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Articles from 1999 In March

PRRS Certification Plan Introduced

A voluntary health certification plan for producers who want to buy and sell PRRS (Porcine Reproductive and Respiratory Syndrome)-negative breeding stock is in the early stages of development by the South Dakota Animal Industry Board.

Extension Veterinarian Bill Epperson describes the motive for the program. "Our producers on the planning committee for this program were very concerned because they would be purchasing animals that would be claimed to be PRRS-negative from herds that were vaccinating for PRRS."

He says the uncertainty of PRRS status of a herd led the board to develop a herd certification program in hopes of controlling and eliminating the disease.

South Dakota producers can certify either a premise or an entire operation. A sampling scheme and certification plan can be built with the herd veterinarian.

Each participating herd owner must sign a certification statement, agreeing to meet sampling and identification requirements of initial certification and monitoring for maintenance of certification (see Table 1).

Epperson stresses the program is designed to certify production systems, and not individual animals, that are PRRS-negative. The program is based on probability testing. Relatively small samples are taken in various stages of production. A one-year grace period is required before producers are certified.

Participation will be limited to those who are interested in being PRRS-negative and who are not vaccinating for the disease, says Epperson.

Enrolled herds will be studied in depth during their one-year phase of initial certification to provide some basis for the effectiveness of the program, he explains.

The study will look in depth at a specific area of concern: the 0.4 level of the ELISA serology test that is used as the cutoff of whether a hog is PRRS positive or negative.

"I think what people are learning experimentally is that in some cases levels below 0.4 may actually also be indicating that the animal is positive for PRRS, " explains David Benfield, South Dakota State University. He adds there is enough uncertainty over the validity of the 0.4 level to warrant looking at a different, lower cutoff value.

"I think it might be beneficial to the use of the ELISA test, especially as we get into test and removal or control programs for PRRS," states Benfield.

For more information, contact Epperson, (605) 688-6649 or Sam Holland, state veterinarian, (605) 773-3321.

Colored Feed Offers Residue Safety Net

Thirty cents per ton is pretty cheap quality assurance. That's the cost of 2 lb. of iron oxide, an inert feed additive that turns feed red.

North Carolina pork producers are using iron oxide to distinguish feeds for different groups, adding it primarily to sow feed, but it has a place in any diet containing costly ingredients or medications which require withdrawal before slaughter, says David Funderburke, a nutrition consultant from Warsaw, NC.

"The more diverse the production system, the greater the chance for error," notes Funderburke, who consults for some of the country's largest hog operations. "A colorant has a place wherever withdrawal times are critical. Even the 100-sow producer who buys from a feed company may want to color the feed, because that producer is not the person mixing it."

Iron oxide comes in two forms: natural and synthetic. The natural form of iron oxide is cheaper, but provides a less-distinct color than synthetic, which has a more potent pigment. Funderburke typically adds about 2 lb. of the natural iron oxide to each ton of complete feed at 15 cents/lb. With synthetic iron oxide, only a pound or less is needed per ton, but the cost would be about $1.50.

Enough iron oxide needs to be added to be able to notice a color difference. Which form producers choose depends on the degree of color desired.

An approved feed additive, iron oxide is safe, with no known hazards. Iron oxide should not be confused with iron carbonate or iron sulfate, which are sources of digestible iron in the ration. Iron oxide has no nutritional value, notes Funderburke. And, both natural and synthetic iron oxides are dusty, he adds.

Ken Purser, nutrition and technical services manager with Prince Agri Products Inc., an iron oxide manufacturer, points out that coloring or marking feed has gained interest in the last three or four years. "It has a lot to do with pork quality initiatives and awareness on the part of producers in observing proper withdrawal times," notes Purser. "Plus, producers are pushing production systems harder, so it's important to have the correct diet in the feeder at the right time.

"The number of employees involved in large, integrated systems can also make communication difficult," he adds. "Marking makes it much easier for everyone to determine if the proper feed is being fed."

Funderburke says adding the iron oxide is one of the cheapest ways to prevent mistakes. "Lactation and gestation feeds can have similar ingredients but as much as a $20/ton difference in price, so we'll use iron oxide in lactation feed (to differentiate it)."

Another place to use a marker is when feed with a withdrawal requirement is fed sporadically. Herds with enteric problems, for example, may add carbadox, which was recently approved for feeding until 42 days before market. These antibiotics may be fed at a higher, disease-control level, or reduced to an amount conducive to growth promotion.

"At times, we may pulse the additive into the ration for just a few weeks at a time when there's a flare-up, which would make it even more critical to mark the feed," Funderburke explains. "Employees are aware not to ship pigs from pens with red feed, even if they're culls."

Monitoring Tool "It's a way to monitor - to make sure the correct feeds are going to the correct animals," Funderburke says.

"Anyone with reservations about delivering medicated feed to the wrong finishing building, for example, should consider using a marker."

Many feed mills in North Carolina are self-owned by integrators with 15,000 sows or more, explains Funderburke. The mills run 12-18 hours/day, producing 1,800 to 2,000 tons of feed each week. The larger the mill, the more segmented the production system, with each segment run independently, he notes.

"There are many opportunities for error in large, integrated production systems," Funderburke adds. To help delivery people avoid mistakes, feed bins and farms are usually numbered. Some bins carry magnetic, color-coded signs. If the sign is red, they'll know to deliver red feed."

'I just love a challenge'

Early October's hog prices looked pretty bad. But Howard "Butch" DeLoach just shook his head. He'd seen this before. He knew the hog operation he managed for 13 years in the Texas Panhandle would weather yet another downturn. His records confirmed he'd just closed August with over $20,000 cash for the month. Added to a January-July positive of nearly $150,000, the 1,200-sow, farrow-to-finish operation was doing pretty well.

What DeLoach couldn't foresee was the record drop in hog prices ahead. Even the farm's low $35.33/cwt. cost of production wasn't low enough to head off the severe market drop that closed out the last three months of 1998.

But true to his word, the hog farm survived without outside capital. He and his wife, Gynette, counted their blessings that they could hold the year's losses to only $46,000.

New Year's Eve also signaled the end of DeLoach's hog management career, one that spanned nearly four decades. He and Gynette headed home to Georgia to be near their family.

But the experienced manager left a legacy for success at the Texas farm that was known for its dismal state when he took over management in 1985. How he turned the operation around is a lesson in paying attention to the basics.

Assessing The Situation Built in 1972, the Texas hog farm was named New Way Pork Co. At the time, it was the largest hog farm in Texas Panhandle with 1,200 sows. Nineteen investors put money into the unit.

During the first 15 years of operation, the unit experienced a steady decline in productivity and rarely generated a profit. In 1986, only 12,000 market hogs were sold.

It was in this state of disrepair that DeLoach entered the scene. He and Gynette had been in a family hog business in Georgia for many years, but were ready for a change. In fact, National Hog Farmer featured DeLoach and his father, Fate, in a story that ran in 1977. At the time, he was president of the Georgia Pork Producers Association and well known for his hog production skills. But during his first visit to New Way Pork, DeLoach learned that some farms weren't in as good shape as his. He knew it would be a big job to fix it. "But I guess I just love a challenge," he says.

DeLoach had his work cut out for him. Pigs born live averaged 7.8/litter. Medication costs ran $3/cwt. And average non-productive sow days mounted to 74 days/year.

"All the rules were violated," DeLoach says. "None of the basics were followed. The only thing they didn't do was run the pigs out on the highway."

Labor appeared the biggest problem. "Just us showing up for work was good for the operation," he says. "The first day, I fired an employee in the first 10 minutes. Word got around that I was either crazy or wouldn't tolerate stuff. So some employees didn't show up again. I didn't need to fire anyone else after that. The labor problem just took care of itself."

DeLoach brought two key employees from Georgia with him. Between the three of them, he says they were able to demonstrate to the old and new employees how to work together. They also taught promptness on the job and proper hog care.

After 60 days, DeLoach attended the annual stockholders meeting. He had spent most of those first two months rescuing live pigs and pulling dead pigs out of the units and was ready to talk to them.

"I think I shocked them," he recalls. "I recommended shutting the unit down due to its poor conditions. Here I had just moved 1,300 miles and I was willing to shut it down and move back."

At this first meeting the only decision was to keep it running for another year. DeLoach felt they wanted him to prove himself before they made a major cash outlay. He was told to see what he could do with minimal cash for repairs. During that first year he worked on production, made a few repairs and cleaned up the farm. He believed the outside appearance would motivate employees to be more sanitary in their work area.

After a year, the owners were ready to hear DeLoach's plans for revitalizing the miserable unit.

His first choice was to shut down the existing unit and build a new one. But due to cash flow problems, the owners talked him into keeping the old unit going while building new facilities.

Moving Ahead DeLoach had help planning his next steps. He used swine consultant Jim Allison, DVM, Corsicana, TX, to review the operation's performance every 90 days. With Allison's help, DeLoach was able to turn things around.

First, he moved to PigChamp records. New Way Pork did not have a computer when he arrived. "Instead, every record kept on finances or production was kept on cards," he relates.

DeLoach enlisted help from his wife to transfer past records to PigChamp. She also took over all the recordkeeping for New Way Pork. Developing the records served as a road map to improving the business. Once they could see where the problems were, they could work to solve them.

Allison taught them to use the assumption rule, which is "never assume anything."

"If you couldn't show Doc the records on it, he didn't want to hear about it," DeLoach says.

The rule also applied to management of the hogs. Don't assume things are done, DeLoach relates. Managing the crew of 13 employees meant making sure everything was done right, every time. Every day he spent time walking through the buildings, checking the employees' work.

Over the years, new buildings were added. DeLoach learned even new facilities require tight management, like the ventilation controls and manure flushing systems.

"When I started with Doc Allison, I thought I knew the basics," he says. "You put a sow out there and make sure she has some feed. But teaching us the basics and us being willing to implement them and not get lax is the hardest thing in the world to do."

Employees must fill out records every day. DeLoach and Gynette use these records to make sure jobs are completed and production remains high. Gynette's job was to watch records and prompt DeLoach when trouble appeared.

Filling Buildings With a 10-pigs/sow/year record, DeLoach knew his attention also had to go to filling the buildings with hogs because most were only half full. He discovered sows in farrowing crates weren't even pregnant. Some sows were recycling and rebred several times without success.

So he fell back on a plan he used successfully in Georgia to prevent this recycle-rebreed problem. The plan required him to cull any sow that recycles instead of rebreeding it. Next, they overbred the number of sows and gilts to insure farrowing rooms were full.

DeLoach ended up with a high culling rate and low sow parity figure. But it was cheaper for him to do this than let the buildings go half empty.

Non-productive sow days dropped substantially from 74.4 in 1990 to 42.9 in September 1998 (see Table 1). "We just don't breed any recycles," he says. "We felt like these animals with a recycle history will breed that problem into the herd."

He's been able to keep his sow herd producing even through a switch to 100% artificial insemination in mid 1995.

Rebuilding While DeLoach was getting a handle on production problems, he also organized the steady rebuilding of New Way Pork. Today, the only buildings still used from the original set is the office and the shell of four farrowing houses.

First on the construction agenda was finishing floors. The original layout of the operation required the crew to move every pen of hogs on the farm every week. That had to stop, so he hired his own construction crew and they immediately built two new finishing buildings. Then they shut down the original finishing buildings, used the pits and rebuilt new structures over the top.

Next on the building agenda was a new gilt development barn. The farm had no place for gilts, which he needed to accommodate his no rebreeding rule.

Nurseries were next and badly needed because mortality rates were at 38%. DeLoach had trouble convincing the owners to invest in new nurseries, however. So he built one new nursery to prove how much better it could be. Meanwhile, he lowered mortality in the existing buildings by putting in 5x5 ft. pens, raising them 3 ft. off the floor, and adding a new heating system.

By 1993, DeLoach convinced the owners to make a big investment in new buildings, allowing him to push the operation's performance up another notch. His planning team, including Allison and a financial consultant, put together a $1.8 million building plan, which called for constant construction for nearly two years.

The building crew started in April 1994 with new breeding and gestation buildings. Then the crews moved on to build six new nurseries. This enabled DeLoach to use all-in, all-out and wean pigs at younger ages. Last on the building agenda were eight new finishing facilities.

Diet Quality A big performance improvement came from changes in the feeding program. Their records had identified the problem. Feed efficiency and sow productivity dropped periodically. After testing their diets, they were able to tie it to poor grain quality.

"This is cattle country and they can get away with poorer grain quality," DeLoach laments. But hogs can't. Gynette sent out milo samples for testing and found a wide variation in quality. Dryland milo, especially, was of poor quality. Irrigated milo, on the other hand, was good.

In 1991, DeLoach put an end to most of the diet problems by building a new, computerized feed mill. It cost the hog operation $60,000, but he figures it was paid for in one year just through improved feed efficiency.

Today, they use only corn. They've incorporated four different nursery rations and five finishing rations. Allison helps formulate the diets.

DeLoach continues to closely watch corn quality. He will occasionally refuse delivery of corn when the quality is poor.

Feed costs generally are higher in Texas. Corn last October cost $2.56/bu. delivered from Dumas. In the Midwest, it was well below $2/bu. Total feed costs ran $23.54/cwt. of pork produced last year.

The Future New Way Pork is now being managed by Jim Allison Jr., the son of DeLoach's consultant. DeLoach believes the unit will continue to improve and prosper under this new management.

He's just proud of what he and his crew accomplished. "We left the farm with some long-term facility indebtedness," he says. "But the farm has done outstanding, financially."

In 1997, the farm reaped good profits. Some of the profits were held in reserves just in case a poor year turned up. After last winter's severe price slump, that was obviously a smart plan. "I think we're one of just a few farms who ended up in this good of shape," DeLoach says.

Samonella Plagues Finishers

A prevalent problem still plaguing the pork industry is salmonella in the finishing barn. The incidence seemed to increase when furox and other antimicrobial products were removed from the market.

Salmonella is commonly seen as either a scours or respiratory problem - sometimes both. The number of sick animals (morbidity) is usually high, but the mortality will vary with the intensity of the disease, the type of barn, environment, management and the aggressiveness of the treatment.

Case Study No. 1 We were called to a 600-sow, farrow-to-finish unit reporting a respiratory problem in a new finishing barn. The unit was on a weekly farrowing schedule, had nursery space for 8 weeks, finishing space for 16 weeks.

The non-vaccinated sow herd had been through a Porcine Reproductive and Respiratory Syndrome (PRRS) outbreak. Farrowing rate had dropped to about 60% due to abortions and recycles. Pigs weaned from several farrowings did poorly in the nursery. This led to a finishing barn picture that was a little confusing because we were called in 10-12 weeks after the PRRS outbreak.

The four, 300-head finishing rooms each had pigs of different age groups and varied considerably in size. Respiratory problems ranged from slightly increased respiration to severe thumping. There was a high percentage of stunted and gaunt, poor-doing pigs, several with very loose stools. A few pigs had discolored and purple ears. Death loss was well over 4-5%, some rooms running up to 15%.

Lab work confirmed salmonella with a Pasteurella multocida involvement. Lungs showed interstitial pneumonia lesions, characteristic of either a salmonella or PRRS infection. Serology showed most pigs had fairly high ELISA titers to PRRS virus.

We felt the pigs were set back by the presence of PRRS first in the nursery then also in the finisher. When stressed, pigs broke with salmonella as a secondary problem. Because the pigs were doing poorly in the nursery, small groups were backing up in the finisher. To keep production flowing, the producer mixed groups of pigs in the same rooms until group sizes returned to normal levels. The problem snowballed despite his efforts.

Our game plan considered that the PRRS infection in the sow herd and nursery pigs was settling down, but was still present. Groups remained small due to the high abortion rate. We marketed the healthy and lightweight pigs and euthanized those that had no chance of economic recovery. Pigs were regrouped by size, moved to an open-front unit and injected on two consecutive days with a salmonella sensitive antibiotic. Another antibiotic was added to the water. Pigs that responded poorly were injected with a third antibiotic for two more days.

Finishing rooms were completely emptied, disinfected and sat empty for a week. Until group sizes no longer allowed, we put two weeks worth of pigs in each room. Once production levels returned to normal, we placed one group per room. Rooms were kept all-in, all-out, to continue breaking the disease cycle.

Pigs were kept on Mecadox as long as legally possible in the nursery and finisher. We also pulse-medicated the nursery twice and the finisher once. The PRRS is now under control. Salmonella has not rebroken in the finisher barns. We discontinued pulse-medication in the finisher, but continue the practice at 120-150 lb.

The key for this producer was to break the cycle right away, cut his losses, institute long-term management strategies rather than try to vaccinate and medicate through the problem.

Case Study No. 2 The second case involved a producer who switched from a farrow-to-finish operation to a feeder-finisher. He purchased pigs from two sources and placed them in a two-room, 1,000 head finishing barn.

About 30% of pigs in one room showed signs of scours; another 25% showed a wide range of respiratory distress.

A laboratory diagnostic workup yielded positive cultures for salmonella in the lungs and intestinal tracts. The histology showed interstitial pneumonia, a common lesion in salmonella or PRRS cases.

The pigs were treated with samonella sensitive antibiotics in the water for five days and by injection for two days. The pigs responded but death loss still reached 4% in that room. Another 2-3% were stunted.

Although the other room had not broken or shown any clinical signs, we vaccinated those pigs for salmonella as a preventative measure, using two doses of a modified live salmonella vaccine. As the vaccine protocol would allow, we also used a water pulse-medication treatment to prevent pigs from becoming infected with salmonella. There was some concern there might be antibiotic interference with the vaccination response since a modified live vaccine was used. The producer took greater care to always walk this room first and wear different coveralls and boots when checking the other rooms. This group made it to market without signs of salmonella.

The barn was emptied, cleaned and disinfected completely before new, single-source pigs were introduced. It took two weeks to stock the barn. The new groups finished without any samonella outbreaks.

Smithfield Buys Carroll's For $500 Million

Smithfield Foods Inc., already the world's largest pork processor, may now be the world's largest pork producer.

Smithfield announced Feb. 25 that it is buying Carroll's Foods Inc., the nation's second largest hog production company with 180,000 sows. The purchase was for approximately $500 million, consisting of 3.3 million shares of Smithfield Foods common stock, $178 million in cash and the assumption of approximately $216 million of debt.

Smithfield, based in Smithfield, VA, controls about 20% of the U.S. hog slaughter capacity (see page 15) and in recent years purchased controlling interests in meat processors in France and Canada.

Smithfield already had a strong presence in production before the Carroll's purchase, with some 165,000 sows. In December, Smithfield reported an 86% interest in Brown's of Carolina, a 50% interest in Smithfield-Carroll's (a joint production arrangement) and a 77% interest in Circle Four, the Utah-based production unit.

This winter, Smithfield purchased Western Pork Production Corp., a 12,000-sow unit near Yuma, CO. With these purchases, Smithfield may have surpassed Rose Hill, NC-based Murphy Family Farms' estimated 340,000 sows.

With the Carroll's acquisition, Smithfield has taken a major step toward achieving its long-term strategic goal of becoming a more vertically integrated company, says Joseph W. Luter, III, Smithfield Chairman and CEO.

"This acquisition will accomplish in one transaction what the company had otherwise hoped to achieve in added hog production over the next five to 10 years, assuming such production could even be added given the current political and environmental climate in existence today," says Luter. Smithfield approximates its level of integration at 27%, up from 11% before the Carroll's purchase.

Carroll's is headquartered in Warsaw, NC. O.S. Carroll started the company in 1939 with the purchase of a feed mill and feeding the mill's byproducts to 200 hogs on dirt lots nearby.

Ever since Carroll's daughter, Joyce Matthews, death about two years ago, rumors of Carroll's sale persisted. Carroll's has about 2,700 employees and about 600 contract growers.

Carroll's CEO F.J. "Sonny" Faison says the deal should have no effect on contract growers. "All the contracts will be assumed. This deal should give our growers some market stability," he says.

Faison says his company was not forced into the deal by the turmoil in the live hog market. "We still had a very, very adequate net worth. We got over $500 million for the company and only $216 million of that was for debt," says Faison. But he adds that 1998 was the first losing year Carroll's Foods ever had and that the losses suffered were extreme. "But that did not lead to this negotiation. These talks have been ongoing. We've had a long-term strategic plan to be an integrated company," Faison says.

In addition to the Smithfield-Carroll's joint venture and Circle Four, the two companies had partnered in the ownership of the exclusive U.S. rights to the NPD line of genetics.

Carroll's is also one of the largest poultry production companies and co-owner of Carolina Turkey, the largest turkey processing plant in the world.

Only 14% Of Hogs Sold Under Long-Term, Risk-Reducing Contracts

If you're worried that you were the only one getting hit by low market prices, you might find some consolation in a recent survey that shows only about 14% of the hogs sold in January were purchased from producers under some type of long-term, risk-reducing pricing system (see Table 1).

Glenn Grimes, University of Missouri ag economist, and the National Pork Producers Council (NPPC) surveyed the 12 largest pork packers (ranked by estimated daily capacity) in early February. The survey asked the packers to classify their purchases, by pricing method, during January 1999. Nine responded. Hormel Foods, Lundy's and Bryan Foods did not.

To more accurately portray the industry total, NPPC's Steve Meyer used industry sources to estimate the portion of the month's slaughter for the three companies failing to respond.

Hormel's January slaughter was estimated at 700,000. Industry analysts estimate that 50-70% of Hormel's supply is under contract, with the payment price tied to feed prices with a ledger balance maintained. For the survey, Grimes used 60%. Although Hormel did not respond to the Grimes/NPPC survey, they have responded to state and federal investigations about contracting. Hormel says that 50% of the hogs they purchased in 1998 were under contract. And, they point out, they have offered the contract to all size producers (see Table 2).

According to Hormel, about 85% of the contracts they have are with producers who deliver 1,000 hogs or less a month (roughly the output of a 600-sow farm). And, Hormel says, a number of those contracts that call for a delivery of more than 1,000 hogs/month are with multiple producer sow co-ops.

For Lundy's, the January slaughter was estimated at 192,000 head. Grimes assumed Lundy's slaughtered 33,000 of their own hogs in January, and added this number to the 'Other' category. It is widely believed Lundy's buys virtually all its remaining hogs on a formula price, so 159,000 head were added to the 'Formula' category.

In the case of Bryan Foods, January slaughter was estimated at 143,000 head. Bryan is known to buy some hogs on formula arrangements, while still buying a significant number on the spot market. For the survey, the split was assumed to be 50-50.

With these adjustments, the total slaughter capacity of these 12 firms made up 91% of the U.S. slaughter.

Grimes pointed out that the formula pricing method does include packer-owned hogs. Excel, for example, owns close to 120,000 sows. But, some of those pigs are purchased by producers and then sold back to Excel on a formula.

Grimes thinks that the 'plus-some amount' of the formula pricing method is generally $1 or $2/cwt., but in some instances it may be higher.

Grimes said he was somewhat surprised at the relatively small number of hogs purchased using contracts that involve ledger accounts. "For the amount of publicity about what effect this might be having on the markets and all the concern expressed by bankers, you'd think it was a much more prevalent practice," says Grimes.

Grimes says that the ledger contract number may be understated as some feed companies have contracts beyond what packers are offering. Grimes says Land O'Lakes is known to have some and Purina Mills is believed to have some.

Formula pricing: The packer agrees to take your hogs at a future point and to pay you the reported Iowa-southern Minnesota packer direct top bid plus $2/cwt.

Fixed price tied to futures market: You agree to deliver during a specific time period and the packer agrees to pay futures price closest to that period plus or minus a certain amount.

Fixed price tied to feed prices, no ledger: Your price varies according to a matrix figured using Omaha corn and Decatur soybean meal prices; sometimes referred to as a cost-plus or matrix contract.

Fixed price tied to feed prices, ledger maintained: Same as above, but a ledger balance is maintained that keeps track of the difference between the market price and the ledger matrix price.

Window risk sharing, no ledger: A $40 to $50/cwt. window is agreed upon. Within the window, market price is paid. Above the window, the difference between market price and the window top is split. Below, the difference between market price and window bottom is split.

Window risk-sharing, ledger maintained: Same as above, but a ledger balance is maintained.

Emergency PRV Cleanup Gets Underway As Minnesota Confronts Major Outbreak

USDA officials are banking on a federal relief program to help win the fight against pseudorabies (PRV). It couldn't come too soon.

With hog prices in the doldrums for months, pork producers have taken to cutting costs where they can. One likely candidate has been vaccination for PRV.

Major State Outbreak Dropping vaccinations is believed to have contributed to a PRV outbreak in Minnesota, creating an emergency situation, according to Thomas Hagerty, state veterinarian.

"We think vaccine usage has dropped quite a bit as people try to find places to tighten their belts with pig prices down," he says. "We would like this area spread of the disease to stop, and I think it would if we had the vaccine out there."

Hagerty says the state legislature has proposed $1.5 million in funding to vaccinate 3.5 million pigs, perform blood testing and lab work for PRV. But he admits it may take a long time for the money to be approved, if at all. In the meantime, he is urging producers to reinstate vaccination programs "just to protect themselves," he says.

"The reason for vaccine money is you need to put up a fire wall someplace in order to get an outbreak like this stopped. That fire wall normally is vaccine so you don't have a naive population around," explains Hagerty.

Around Christmas time, Hagerty says state officials started to notice an increase in PRV activity. On Jan. 1, there were 144 quarantined herds. When it hit 234 in mid-February, it was the largest number of cases in three years (see Figure 1).

There are PRV breaks going on in three distinct areas of southern and west central Minnesota, with an unusual number of finishing barns affected. It is a "very hot virus outbreak" that is also causing sow deaths and abortions, and is killing dogs, says Hagerty.

Federal Buyout Welcomed Some of the herds that have recently broken with PRV have signed up for the federal buyout program, says Paul Anderson, DVM, veterinarian in charge, Swine Diseases Division, Minnesota Board of Animal Health.

"When a couple of herds broke, and all their sows got infected, they knew the herd had to go," he points out. For many producers with two- and three-site production systems, the required depopulation is not such a hardship. Often, infection is centered in the breeding herd and has to be cleaned up. But if nursery and finishing production are on separate sites and remain uninfected, production flow can continue unabated, says Anderson.

Other reasons producers are enrolling in the PRV buyout program include a need for new genetics and herds having a PRRS (Porcine Reproductive and Respiratory Syndrome) problem, he notes.

So far, 60,000 head in 19 herds are involved in the emergency buyout in Minnesota, says David Vogel, area veterinarian in charge.

In Iowa, all quarantined herd owners were contacted by telephone and also by certified letter. About 570 letters went out, says Lawrence Birchmier, DVM, in charge of the PRV program. He says close to 40% of those herds have expressed an interest. In the end, he expects close to 200 producers will express an interest in participating.

Once producers agree to have district veterinary officials visit their farm and project an indemnity payment, they have seven days to decide whether to go through with herd buyout. Producers are also given seven days notice of depopulation to get their farm in order and line up help for load-out day.

In addition to animal indemnity, animal transportation, equipment and carcass rendering, USDA will also pay for the hiring of extra help for load-out. The cost of cleaning and disinfecting is borne by the producer. Herds can be repopulated within 30 days.

Nebraska Status In Nebraska, eradication is imminent. There are only 12 quarantined herds owned by seven producers. Three herds have agreed to the buyout, says Jim Weiss, DVM, state epidemiologist. One producer has 150 sows, the second just 50 sows and the third one is a finisher with 1,500 head in inventory. One of the quarantines dates back to 1991, the other two to 1995.

Weiss says even though quarantined numbers are low, officials expected to be cleaned up by now. Two, 5,000-sow operations that chose not to join in the buyout wereinfected about a year ago. Adjusted target for completion of eradication is late summer or early fall, he says.

National Participation Overall, there are 1,060 quarantined, PRV-infected herds in the U.S. eligible for the buyout program, says Joe Annelli, DVM, in charge of Emergency Programs for USDA's Animal and Plant Health Inspection Service (APHIS).

That represents 895 producers, all of whom have been contacted at least once about participation. Sixty-one producers have enrolled in the buyout, explains Annelli.

The APHIS home page provides weekly updates of current market values being paid. The Web site is www.aphis.usda. gov. Producers are paid the larger of the two values between contact (time the producer calls USDA to set up a farm visit) and time of depopulation. The USDA goal is to provide indemnity checks within seven days.

There are three, declining payment levels in the accelerated PRV cleanup program (see "USDA Authorizes Pseudorabies Buyout," Feb. 15, 1999, page 12, National Hog Farmer). In mid-March, the third and final payment phase goes into effect. It will last until June 30 or until the last of the $80 million appropriated from USDA is used up, says Annelli.

If your herd is quarantined for PRV, it won't cost anything to contact USDA about an estimate for cleanup. The best thing you can do is sit down with your veterinarian and banker to decide whether to participate in this federal program, explains Paul Sundberg, DVM, assistant vice president, veterinary issues, National Pork Producers Council. Or call the APHIS hotline at (800) 601-9327. It is a voluntary decision.

But remember, should you decline, you still must meet all of the current rules of the national/state eradication programs, he says.

Market Access: What Price For Shackle Space?

Pork producers have worried about it. The National Pork Producers Council (NPPC) published a 142-page book about it in 1995. Lenders nudged producers toward packer contracts because of their concerns about it.

But in 1998 it - market access - became a reality.

"Sorry, we've filled our kill. Sure, we'll buy them, bring them to the plant in two weeks. The bid? $8/cwt."

No matter how the message was conveyed, it came through loud and clear. There's not enough shackle space for the record number of hogs in the chain.

Pork producers everywhere are now clamoring for more slaughter capacity. The bad news, Iowa State ag economist John Lawrence says, is it's unlikely they'll find it. "The question producers should be asking is which packer is going to close next, not which is going to expand," says Lawrence.

Farmland Industries' vice-president of pork production, Wayne Snyder, sees the issue from a unique view as Farmland has ties to both producing and packing.

"We had production exceeding capacity," says Snyder. "We saw some capacity shut down (see Table 1). We saw the elimination of expectations for exports. To some lesser degree, we had the importing of live hogs. With this all happening simultaneously, we created an environment where the normal market forces were put to such an extreme test - because of that market access issue - that we saw a breakdown of the traditional pricing situation," says Snyder.

Snyder wonders now if the traditional self-correction mechanisms in the market - increased sow slaughter, fewer gilt retentions and the resulting reduction in farrowings - will work this time. "The macro-perspective is still one that says, as an industry, packing plants have age. As an industry, we have packing plants that have high cost. And, as an industry, we have a history of earnings for that piece of our business that doesn't warrant new investment," says Snyder.

His bottom line? We'll have less capacity, not more.

Compounding the problem, not only is the number of shackle spaces shrinking, those available may already be spoken for. Glenn Grimes, University of Missouri ag economist, completed a NPPC-supported survey of marketing contracts. His data shows two out of three hogs sold were on some type of contract. (See story on page 16.) That remaining third, the spot market, could be left out in the cold if capacity shrinks further.

Packers & Stockyards Limitations The reality of more packer-owned hogs, more packer-producer contracts, a shrinking slaughter capacity and what it will mean, has many producers calling for the government to step in. The USDA's Grain Inspection, Packers and Stockyards Administration (GIPSA) is the lead agency in dealing with these issues. Jay Johnson, regional supervisor for the GIPSA Des Moines office, explains they have started an investigation of all aspects of contracts and marketing agreements.

"We're looking at the level to which they're used, their terms and conditions, whether or not they have an adverse effect on prices and competition in the spot market, and any other competitive issues that arise," says Johnson.

But, Johnson cautions, don't expect GIPSA to be a cure-all. "A lot of producers think all ills can be solved by packers and stockyards. Some even think our authority allows us to limit hogs coming from Canada. The perception is that the Packers and Stockyards Act is going unenforced."

Johnson and his staff are trying to tell people what they can and can't do. "You can read Section 202 of the Packers and Stockyards Act however you want," he continues. "But understand that since 1921 there has been no shortage of courts that have rendered decisions on it. So we are constrained by the legal precedent that has been set."

Johnson acknowledges that Section 202 of the Act says it should be unlawful for any packer to engage in any unfair, unjustly discriminatory practice.

"Discrimination means somebody else is getting more money than you," says Johnson. "That, in and by itself, is all right if it's economically justified. It's certainly much to the displeasure of producers that there is an economic justification for paying a premium for larger volumes, say 200 vs. 20 head."

Johnson thinks that market access via contracts may be an issue his office can tackle. "You don't have to offer the same deal to everybody because you don't want all your livestock tied up into one type of deal," he says. "But we're saying if you're going to buy 100,000 of your pigs under this type of contract, maybe you need to make that contract available under equal terms to everyone. Even if that means you have a lottery or something so that the first people who can meet the terms of that contract have access to it."

But don't expect packers to offer more contracts any time in the near future. NPPC economist Steve Meyer points to IBP as an example. Meyer says IBP was probably the least aggressive of the midwestern packers at offering contracts. As a result, "They ended up being the big winner in this hog market again," Meyer says. "IBP won big by being behind the times."

Yet, Meyer still thinks Hormel Foods, which has aggressively contracted its kill needs with producers by locking in upwards of 50% into seven-year or longer deals, is better off long term.

"Hormel is the one that's in the real catbirds' seat. They've got supplies, and pretty low cost supplies, locked in because of the ledger contracts. IBP can not say that. They're going to have to pay full market price for everything they buy, or at least far more than Hormel, on the open market," Meyer comments.

Of course, some of the new capacity that has gone up in recent years has been done with the idea that vertical integration will make the plant profitable. Premium Standard Farms and Seaboard both worked off that model in their start-ups. Smithfield with their purchase of Carroll's Foods (see page 33) certainly has taken a huge step in that direction.

Smithfield built a supply network for its East Coast facilities primarily with the use of marketing agreements, tying prices to formulas based off of the traditionally more open Iowa markets.

The agreements have allowed Smithfield to know exactly how many hogs to expect, what genetics and what weights. With that information in hand, a packer has some better tools to use in working with retailers on long term agreements for branded label products.

This North Carolina model has some flaws though, according to Walt Cherry, North Carolina Pork Council executive director. There is no open market for price discovery. Cherry says checkoff data indicates that five years ago North Carolina producers were getting about $5 more/head than the national average. But in 1998, North Carolina hogs were $7/head under the national average.

Price Discovery - The Real Issue Walt Hackney, Hackney Ag Associates, Omaha, NE, works at group marketing producers' hogs to get a better price. He understands the independent producer's concern about access to packers, but says the price discovery issue accompanying the shrinking spot market sales is of greater concern today. Hackney says the average producer has no conception of how the price for his pigs was determined. "It's a figure quoted to him by USDA or on DTN or by his local packer. Our concern is how are we going to insure our clients that they have the highest, most accurate degree of base price discovery out there, he says.

Hackney maintains that the basic bible of hog prices, the Iowa plant delivered top, always has been reliable, but is losing its credibility as more and more hogs are contracted. "We always trusted that price in the past. It allowed the packer to negotiate a deal with you on your pigs on a carcass merit program of $2.50/cwt. over the Iowa interior top. That would be your base price. Then, the matrix would kick in and you would get all the added value and you felt good about that," says Hackney.

As of the end of February, though, Hackney was planning to abandon that market as a reliable tool for price discovery. "It's our opinion, it's not an identifiable thing. There isn't research that's going to show it, but common sense tells you the packers are abnormally, unnecessarily, fictitiously lowering the quotable cash," says Hackney.

He believes the level of contracting is directly responsible for this. Hackney now relies more on what he sees in his own sales data and at the cut-out value of the carcass as they bargain with packers.

Manure Odor Tied To Diet

Swine nutritionists at the University of Kentucky (UK) cooperated with UK agricultural engineers to investigate ways of reducing ammonia in stored pig manure. The researchers found ammonia concentration above manure pits was related to dietary protein.

Simulated anaerobic manure pits were constructed containing monitoring instruments to measure production of gases in the pits. Researchers measured ammonia, methane and carbon dioxide in the space above the anaerobic pits over 2- to 3-week periods. Concentrations of volatile fatty acids in the manure were also monitored.

The odorous gases produced by manure are normal end-products produced by anaerobic microorganisms in the manure. A number of volatile gases (some researchers estimate more than 200) are thought to contribute to the odor of swine manure. These gases include ammonia, hydrogen sulfide and other sulfur-containing compounds.

Most of the odorous compounds in manure originate from nitrogen-containing products that have passed through the gut and urinary tract. For example, ammonia results from the decomposition of urea nitrogen in urine and undigested protein in feces. Indole, phenol, para-cresol and skatole are degradation products of the amino acids tryptophan, phenylalanine and tyrosine. Hydrogen sulfide and other sulfide-based odors originate from the breakdown of the sulfur amino acids, methionine and cystine, and from other sulfur compounds.

Results of one of the UK experiments are shown in Figure 1. Finishing pigs in the experiment were fed the following four, corn-soybean meal diets. The first diet was an excess protein diet that had 2% more protein than the amount needed to meet the lysine requirement. The second diet was an adequate protein diet that met the lysine requirement. The third diet was a reduced protein diet that contained 2% less protein than diet 2, but was supplemented with L-lysine. The fourth diet contained very low protein that was 4% below diet 2, but was supplemented with L-lysine, L-tryptophan and L-threonine.

Manure was collected from the pigs and placed in the pits. Note the ammonia concentrations in the air above the manure pits was closely related to the amount of protein in the diet. Ammonia levels in pits containing manure from pigs fed the lowest protein diet were less than half of those of pigs fed the highest protein diet. Volatile fatty acid levels were also altered by the diets. Researchers: Gary Cromwell, Merlin Lindemann, Jim Monegue, Animal Science Dept.; Larry Turner, Richard Gates, Joe Taraba, Biosystems and Agricultural Engineering Dept., University of Kentucky. Phone Cromwell at (606) 257-7534.

How The Europeans Feed Their Sows

This week I got a plaintive, if not desperate, phone call from a 5,000-sow operation manager in the U.S.

His problem was the litter average in his unit was just a little over nine born. But despite this modest output, his sows were wasting away to skin-and-bones.

And management seemed reluctant to increase the feed allowance or improve the nutrient specifications, even though they had invested in a modern genetic line with a high appetite.

Six years ago, the mixed genotypes of that time averaged 21.9 pigs weaned/year (weaning at 23 days of age), on 1.27 tonnes (2,822 lb./tonne) of feed. This yielded 280 lb. weaner weight/sow/year.

Some of today's producers with modern genetic lines weaned over 25.6 pigs/sow/year (22 days at weaning) on 1.28 tonnes of feed/year. This yielded just under 400 lb. of weaner weight/sow/year. That's a 42% increase in productivity.

This provides some important lessons for his employers:

1. Modern genotypes have the ability to produce 40% or more weaner output for the same amount of feed consumed 10 or more years ago (see Table 1).

2. Therefore, if the same amount of feed is fed/sow/year, the sow must have a higher nutrient-dense diet, otherwise performances will drop (ac- counting for the nine born).

3. Diets must be fed in a much more precise manner, with certain diets offered certain times.

4. It will cost about 18% more each year to feed that way, but so what. Feed costs - about 60% of total costs - increase by 18%, an 11% increase in total costs, but income rises by 42%, giving a 3.8:1 return on extra outlay (REO).

Feeding Right From The Start Correct sow nutrition de- pends, first of all, on setting up the replacement gilt correctly. Like it or not (and some academics don't), we firmly believe in Europe that modern lean-gain gilts should be mated much later and at heavier weights. Not doing this jeopardizes the chance of 25 weaners/sow/year.

For example, gilts are first mated during their third estrus when they are about 210-230 days old, weighing 298-320 lb. and with about 3/4-in backfat at P2 (Parity 2).

Not following this procedure jeopardizes long-term productivity. Poor sow condition causes premature culling, lowers the herd's immune status and this susceptibility leads to more disease.

To combat diseases, a 6-week (preferably 8-week) acclimation period is needed after first entry into the herd. If bought-in at 220 lb. with P2 fat not less than 1/2 in., during the acclimation period, the replacement gilt should gain about 77 lb. and P2 backfat increase by 1/4 in.

To achieve this, feed 9,082 kilocals digestible energy (DE)/day and 16 grams/day total lysine. At a daily intake of 6.5 lb./day this suggests a diet of 1,397 kilocals/lb. and 6 grams total lysine, supported by the usual amino acid profile.

And gilts should be flushed two weeks before the third estrus.

After First Service During pregnancy, all sows can be fed basically the same, but daily allowances depend on age, body condition and size, along with environmental differences.

Today's young sows, which are well below their mature body weight, have a high potential for lean growth. Although this increases the requirement for protein and energy intake, current advice is to limit lean growth in early life and during consecutive pregnancies. This ensures their potential for production and tissue repair is satisfied while minimizing their needs for maintenance, especially later in life. This can be achieved by restricting the intake of lysine (ideal protein) during the first pregnancy (see Table 2).

The values are based on model predictions, assuming minimum backfat thickness of 5/8 in. at mating and 3/4 in. at farrowing and 11 pigs born/litter.

Currently, on many units in Europe, the feeding strategy advised for all dry sows is to standardize the intake of lysine to 12.4 grams/day (5 lb. of feed/day, 0.55% lysine) for all genotypes. This aims to bring down lean tissue growth rate to a level which is below the potential for most genotypes - a potential which is not required in the female. Recently, energy intake has been increased from 7,100 to 7,290 kilocals DE/day with the aim of further defending fat reserves and enhancing fetal growth. Preliminary results have shown an improvement in piglet birth weight.

Lactating Sows We now should have a sow at farrowing with a condition score of 3.5 and a P2 backfat between 0.94 and 1.10 in. would be bordering on condition score of 4.

The secret of lactation feeding is to minimize fat and muscle loss during lactation. The key to this is appetite.

Figure 1 gives a typical target energy intake to minimize condition loss and sustain litters of various sizes and weaning weights.

Based on model predictions and assuming sow weight at farrowing of 350 lb., piglet birth weight averages 2.9 lb. and weaning at 24 days.

In Europe, the key to satisfactory intake is the use of a standardized feeding scale during lactation. All sows are fed to a standard scale in the first 10 days after farrowing. This allows 5.5 lb. of feed on day 1, increasing by 1.1 lb./day to achieve an allowance of 15.5 lb. on day 10. Thereafter, sows are treated as individuals by placing them on a daily feed allowance based on litter size and piglet growth rate, called the "Stotfold Scale."

For anything, but exceptionally lean genotypes, you will find 1,572 kilocals/DE kg. and 1% total lysine, and 0.8% oil fed at the scale above (and after 7 days, to the Stotfold Scale) will be excellent for modern genotypes, and sows will only lose 10-20 lb. and 0.07-0.15 in. P2 backfat if at all, assuming the correct environmental conditions are provided, of course.

Weaning To Rebreeding Latest advice is to provide a diet with 1,604 kilocals DE/lb. and 1.3% lysine, and 5% oil. Sows are offered 11-13 lb./day. This generous intake helps them switch from a catabolic (tissue-mobilization) state to an anabolic (tissue-building) state to get the right hormones in place in the 4 to 5 days available.

Overall It is essential to feed the whole sequence, and check carefully that your feed supplier is meeting these nutrient specifications. They may seem unnecessarily high to an American feed mill, but insist that they meet them.

It will cost more, but remember, you should increase your output by 40%, and that covers a price increase per ton, with a lot to spare.

I realize that some of the criteria - the long wait to first service, the special gilt developer diet, the high lactation dietary specifications, three diets, etc., - could seem strange and over-fussy to traditional American producers. They are definitely not. We find them essential for lean, fast growing and big sows with large litter potential. Correct nutrition will let them express it.

After all, many are achieving 25 pigs/sow/year quite easily, but we would never do it without these sort of increased nutrient specifications.