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Caspers Chosen Chairman-Elect

National Pork Producers Council Past President Jon Caspers of Swaledale, IA, has been chosen chairman-elect of the board of directors of the National Institute for Animal Agriculture (NIAA) during the group’s recent annual meeting.

In two years, Caspers will become chairman of the NIAA, which provides a forum for building consensus and advancing solutions for animal agriculture.

Arizona Chef Tops Taste of Elegance

Klaus Happel, executive chef at the Renaissance Scottsdale Resort in Scottsdale, AZ, won top honors in the 17th annual national Taste of Elegance contest May 1 in Orlando, FL.

The Pork Checkoff-funded competition featured 22 chefs, all winners of state and regional Taste of Elegance contests.

Chef Happel earned Chef Par Excellence honors and a check for $5,000 for his winning entrée, Braised Pork Shank Medallion Wrapped in Savoy Cabbage.

Trucker Quality Assurance Pays Off

More than 360 instructors and 14,000 producers, drivers and handlers have been certified in the Trucker Quality Assurance (TQA) program since the effort was launched in 2002.

“An economic analysis has shown that TQA has saved the pork industry more than $6 million,” says Erik Risa, education program manager for the National Pork Board.

TQA provides information to facilitate transportation and delivery of the highest-quality, safest product possible to keep pork competitive in U.S. and world markets.

“TQA isn’t just for truck drivers – it’s for producers, load crews, packing plant employees and others who work in the swine industry,” relates Risa. “By focusing on animal welfare and biosecurity throughout the pork production chain, TQA plays a key role in making U.S. pork consumers’ meat of choice.”

Internet Site Tells Agriculture’s Story

The National Pork Producers Council (NPPC) has joined with other food and agricultural groups in launching a Web site dedicated to telling the true story of agriculture.

“We have the safest, most abundant, most affordable food in the world,” says NPPC President Joy Philippi, a pork producer from Bruning, NE. “And the U.S. pork industry is proud of the role it plays in offering the public quality, healthful products and proud that we are good employers, good neighbors, good stewards of the environment and good care-givers to our animals.”

The new Web site was launched in response to “Chew on This: Everything You Don’t Want to Know About Fast Food,” Eric Schlosser’s latest book critical of food production and processing. Aimed at middle school students, it is a follow-up to his earlier work, “Fast Food Nation,” that offered sensationalized misinformation about the U.S. food system.

“We welcome open dialogue about our food system,” says Janet Riley of the American Meat Institute. “There are important issues worthy of discussion. However, some of the information contained in this latest book is inaccurate and misleading, and Americans should know the facts so they can form their own opinions.”

To provide those facts, the groups launched BestFoodNation.com, providing factual information about the positive contributions made by millions who make up the food industry. Visitors to the site can learn about healthy food choices offered by restaurants and food product manufacturers. Also, the site carries the positive animal welfare and environmental stewardship practices of farmers and ranchers, and the numerous benefits local communities derive from the food and agriculture industries.

The new site is supported by 18 agricultural organizations and food-related groups, including the NPPC and the National Pork Board.

Certified Frozen Boar Semen Program

A pilot project at the University of Illinois (U of I) could create a worldwide market for swine semen production in the state.

The Illinois Department of Agriculture has provided $69,500 under its AgriFIRST grant program, part of the governor’s Opportunity Returns Initiative.

The pilot effort for an Illinois Certified Frozen Boar Semen Program is targeted at expanding the use of frozen boar semen, which can be shipped greater distances than fresh semen, while still retaining health and fertility characteristics.

“Today, about 99.5% of boar semen is shipped as a liquid fresh product,” explains Rob Knox, U of I Extension swine reproduction specialist and co-leader of the state project with Sherrie Clark, DVM, a U of I faculty member in the College of Veterinary Medicine.

“The liquid product has a very short shelf life which creates shipping and timing problems,” adds Knox. “We thought that a frozen product, while giving up a little in fertility, would open new opportunities to ship domestically and worldwide.”

The key to the project is to establish independent testing to ensure the product’s value. Knox and Clark will run fertility tests on frozen semen, and independent labs will test for health-related issues.

The pilot project also includes collaboration with three Illinois commercial genetic suppliers and genetic exporters.

“Neither the U of I labs nor the independent labs will have any stake in the businesses, so the independence is assured,” says Knox. “In the future, the semen may come from a number of private commercial suppliers in Illinois.”

Information on the project will be posted at www.marketmaker.uiuc.edu.

Knox concludes the one-year project could produce a major increase in exports of valuable semen to international markets and create new sales of certified semen in the domestic youth and show pig areas.

Cost of Production Data Elusive

I am often asked about production costs and how U.S. producers stack up against Canada and other countries. I'll admit, I usually hem and haw a bit because there just is not much factual data available.

That wasn't always the case, but with the demise of many publicly-funded farm records systems, or at least the demise or growth of the pork producers who used them, we have far less data on the cost of producing hogs.

There are still a number of private data-gathering systems, but their data are available only to members. Agrimetrics is probably the oldest and most widely discussed system. The last time I heard, it still included most of the large producers in the United States. These producers use the data to benchmark their physical productivity and financial performance.

For many years, I used data from the Iowa State University (ISU) Enterprise Records system. It was reasonably detailed and divided into thirds -- low, average, high -- based on profitability. It provided an idea of the competitive situation among independent Iowa producers. However, the number of producers participating in the system declined steadily during the '90s and the industry sort of grew away from the data. So much of Iowa's production was being held by farms substantially larger than the operations enrolled in the system that the data wasn't representative of the Iowa pork industry. ISU stopped publishing the data in 2000.

I now use ISU's Estimated Costs and Returns, mainly because it is a series with a long history that is based on reasonable assumptions. Figure 1 shows the ISU estimated breakeven costs back to 1991. In preparing this article, I discovered that the ISU cost of production data for 1973 to 1991 has not yet made the jump to an electronic format, so this is as far back as I can graph the data at this time. I'll provide the older data in a future article.

This data series has several strengths: First, it is very public. You can see this year's computations and historical data back to 1991 at www.econ.iastate.edu/faculty/lawrence/EstRet/Index.html. Second, it is reasonably detailed and responsive to changing market conditions. Third, it looks at more than just farrow-to-finish operations. From that same source you can see estimated costs and returns for selling feeder pigs and for finishing feeder pigs. And, fourth and possibly most important, it contains "reasonable" estimates.

The numbers in the ISU series are close to what I hear in the countryside. They seem to reasonably represent an "action point," and when prices drop below it, we begin to hear of financial difficulties and see output changes.

It is the "reasonable" point that trips up USDA's estimates of hog production costs. Since 1990 (the oldest data I could find), USDA has never estimated total costs for farrow-to-finish production to be less than $50/cwt., live weight, and has estimated annual profits to be -$5.53 to -$17.89/cwt., live weight.

In other words, USDA claims that U.S. hog producers have not covered total costs since 1990. If that were true, we would have no pork industry in the United States. You can find USDA cost estimates for many commodities at www.ers.usda.gov/Data/CostsAndReturns/testpick.htm.

The ISU data have some weaknesses, too. The major weakness is the "fixity" of the cost of non-feed items. The costs of medicines, bedding, labor, transportation, buildings, etc. were for many years based on the ISU Enterprise Records data. Since those data have not been available from 2000 to date, the numbers in the current estimates are probably too low, especially with the run-up of energy and building material prices over the past two years. ISU Agricultural Economist John Lawrence reports that an update of these cost components is underway.

When all is said and done, I still believe the ISU estimates are a reasonable barometer of costs in the United States. They are logical and transparent and have a long history. All of those add to their credibility and usefulness.

Speaking of costs, another question that comes up often is, "Where does the U.S. rank in costs of production vs. international competitors?" That's an even more difficult one to answer due to the influence of exchange rates which, when they are fluctuating wildly, can sometimes make even last week's comparisons look pretty silly.

PIC, the worldwide breeding stock supplier, is in an almost unique position to see costs of production around the world and, from time to time, takes a stab at compiling and comparing them. Their latest effort (February 2006) appears in Figure 2. I apologize for the size of the type, but I just got a picture of the figure and cannot change the format. I think you can zoom in to read the details.

Keep an Eye on China
The United States ranks third to Argentina and Brazil in this ranking. China is fourth, Canada is fifth, and Chile is sixth. Interestingly, the United States has an advantage on Brazil in terms of both feed costs/ton and feed cost/kg of gain. Only Argentina has lower feed costs than the United States.

China's status as a low-cost producer is important. While a high proportion of their pigs are still produced in small lots with many fed garbage and other by-products, we cannot write that production off. It is going to be part of the massive Chinese pork sector (five times as large as the United States). That sort of production will only be replaced if "commercial" production can be done cheaper, or Chinese consumers have enough money to turn their backs on products from backyard operations. I'm no expert on China, but it doesn't appear that will happen soon either.

China may still be a large export market for the United States, since it doesn't take much of a share of 1.3 billion consumers to build a nice business. Displacing very much of this low-cost Chinese production, however, will be difficult, and our most likely success will be in capturing segments, such as by-products and offal, where we can be very competitive.




Click to view graphs.

Steve R. Meyer, Ph.D.
Paragon Economics, Inc.
e-mail: [email protected]