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Articles from 2013 In June


Common Sense Prevails in East Coast Gestation Stall Decisions

Common Sense Prevails in East Coast Gestation Stall Decisions

Good news is always appreciated, and the common sense displayed by governmental officials in both New York and New Jersey this month is positive for pork producers. On Thursday, New Jersey Gov. Chris Christie vetoed legislation that would have banned the use of sow stalls. The legislation had been pushed by animal rights groups. Earlier this month, the New York Legislature refused to pass legislation banning gestation stalls.

Gov. Christie said, “The proper balancing of humane treatment of gestating pigs  with the interests of farmers whose livelihood depends on their ability to properly manage their livestock best rests with the state’s farming experts — the State Board (of Agriculture) and the Department (of Agriculture).” In response, National Pork Producers Council (NPPC) President-elect Howard Hill, DVM, a pork producer from Cambridge, IA, said, “This is a great example of a governor standing up to powerful lobbying groups on behalf of small, independent farmers. America’s family farmers thank Gov. Christie for rejecting this bad legislation.”

NPPC also joined New York pork producers to applaud the New York Legislature for failing to pass a similar gestation stall-banning measure pushed by the Humane Society of the United States (HSUS) and other animal rights groups. While talking about the situation, New York pork producer John Lash said, “This is about HSUS using New York to advance its national agenda, regardless of the negative impact it would have on the health and safety of the animals and the small, independent farmers who care for them. Decisions about animal well-being and housing should be determined by those who understand the animals and work with them every day.”

 

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NPPC said the New York measure could have had a devastating effect on local sustainable agriculture in New York by forcing farmers to abandon this humane housing system. Several small farmers in New York use individual gestation stalls.

In early June, the Connecticut Legislature also defeated a bill to ban the use of gestation stalls for sows. “This is the latest defeat for HSUS; momentum against these ill-advised measures is building,” Hill said. “Similar legislation was also recently defeated in New Hampshire and Vermont. Decisions about animal well-being and housing should be determined by those who understand the animals and work with them every day.”

National Hog Farmer agrees with the common sense approach of letting producers decide what works best for their operations and their animals. What do you think about these recent legislative decisions? Where do you think HSUS will strike next? Share your thoughts in the “Comments” section below, or email [email protected]

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Corn Acreage Advances for Fifth Consecutive Year

Corn Acreage Advances for Fifth Consecutive Year

U.S. farmers successfully overcame a cold and wet early spring this year, planting 97.4 million acres of corn, up slightly from 2012, according to the Acreage report released today by the U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS).

This is the highest acreage planted to corn since 1936 and marks the fifth year in a row of corn acreage increases in the United States.

This growing season did not get off to a good start. Hampered by cold and wet weather in early spring in much of the major corn-producing region, U.S. growers had only 5% of the crop planted by April 28, making it the slowest planting pace since 1984.

In May, however, the weather conditions improved significantly, helping U.S. corn growers to make great strides in planting. The week of May 19, farmers tied the fastest corn planting pace on record, planting 43% of the total crop during that one week.

 

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Overall, 63% of the corn crop was reported in good or excellent condition as of June 2, compared with 72% at the same time last year.

Despite being hampered by the same weather problems in the early spring, for U.S. soybean growers, 2013 is estimated to be a record-setting year. According to the report, farmers planted a record-high 77.7 million acres of soybeans this season, up 1% from last year. By June 16, soybean emergence remained behind the five-year average in most of the soybean-growing states.

U.S. farmers also increased all wheat acreage this year. All wheat planted area for 2013 is estimated at 56.5 million acres, up 1% from last year. The wheat acreage increased in part due to an early row crop harvest, which allowed farmers to seed more acres.

In contrast with the increase in acreage for the first three principal crops, U.S. all cotton planted area is significantly lower in 2013, compared with last year. All cotton acreage is estimated at 10.3 million, 17% below 2012 acres. As of June 23, an estimated 43% of all cotton crop was in good or excellent condition, compared with 50% rated in these two categories at the same time last year.

NASS also released the quarterly Grain Stocks report today, showing U.S. corn stocks down 12% from June 2012, soybean stocks down 35% and all wheat stocks down 3% percent.

Acreage, Grain Stocks and all other NASS reports are available online at www.nass.usda.gov.

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Senators Offer Bill to Restrict Use of Antibiotics in Food Animals

Watch for PED Virus at Summer Fairs

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NPPC Applauds Veto of Proposed Sow Stall Ban in New Jersey

 

 

 

Watch for PED Virus at Summer Fairs

Watch for PED Virus at Summer Fairs

A Purdue University professor of veterinary medicine is cautioning Indiana 4-H members exhibiting swine at summer fairs to take steps to reduce the chance of exposing their animals to a viral disease deadly to young pigs.

Health officials say the disease poses no health threat to the public or other animals, and there is no risk to food safety.

Porcine epidemic diarrhea (PED) virus is spread by pigs eating contaminated feces or bedding, or transferred by objects such as livestock trailers, equipment, feed, and clothing and boots.

“The virus can affect all age groups of pigs, but the mortality rate is highest for young pigs,” says Stephen B. Hooser, who also is director of the Indiana Animal Disease and Diagnostic Laboratory based at Purdue. “Older pigs usually recover.”

The Indiana Board of Animal Health issued disease management recommendations for exhibitors, which include ensuring barn and equipment sanitation, checking livestock for signs of illness, and isolating animals before returning them to the herd.

 

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Putting livestock from different farms together increases the chance that infected swine could transmit the virus to other swine. Biosecurity measures help prevent PED virus from being introduced into other herds as the animals return to their home herd or to another facility.

More than 10,000 Indiana youth were enrolled in the 4-H swine project during 2012.

“They don't all exhibit, but the majority of those who do exhibit show more than one animal,” says Aaron Fisher, 4-H youth development specialist in animal science. Last year, 1,100 4-H exhibitors showed a total of 1,900 hogs at the Indiana State Fair.

All members who exhibit must earn Youth Pork Quality Assurance Plus certification through the National Pork Board, Fisher says.

PED virus was confirmed for the first time in the United States this spring, with the earliest cases found in Iowa and Indiana. Cases have been confirmed in more than a dozen states since.

Laboratory testing is the only way to accurately diagnose the disease, as it has the same symptoms – diarrhea, vomiting and dehydration – as Transmissible gastroenteritis, known as TGE, says Roman Pogranichniy, associate professor of virology and head of the virology testing section of the Animal Disease and Diagnostic Laboratory. Indiana swine producers noticed illness in pigs of all ages, which is unusual, he says.

The U.S. Department of Agriculture's National Veterinary Services Laboratory is conducting the majority of testing to confirm PED virus. The Indiana Animal Disease and Diagnostic Laboratory has been testing to either confirm or rule out TGE or rotavirus as the cause, Pogranichniy says.

There have been at least nine confirmed cases of PED virus in Indiana.

“While PED virus has been in Europe and Asia, it's a new, emerging disease in the United States,” he says. “We will need to develop testing for it in the near future.”

Pogranichniy is looking for funding opportunities to begin research on the disease.

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Senators Offer Bill to Restrict Use of Antibiotics in Food Animals

Senators Offer Bill to Restrict Use of Antibiotics in Food Animals

Four senators — three Democrats and a Republican — have introduced legislation that would restrict the use of antibiotics in animal agriculture, according to a report from The Hill.

The bill is a companion measure to legislation introduced earlier in the House by Rep. Louise Slaughter (D-NY). It would ban farmers from using seven classes of antibiotics critical for human health to treat sick animals.

The bill comes as the House has repealed a provision of the 2012 agriculture spending bill that aimed to prevent the Food and Drug Administration (FDA) from similarly restricting antibiotic use in livestock and poultry. The amendment, from Rep. Denny Rehberg (R-MT), drew concerns from Energy and Commerce Chair Fred Upton (R-MI) because of its wide-ranging policy implications.

“Congressman Rehberg has been working with Chairman Upton to highlight his concerns about FDA's burdensome and unscientific regulations on Montana's ag community while avoiding any unintended consequences that could come through the appropriations process," Rehberg spokesman Jed Link told The Hill.

 

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The agricultural and animal drug industries say current practices are safe and keep animals healthy. A new study of E. coli in the scientific journal Microbial Drug Resistance, however, raises concerns that low doses of antibiotics, of the sort administered on U.S. farms to promote animal growth, create the "greatest risk" of promoting drug-resistant bacteria.

“The extensive use of antibiotics in the agricultural sector has turned farms into sources of resistant microbes,” the study says. “The resistance selected for in the agricultural setting may be a direct threat as zoonotic agents become resistant or it can be indirect as it is eventually transferred from animal commensals to human pathogens.”

The bill is cosponsored by Sens. Dianne Feinstein (D-CA), Susan Collins (R-Maine), Jack Reed (D-RI) and Barbara Boxer (D-CA). It was immediately praised by the Pew Campaign on Human Health and Industrial Farming.

“The emergence of drug-resistant superbugs is a human health problem that affects us all,” said Laura Rogers, the program's project director. “We commend Senator Feinstein, Senator Collins, Senator Reed and Senator Boxer for their bipartisan collaboration to ensure that our antibiotics will work for us when we need them most.”

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Battling More Arthritis

As I approach the big “5-0,” I am gaining a new appreciation for the term arthritis — especially after working out with my college-aged sons at the gym. I also see my still-very-active mother, using a cane for assistance due to osteoarthritis in her knees and hips. So while the joint pain and arthritis we deal with is most often age- or injury-related, why is it that we battle arthritis in pigs from birth to market?

Data from Iowa State University Veterinary Diagnostic Laboratory (ISU-VDL) suggest an increase in infectious arthritis and lameness in pigs. Arthritis in pigs can be initiated by disease, environment, body structure, nutrition, etc. It is imperative to do a thorough diagnostic workup to ensure it is treated correctly.

Case Study No. 1

A well-managed, 1,200-sow, farrow-to-finish operation battles swollen joints and lameness in piglets 14-21 days of age. The clinical signs usually occur just prior to weaning. Over time, multiple diagnostic samples have revealed a plethora of agents, including Streptococcus suis, Haemophilus parasuis and Mycoplasma hyorhinis.

To date, we have not found a silver-bullet treatment. Control has involved a variety of therapies:

  • Autogenous vaccine
  • Sanitation/disinfection
  • Serial antibiotic treatments
  • Ventilation fine-tuning
  • Management protocols: navel cord management, instrument management.
  • Sow herd stabilization for porcine reproductive and respiratory syndrome (PRRS) and swine influenza viruses.

The lesson from this farm is that a single therapy may not always produce the desired results, so multiple therapies may be required.

Case Study No. 2

The manager of a wean-to-finish facility called about an increasing number of lame, “dog-sitting” pigs. Individual pigs were treated with injectable antibiotics, but the number of cases kept rising.

Investigating the large-pen facility revealed active, apparently healthy pigs on my initial walk through the rooms. But as I slowly walked back to the entrance, it became apparent that there were a large number of lame pigs dog-sitting, slow to rise and tiptoeing, trying not to bear weight.

Necropsies and diagnostics revealed Mycoplasma hyosynoviae. Injectable antibiotics were continued, along with water and feed medication. The process to complete normalcy took 5-6 weeks, but the final results led to an exceptional closeout of pigs for average daily gain, feed efficiency, mortality and culls.

Monitoring lameness as pigs near 100 lb. and quicker implementation of water medications havereduced cases.

Case Study No. 3

I was called to examine lameness in market-weight pigs at a 4,800-head, wean-to-finish facility. Upon arrival, the manager also pointed out one dog-sitting pig with red blotches on the skin.

The skin lesions were slightly raised and had a distinctive diamond shape. Necropsy lesions and follow-up diagnostics were positive for erysipelas. There were several other pigs experiencing painful rear limbs and swollen hocks, but no skin lesions. My diagnosis was erysipelas and M. hyosynoviae.

Considering the weight and size of the pigs, treatment options were limited. We ran aspirin in the water for inflammation and pain relief. Severely affected animals were injected with antibiotics and held for proper withdrawal time. The producer now vaccinates for erysipelas, and we are monitoring for future outbreaks.

Case Study No. 4

A client was preparing for the county fair when two pigs developed acute rear lameness, with swelling and redness of the hocks. Pigs were feverish and had also backed off feed. The weather had been very hot, and misters were running almost continuously; the bedding was wet and the concrete slick. One pig had a slight “head tilt.”

We elected to treat for Strepococcus suis, which can show symptomatically as head tilt and/or swollen, hot joints.

Fortunately, the pig responded well and recovered just in time for the fair. Proper withdrawal times were observed. We also made sure the misters were not being left on, and that bedding was changed if it became wet. Drying powder was used on the concrete to prevent slippage.

Summary

Diagnosing arthritis cases and lameness in pigs simply is not simple! There are multiple causes and risk factors, including health, environment, structure, nutrition and a multitude of stress factors that can lead to arthritis.

Do not tarry when clinical signs are seen. Call your veterinarian, get a diagnosis, and implement treatment and prevention therapies. Delaying treatments can lead to poor prognosis on individual pigs and higher morbidity for the herd. Our industry must continue to find solutions to this increasing trend in arthritis and lameness one step at a time!

 

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Prudent Use Of Antibiotics

Livestock producers today face pressures that are not the normal economic and resource challenges faced by all businesses. Farmers and their veterinarians often wonder: “How did I become the villain when I am just trying to feed people as efficiently as possible?” or “Why is the use of medicine (e.g., antimicrobials) to prevent and relieve animal suffering considered by some to be an antisocial behavior?”

I will not delve into the “whys” of this political pressure, other than to say that much of the concern about public health risk from antimicrobial use is driven by the values and feelings of an extreme political agenda.

Certainly there is concern that antimicrobial use does create or select for a resistant population of bacteria, and those resistant genomes may find their way from western Nebraska to a ham and Swiss cheese sandwich in New Jersey, for example.

As a result, the 250-lb. welder who eats that sandwich and gets sick with a resistant bacteria, then goes to the doctor, who prescribes an antibiotic similar to the one used on the farm, resulting in him being ill for a few extra days.

If we calculate the probability of that scenario and its many versions occurring across the U.S. population, a risk assessment would determine that it is possible, but the risk is very low.

Educating Consumers

There are a few key facts that a swine veterinarian can use when educating producers, buyers and consumers about antimicrobial use:

  • All scientific risk assessments published to date have shown a negligible risk to humans from resistant bacteria resulting from food animal antibiotic use.
  • Failure to prevent or treat animal illness causes unnecessary animal suffering and death.
  • Animals with residual effects of illness are more likely to cause human foodborne disease.
  • Prudent, legal antimicrobial use with documentable veterinary oversight is a key to avoiding further restrictions.

Additional references and support available at hurdhealth.com, and the Food Risk Modeling and Policy website.

Negligible Risk

Risk is a combination of two key elements: probability of an event occurring and the consequence of an event having occurred. When scientists have calculated the risk using this scenario, the probability of an adverse consequence (i.e., extra days of diarrhea) is very low.

It is interesting that those worrying about antimicrobial use have never published a peer-reviewed risk assessment. They just talk about what “might happen.”

I am not saying there is zero risk from on-farm antimicrobial use, but the risk is very low. If our society accepts that risk, the benefit must be greater than the risk.

There was a time when our society felt that if a policy was good for the animals, measured by improved growth, then it should be a benefit for all.

However, today we must argue the benefit from different perspectives, such as animal welfare and public health.

Unnecessary Suffering

Swine veterinarians need to emphasize the consequences of delaying treatment or failing to prevent an epidemic pig infection. Society needs to understand that “meat without drugs” or “antibiotic-free meat” may have very negative consequences to our pig patients. Meat without drugs may mean “animals without medicine.”

Public Health Risk

A relatively new area of scientific inquiry is the question of whether pig health is quantitatively correlated with public health risk (see Council for Agricultural Science and Technology, The Direct Relationship between Animal Health and Food Safety Outcomes).

Slogans promote the concept that “healthy animals make safe food,” which is a concept we all “feel.” But the research is just beginning, and much more is needed. However, a recent report showed that a pig carcass with a peel-out (pleuritis or adhesions) is 90% more likely to be positive for salmonella just before it enters the cooler.

Veterinary Oversight

Finally and most importantly, the veterinary profession, at all costs, must maintain the public trust by promoting and documenting appropriate use of all medicines in the food supply. The Food and Drug Administration (FDA), the producers and the packers are counting on us.

Doctors of human medicine receive tremendous pressure to improve antimicrobial prescription practices. Veterinarians are applying the same rigor to drug use in livestock production.

Most consumers greatly trust veterinarians, but most don’t understand that they are involved in the use of antimicrobials.

There is a sculpture at Iowa State University called the “Gentle Doctor,” with this inscription by Frank K. Ramsey, DVM: “The Gentle Doctor reflects concern, affection, love, and the significance of life for all of God’s creatures — great and small.”

We need to help consumers understand “the Gentle Doctor” is on duty.

 

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Agricultural Advocacy Movement Grows

Agricultural Advocacy Movement Grows

A growing number of U.S. pork producers are taking time out of their busy days to build connections with those who buy their products. These agricultural advocates, often called “agvocates,” will tell you that the time they spend speaking to groups, blogging and providing straightforward and factual information through social media outlets, such as Facebook, Twitter, YouTube and Pinterest, is an investment in the future of farming. 

Risk Management Strategy

Justin Roelofs, AgStar Financial Services, Mankato, MN, considers agricultural advocacy to be an important part of pork producers’ risk management strategies. Roelofs says a long-term key to producer profitability could actually depend on a producer’s willingness to become more involved in advocating for agriculture.

“With such a small portion of the population involved in agriculture — even fewer in animal agriculture — advocacy will be vital in the long term,” he explains. “Some countries have not had advocacy programs in place to address animal rights groups’ agendas, which has led to much smaller industries and higher food costs. It is critical that everyone involved in agriculture help educate the general public, who may not understand modern agricultural practices. Providing this education is a vital risk management tool going forward.”

‘Tell Your Story’ 

Chris Chinn, and her husband, Kevin, are fifth-generation farmers near Clarence, MO. They operate a 1,500-sow, farrow-to-finish operation as part of a joint-farming venture with Kevin’s parents and brother as part of Chinn Hog Farm. They also raise cattle, hay and row crops.

Chinn says she started realizing the importance of telling agriculture’s story when she and her husband were part of the American Farm Bureau Federation’s Young Farmers and Ranchers Committee. “As we traveled through airports and were visiting with people, I started to realize people were disconnected from farming; fewer people understood much about agriculture.” She also realized that the negative perceptions about agriculture had the potential to impact her children’s chances of taking over the family farm or having a future in agriculture.

“Agriculture is under attack,” she explains. “I realized that, like it or not, farmers have targets on their backs. I realized I had better start telling my story.”

Chinn (at right) started blogging on the Farm Bureau Young Farmer’s and Rancher’s website in 2007. In 2010, she launched a personal blog under the heading,“My farm, my family, my story” (chrischinn.wordpress.com).

As she monitored comments to her blog, her confidence grew,and she then started reaching out to tell her story through Facebook and Twitter. One of her tweets about last summer’s drought was picked up by a CNN reporter, leading to both a story and a positive relationship that helped her reach a new and larger audience. 

“Having the chance to work with the CNN reporter was an amazing opportunity,” she relates. “It opened my eyes to how one person could make a difference.”

CNN recently ran one of her blog posts about animal care and antibiotic use with the headline,“Why My Hogs are on a Healthcare Plan,” also available on the website nationalhogfarmer.com/health/hogs-don-t-have-health-insurance-myth-antibiotic-use-0.

Faces of Farming 

Chris Chinn was recently chosen as one of four farmers to represent the U.S. Farmers and Ranchers Alliance (USFRA) in its “Faces of Farming” program. She will travel throughout the country, speaking to groups and conducting interviews with key media outlets.

The outreach efforts on behalf of the USFRA are a natural extension of the steps Chinn and others were already taking to get the real message out about how farmers take care of their land and animals.

“I have a YouTube video that allows people to see inside our hog barns. I also use Facebook, Twitter and my blog to connect with people outside of agriculture,” she explains. “My goal is to help more people engage in meaningful conversations about how food is produced, and why changes have taken place on the farm or ranch. I want people to see the values that farm and ranch families have, and understand our intentions are always to improve the quality of care we give to our animals and our land. I realize many people are skeptical about technology on the farm, and I hope the Faces of Farming program can help clear up the misinformation that has been mistaken as the truth.”

Chinn urges other pork producers to get involved with telling their stories, too. “I know what it’s like to be scared. It’s a scary thing to put yourself out there.” She suggests taking baby steps. “I started with my blog and moved to other social media outlets when I had built my confidence. I stumbled and learned as I went along. Do what you are comfortable with at first,” she adds.

Chinn has set a goal to spend 20 minutes a day advocating for agriculture. “Sometimes I spend that time writing my blog; other days I may concentrate more on Twitter or Facebook. Other days I take time to comment on articles that have been posted about agriculture on the Internet,” she explains.

Naturally, not everyone will agree. “Everyone has a right to their opinion. Sometimes, we have to politely agree to disagree. I want to take the time to clear up misunderstandings and make sure that I answer questions from people who really do want to learn more about agriculture,” she says.

She encourages all pork producers to tell their story — and speak from the heart. “I talk about what impact my farm could have on people’s lives. I relate how a change in hog prices or corn prices can make a difference when it comes to their food,” she adds. 

 

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10 Tips for Young Pork Producers

10 Tips for Young Pork Producers

Young men and women and their parents attending a financial and management seminar targeting young pork producers at the Minnesota Pork Congress this year were treated to an animated presentation by David Kohl, who offered 10 guidelines for their everyday financial planning.

1. Know the Score

At the outset, the Virginia Tech professor emeritus of agricultural and applied economics zeroed in on the practical matter of credit scores. “Young producers need to check their credit scores because it is a baseline that creditors, insurance companies and potential employers regularly use to evaluate risk,” he says.

“Even as a student, you need to begin building your credit history,” Kohl emphasizes. “You need to know your score, because you don’t have a lot of net worth and you don’t have a lot of experience. Creditors and employers examine your character through your credit score.”

Recent research has shown 42% of employers check credit scores. “The lower the credit score, the higher your risk for insurance purposes and the less reliable you will be as an employee,” he explains.

The “magic number” is 700. To a lender, a 700 credit score means there is about a 5% chance of loan delinquency. But, when a credit score falls to 650, the delinquency rate rises quickly to 33%; a score of 600 has delinquency rates averaging more than 50%.

Young, married pork producers should also check a spouse’s credit score. “Since the financial crisis, more lenders will use the lowest score; some will use an average score,” he says.

Check your credit scores at least once a year; 27% of people find false information on their credit scores.

Kohl dispels the belief that checking your credit score will actually lower it. However, if there are a lot of inquiries into your credit score, it may reflect frequent applications for credit or concerned creditors frequently checking your score, which can lower it, he notes.

2. Credit Card Debt

“Be careful about credit card debt,” Kohl urges. “If you want to build your credit score, keep credit card debt about 15% under the limit and make sure you make your monthly payments. If you get too close to the limit, it will ding your credit score.”

Many lenders also check the number of credit cards a person has. No more than three is ideal, he says. 

3. Student Loan Debt

Student loan debts are rapidly replacing credit card debt as a major concern. “Credit card debt is averaging $10,000 to $15,000 per family, but student debt is averaging $22,000 for undergraduates and $100,000-plus for those with professional school degrees,” he notes.

Students are asking whether the investment is worth it. The university professor says not everybody needs a university degree. “That’s why I really like community colleges and vocational/technical schools,” he says.

There is a trend toward lifelong learning, adult education and learning specific skills. “There is nothing wrong with a broader education, but I think you will see university programs shifting to lifelong learning programs, and they are going to shift pretty fast,” he predicts.

4. Balance Sheets

Young pork producers need to assess their assets and liabilities to establish their net worth early in the year, Kohl stresses.

Focus on percent equity because it is a good reflection of “earned equity,” he says. For example: If you have $1 million worth of assets and $600,000 in liabilities — typical for a young farmer — your net worth is $400,000.

“The first thing a lender will ask is, ‘Where did the net worth come from?’ With land values jumping $2,000, $3,000 or $4,000/acre over a 2-3 year period, did net worth come from appreciated land values or did earned profits actually accumulate on your balance sheet? Was it ‘earned’ net worth?” he explains.

With $400,000 in net worth and $1 million in assets, your percent equity is 40%. “This would be an understandable figure for a young producer,” Kohl says. “Pork producers tend to carry much more debt because they turn their assets faster than beef or crop producers generally do.

“When percent equity falls below 50%, you have got to be a superior manager. You have got to have a risk management program. And you have got to be modest with your family living costs,” he adds.

5. Family Living Budgets

More and more lenders want a family living budget.“You have to decide how much you are going to take out of the business to live on, and how much you will plow back into the business to grow,” Kohl continues.

“Do a monthly budget, then add 25%, and have 4-6 months of cash reserves. The average American has 13 days in cash reserves; basically, they are living paycheck to paycheck,” he notes. “If your goal is to start, nurture and grow your business, your family living cost might be $45,000 to $50,000. The average farm family living cost is approximately $85,000 for 3.3 persons.”

A common mistake of young producers is relying on the farm checkbook to evaluate living costs. “I tell every young producer: Set up a separate budget for living expenses and keep your farm expenses separate, so you know what is truly going on in your business. Lenders do not like to see personal and business expenses commingled,” he explains.

6. Working Capital

Kohl describes working capital as “the big one” for young pork producers. Do not confuse this with cash on hand. Working capital is the current assets on hand that can be turned into cash without disrupting normal operations, he says.

“This can include current inventory, accounts receivable, outstanding contracts, prepaid expenses and, of course, actual cash,” he says. “Current liabilities are your accounts payable, your lines of credit, principal reduction in the next 12 months and your accrued expenses. Subtracting current liabilities from current assets is your working capital.”

For example, for a business that generates $500,000 in revenue and has $200,000 in current assets and $100,000 in current liabilities, the working capital-to-revenue ratio is 20%.

Is that good? Kohl says the top 20% of farms have a working capital-to-revenue ratio above 40%, while the bottom 20% typically have 11% or less.

Using a James Bond analogy, he says the first thing James Bond does when he enters a room is to look for an alternative exit or backup plan. “Working capital is your resilience, your exit plan; it’s your James Bond,” he notes.

Agricultural lenders stress working capital for young producers. If working capital is hogs, corn or soybeans, your lender may ask when those assets can be sold. But a forced sale of assets could mean those assets will be sold at a discount.

Working capital can work in your favor, too. “What if the neighbor’s land suddenly comes up for sale or you are offered cash discounts on feed or fertilizer? That’s the benefit of having strong liquidity. Remember, success in financial management is not doing one thing 1,000% better; it’s doing 1,000 things 1% better. It’s those things that can put you ahead in the game,” he explains.

7. Watch Interest Expense

Be sure to include interest paid on all of your credit. “It should not be above 15% of your revenue, especially with interest rates as low as they are. I like to see it less than 10%. Make sure you calculate it over a 3-5 year period. The trend analysis is important, because one year could give you a misread,” he cautions.

8. Accrual Adjusted Income

“Never manage your business off of tax records,” Kohl warns. Take your beginning and end-of-period balance sheets and adjust for inventories, payables, receivables, etc. “If you don’t know the difference, have your lender explain them, and have them create an accrual adjusted income statement,” he says.

“Do you know the difference between what you report to Uncle Sam and what you really did in your business?” he asks. Based on studies conducted over a five-year period at Purdue University and the University of Illinois, Kohl says the difference is about 60%. “Some producers are making five-, 10-, 15-, or 20-year decisions with information that is 60% inaccurate,” he notes.

9. Enterprise Analysis

A quick read of your income statement — income minus expenses, depreciation and interest equals revenue. Farms with no debt pay no interest, but they depreciate their assets.

That can be a problem in the long run. He cites a farmer who maximized depreciation and did whatever he could to avoid paying taxes. “Faced with the sale of his business, everything was depreciated out, his assets were being sold and he had a huge tax problem — the equity coming out would barely cover his debt,” Kohl notes. 

Another example — a very young pork producer generating $500,000 in revenue, after subtracting depreciation and interest, is left with $300,000 in expenses, so it takes him 60 cents to produce $1.00 of income ($300,000 divided by $500,000).

Kohl finds most efficient businesses are under 70¢/$1.00. “That’s the proverbial green light,” he explains. “The yellow light is 70¢-85¢/$1.00; when you get above 85¢/$1.00, there’s no margin to pay debt. You’ve either got to live frugally or have a non-farm income.

“That’s why you need enterprise analysis. It is critical to know what is making money in the business so you can allocate time and capital toward it. Remember, profitability turned to cash flow pays loans,” he adds.

10. Salaries and Labor

The swine industry still has a lot of farm businesses that include multiple family members. “One thing that will cause family arguments when young and old generations are involved is cash salary,” Kohl says. “Remember to place value on the perks that you get — home, fuel, locker pork, etc. This is very critical when you examine cash flow.”

 

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Spend Time and Money On Succession Planning

Spend Time and Money On Succession Planning

There are so many risks that you can’t control in farming, so why not take advantage of the ones that you can control — like succession planning, says Angela Gloy, Purdue University Extension farm business planning specialist.

Some farmers initially shy away from the time and cost commitments associated with planning professionals, such as accountants and attorneys. Generally, they come to recognize that the end goal is validated.

For the most part, current farm owners recognize the value of a succession plan, and as the first generation of formal planners, they are in search of general guidance on how to proceed, she points out. 

Purdue Venture

The idea of Extension helping farmers with succession and estate planning is not new. Many states have developed a number of resources to help farmers find a plan that fits their operation, says Gloy (at right).

In Indiana, farmers have been making the trek to Purdue University at West Lafayette to spend a day in a conference room trying to iron out a plan for going forward for relatives or trusted employees.

At Purdue, farm business planning is venturing out on a new course, where staff visits individual farm families. This focus is a more coordinated statewide effort to assemble a group to deal specifically with the critical issues facing agriculture.

“We are trying to add an accessibility component to our planning resources, as well as a level of formality and uniformity to annual programming efforts,” she explains.

Statewide Program

The statewide program prepared by Purdue’s team of experts will be delivered annually at select sites statewide.

“Indiana has 92 counties, and we want to provide high-quality, uniform programming across the state,” Gloy explains. Staff will provide references for more detailed financial assistance, and put families in touch with other resources, when counseling and therapy may be needed.

“Our goal is to help farmers get organized so that when they sit down with an attorney, they are hitting the ground running, getting what they paid for and leveraging the skill sets of local professionals,” she continues.

Next year’s programming topic focuses on business structure and taxes, with additional discussions of insurance and liability concerns, business valuation methods, and considerations for drafting operating and buy-sell agreements. “Farmers like having access to top professionals well-versed in succession planning at our programs,” Gloy says.

Need for Planning

Gloy says Purdue staff takes the umbrella approach to risk management. Succession planning is not any more important than business or marketing planning, but make sure you are thinking about all of those pieces when doing the succession plan, she says. Farm businesses will continue to become more management-driven in light of market conditions, increased size and complexity of agricultural operations. “Succession planning is just one piece of the management puzzle,” she notes.

Gloy has formulated five key questions for current farm owners and five key questions for beginning farm owners to smooth the transition of farm ownership. (See questions below.)

Key to successful integration is for existing farm owners to figure out how to build the management and production capacities of the incoming generation, to provide a long period of farming together before the farm transfer actually occurs.

For relatives working together in a farming operation, it’s important to have honesty: Talk about all of the expectations up front; recognize when some family members cannot get along.

In some cases, the best farm transfer may be to a loyal farm manager instead of a balky family member.

Escalating land values and high-priced farm machinery have created estate tax concerns that must be addressed in farm transfers, she says.

Set for Success

Often, when farmers want to bring a son or daughter back into the operation, they think expansion is the answer. “I think farmers will want to expand cautiously under current land market conditions. The concern is that we don’t financially hamstring the next generation of owners. Today’s land purchases that will take the next 30 years to cash-flow are one example. It just exacerbates the value challenge for generations looking to get value into/out of the farm business simultaneously,” Gloy emphasizes.

Don’t overextend your finances. Know your equity situation. Do what’s right in order to set up the next generation for success, she says.

Market volatility has made succession planning much more involved than in past generations. The production team needs to develop strong skill sets that can be passed onto the next generation who will manage the operation, Gloy points out.

To track employee progress, develop job descriptions and establish expectations in terms of job responsibility, and evaluate their performance to ensure success.

Operation Viability

The lists of five questions can also help determine the status of the farming business and whether it is a viable operation to be passed on to the next generation — or if there are challenges that need to be addressed first.

Gloy teaches Purdue’s undergraduate estate planning and property transfer class, which highlights the fundamental principles of property ownership and transfer strategies. Understanding how titled property is held and what transfer mechanisms are available to them is critical to all business owners. 

Next Step

As a result of the one-on-one meetings with farm families who are interested in succession planning, a one-year planning program is under way.

“We will sit down with the farm family and get a snapshot of where they are, what their goals are, then give them a step-by-step, month-by-month plan,” she explains.

The goal is that at the end of that year, the farm family will be ready to sit down with an attorney and an accountant to ask really thoughtful questions on the future direction of their operation.

“Farmers want to do this; they are pretty receptive to formal planning. Our job is to help them accomplish their goal,” Gloy says.

Five Questions for Current Farm Owners

1. What do your evaluations of the farm business tell you about ...

  • Current business finances: debt level, profitability?
  • Financial feasibility: can additional families be supported?
  • Current management practices?
  • Future business potential?

2. Do you have a plan for ...

  • Teaching incoming owners the production/management skills required?
  • Decision-making with a larger number of owners?
  • Transitioning management responsibilities from yourself/current owners to new owners?
  • Providing feedback to incoming owners?

3. In light of your experience, what 2-3 pieces of information are most critical to pass to new owners ... 

  • Operationally?
  • Agronomically?
  • Financially?
  • About people?

4. How will you define your retirement?

  • What does retirement mean for you personally (changes in your schedule, hobbies/interests, etc.)?
  • What does retirement mean for you professionally (changes in your time commitment and managerial roles)?
  • What does retirement mean for you financially? How diversified are you? Do you have a current estate plan?

5. Are you ready to let others lead?

  • Mentoring increases one’s confidence in letting the next generation assume responsibilities.
  • Consider that one day, someone had to believe in you.

 

Five Questions For Beginning Farm Owners

1. What do your evaluations of the farm business tell you about ...

  • Current business finances: debt level, profitability?
  • Financial feasibility: Can additional families be supported?
  • Current management practices?
  • Future business potential?

2. Do you have a plan for …

  • Buying ownership interests in the operation?
  • Paying off existing debt (e.g., credit card debt, student loans, a new pickup)?
  • Business/marketing/retirement/estate/farm succession plans?

3. What do you bring to the table in terms of equity, experience and education?

  • Are you a disciplined financial manager?
  • Are you willing to work elsewhere first?
  • How will you continue your farming education?
  • Are you willing to work your way up or do you want to start as CEO?
  • To what extent do your skills (e.g., management, operational, agronomic) complement others’ currently in the operation?

4. What are your expectations regarding farm business ownership ...

  • Professionally: income, hours worked, production and management responsibilities (how much, when, which ones), terms for coming into the farm business?
  • Personally: vacations, housing options, free time?

5. Are you ready to lead?

  • Leadership suggests an ability to make difficult decisions in the face of less-than-complete information. As a future manager/owner, you will be confronted with making difficult and likely unpopular decisions. Are you willing to learn so you’re ready for that day?

 

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NPPC Applauds Veto of Proposed Sow Stall Ban in New Jersey

Continuing the recent string of legislative defeats for the animal rights community, today New Jersey Gov. Chris Christie vetoed legislation that would have banned the use of individual maternity pens for pregnant sows. The legislation was pushed by animal-rights groups despite the fact that few of New Jersey’s small number of hog farmers use such housing.

“This is a great example of a governor standing up to powerful lobbying groups on behalf of small, independent farmers,” says NPPC President-elect Howard Hill, DVM. a pork producer from Cambridge, IA. “America’s family hog farmers thank Gov. Christie for rejecting this bad legislation.”

The legislation was championed by the Humane Society of the United States (HSUS) and other radical animal-rights activists even though it would have prevented farmers from caring for their animals in a way approved by the American Veterinary Medical Association and the American Association of Swine Veterinarians. Those organizations long have recognized individual maternity pens as appropriate for providing for the well-being of sows during pregnancy.

“HSUS continues to drive this unreasonable legislation in states with little pork production in an attempt to push a national agenda, but states are starting to push back,” Hill says.

In rejecting the legislation, Christie said: “The proper balancing of humane treatment of gestation pigs with the interests of farmers whose livelihood depends on their ability to properly manage their livestock best rests with the state’s farming experts – the State Board [of Agriculture] and the Department [of Agriculture].”

The New Jersey Agriculture Department in 2004 adopted “Humane Standards” for livestock, and the state supreme court in 2008 upheld most of the standards, including a direct challenge of the regulations governing the treatment of gestating pigs.

The defeat in New Jersey was the latest in a series of setbacks for HSUS, which over the past 10 years has spent millions of dollars in states around the country to advance its radical agenda.

Very few states have enacted bans through ballot initiatives or through the legislative process because of the negative impacts such prohibitions would have had on local pork producers. Most recently, the legislatures in Connecticut, New Hampshire, New York and Vermont chose not to pass measures banning individual maternity pens.