning curve, we must study the best possible means of allowing them to cohabitate.

Individual care should be tantamount in our efforts to better care for and house our sows. Anything short of that is indefensible, regardless of your stand on sow housing.

Terminal Sire Line

New boar line offers key production attributes.

Monsanto Choice Genetics (MCG) has launched its new GX terminal sire line, offering traits for growth and meat quality. “With the GX boar, producers will be able to experience the ideal intersection of lean growth, feed efficiency and meat quality to maximize their profitability,” says Kelly Fleming, Business Development Lead for MCG. Using simple hybrid lines, the GX is a composite boar created through five generations of selection using MCG's proprietary swine genome map. Using genomics, genetic markers throughout the genome are mapped, and markers associated with traits of economic importance are identified. MCG uses marker-assisted selection to breed pigs with traits valuable to both producers and packers. For more information, go to

Free-Access Gestation Stall

An animal-friendly gestation stall system that allows producers to optimize animal well-being and productivity has been introduced by Chore-Time Hog Production Systems. These unique gestation stalls are German-engineered and designed to offer superior animal comfort and solutions to today's hog production challenges. The Chore-Time gestation stalls allow sows to freely walk in and out of individual stalls, providing sows more opportunity for exercise. When a sow enters a stall, the door automatically closes behind her to ensure privacy for eating. Sows release themselves by simply backing up to trigger the release latch. Sows can be temporarily locked in the stalls for vaccinating, breeding and pregnancy checking. The gestation stalls feature an integrated drop-feeding system with solid steel partitions to reduce competition when eating. The stalls are uniquely angled to save building space and to discourage sows from stepping into the feed trough. Stalls are made of galvanized steel for low maintenance and durability. For more information, call (574) 658-4101, email or log onto

Software Data Management

FBS Systems, Inc. has licensed rights to market a patent-pending technology that extracts data from nearly every source and creates “real-time” management control. The Farm Servey Executive Dashboard automatically generates graphs and maps; monitors key performance indicators; and triggers alerts directly from FBS Servware software and many other accounting and production programs, spreadsheets, facility monitoring systems and Web sites. Views of maps, charts, etc. can be customized by the user and automatically updated as underlying data changes. Dashboard software is an emerging class of information systems that integrates data to assist organizations to measure, monitor and manage business performance more effectively. For more information, e-mail or log onto

New Paylean Program

A new study from Elanco Animal Health on Paylean dosage offers pork producers a new option in the face of rising feed costs. Researchers have shown that when Paylean is fed at 6.75 grams/ton, there were significant improvements in average daily gain, feed efficiency and overall net returns. This dose is midway between the Food and Drug Administration-approved levels of 4.5 and 9 grams/ton. Study results indicated pigs fed Paylean at 6.75 grams/ton, for an average of 25 days, achieved 15.1% better feed efficiency and 19.6% better average daily gain than pigs fed control diets without Paylean. Paylean-fed pigs also produced 1.2% more yield and 8.38 more lb. of hot carcass weight vs. controls at a market weight of 272 lb. These improvements translated into a net return of $3.53 more revenue/pig. “The data shows Paylean at 6.75 grams/ton works very well in improving average daily gain and feed efficiency in late finishing,” says Gary Allee, swine nutritionist at the University of Missouri and study researcher. “If lysine levels are adequate, 6.75 grams of Paylean certainly fits into any operation looking to improve pig performance.” Paylean had no impact on meat quality. More information is available at (800) 428-4441 or by logging onto

Send product submissions to Dale Miller, Editor (952) 851-4661;

Circovirus Research Projects Approved

A number of research institutions across the country have received significant funding to find answers for porcine circovirus-associated disease (PCVAD) in 2007.

The Minnesota Rapid Agriculture Response Fund has approved $300,000 for University of Minnesota researchers to combat the disease in the state.

Funds will enable researchers to investigate the epidemiology or distribution of PCVAD infections in boar studs, and determine the role of non-porcine circovirus factors in causing PCVAD. Researchers will develop objective monitoring procedures using diagnostic testing and sequencing, boar stud serum, semen and blood.

“Boar studs have enormous potential to impact the health of the entire swine industry. Therefore, they warrant urgent investigation to understand if circovirus can be transmitted in the semen and, if so, how frequently transmission occurs,” says Trevor Ames, chair of the Veterinary Population Medicine Department at the University of Minnesota. “By concentrating efforts on understanding how to stop the spread of the virus in semen, University of Minnesota researchers will potentially save the Minnesota swine industry millions of dollars.”

University of Minnesota Leman chair Peter Davies, DVM, is project coordinator.

More information on this effort can be found at

The National Pork Board has committed about $630,000 to researchers in the United States and Canada on more than a dozen projects on PCVAD.

The pork checkoff-funded efforts will look at the development of a marker vaccine, compare strain differences in PCV2 outbreaks in Canada, characterize severe cases of the disease in Kansas, compare clinical and subclinical infections, determine the role of boar semen in transmission, evaluate breed differences, study severe cases of circovirus-associated finishing mortality and characterize the virus in serum and disease expression in different populations of pigs.