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Finance Committee Approves Froman Nomination

The Senate Finance Committee voted unanimously on the nomination of Mike Froman to be U.S. Trade Representative.  Froman is currently the assistant to the president and deputy national security advisor for international economics.  

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Variety Meat: The Hidden Pork Value

Importers ustilize many parts of the pig
<p> Importers in Mexico, Asia and Russia are among the most avid bidders for U.S. pork livers, hearts, kidneys, tongues, stomachs, snouts, ears, feet and tails.</p>

Offal, organ meat, edible viscera, fancy meats – no matter what you call variety meat cuts they are critically important to the U.S. pork industry. While these cuts aren’t likely to be found on American dinner plates, they are hot commodities in the international marketplace and they add significant value for U.S. producers.

Importers in Mexico, Asia and Russia are among the most avid bidders for U.S. pork livers, hearts, kidneys, tongues, stomachs, snouts, ears, feet and tails (Figure 1).   In years past, these products often would be rendered into protein meal or commodity greases, their value measured in cents on the dollar for lack of a buyer in the United States.

Figure 1: International Pork Variety Meat Utilization

American exporters are well-aware of the global interest in variety meat cuts.  As their global customers become more familiar with the quality and value of U.S. pork variety meat – with the help of education programs offered through the U.S. Meat Export Federation (USMEF) – those international buyers are seeking out more items that fit in their local cuisine.  Here are a few examples of the premiums that international buyers pay for these increasingly popular items:

·        Pork bungs – No domestic edible value.  Rendered value: $0.10/lb.  Value in prime markets (Japan, South Korea): $1.50/lb.  Net gain: $1.40/lb.

·        Pork ears – No domestic edible value, but domestic pet treat value of $0.70/lb. Value in China: $2.30/lb. Net gain: $1.60/lb.

Last year, pork variety meat products accounted for 13.7% of the total value of U.S. pork exports ($866.8 million of the record total $6.3 billion) and 19.9% of exports by volume: 450,650 metric tons (993.5 million pounds) of the 2,262,109 metric ton (5 billion pounds) total.

 

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Overall, U.S. pork exports returned $55.87 in per-head value for each animal processed in 2012.  Those exports accounted for 27% of all U.S. pork production for the year.  But the numbers don’t paint a clear picture of how the pig carcass is divided among customers.

Americans love their bacon, so barely 1 lb. in 20 lb. of pork belly gets exported.  Similarly, 20% of loins, 25% of butts, and about 50% of hams and picnics get sold internationally (Figure 2).

Figure 2: International Pork Primal Cut Utilization

The picture changes when it comes to variety meat.  More than 90% of tongues, hearts, kidneys, livers, stomachs, bladders, uterus, snouts, ears, feet and tails are shipped around the world.  Thus, virtually every animal processed in the United States has some part of it sold and consumed in the global marketplace.

“Variety meat exports are essential to our industry and the drop credit,” said Darin Parker, general manager of PMI Foods, a global food distribution company.  “There are a lot of markets, from Mexico, Peru, Japan and South Korea to Taiwan, Hong Kong, China and the Philippines, that each wants specific variety meat items.  That puts money back into the business as a whole, which brings dollars back to the farmer.”

The key, Parker says, is supply and demand.

“The thing you have to realize is that it’s a matter of volume,” he continues.  “For many items – snouts, stomachs and hearts, for example – there’s only one per animal.  It is important that we have unfettered access to as many export markets as possible so we can maximize the value of these cuts.”

The growth of pork exports into new markets has taken products that had virtually no value in the United States and creates both a demand and profit potential, he reminds. “Where else can you upgrade an item that was virtually worthless – like pork bungs – and increase it more than 10 times in value?” he asks.

Similarly, the price of pork stomachs on the international market currently is $1.24/lb. and quoted $0.09 cheaper in the United States. The reality is that more than 95% of stomachs are shipped outside the United States.  If all pork stomachs remained in this country, it is estimated that the price would fall to $0.40/lb. or lower. 

“The growth in U.S. pork exports provides significant benefits for the entire pork industry,” notes David Peterson, assistant vice president of international sales for Seaboard Foods.  “But since there’s less demand for and experience with variety meat in this country, the importance of the U.S. Meat Export Federation’s international efforts to promote variety meat equally with muscle cuts has been very beneficial for exporters, processors and producers up and down the value chain,” he says.

“With the greater volume of variety meat and muscle cuts being shipped internationally, this allows like cuts to grow in value in the domestic market as the supply is diminished,” Peterson explains.  “This increased value can make the difference between operating in the black vs. in the red,” he adds.

The growth in U.S. pork exports over the past decade has been dramatic, rising 199% in volume and 300% in value between 2003 and 2012 – from 757,406 metric tons valued at $1.58 billion in 2003 to 2,262,109 metric tons valued at $6.32 billion last year.

Pork variety meat has seen a similar growth curve with even bigger jumps in value: 179,254 metric tons valued at $188.8 million in 2003 to 450,650 metric tons valued at $866.8 million last year – increases of 151.4 % in volume and 359% in value.

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Students Face Real-World Challenges

Several of the major swine production employers in Iowa met with Iowa State University professors to evaluate the strengths and weaknesses of the swine-based curriculum. Their focus was primarily on two swine-oriented courses —the basic swine science course (Animal Science 225), taught by Tom Baas, and the swine systems management course (Animal Science 425), taught by Ken Stalder (at right).

Specifically, these most-likely employers of ISU graduates were asked to evaluate course work for “soft skills/real-world skills,” such as communications, leadership, personality knowledge, interpersonal skills and team- building knowledge.

ISU students and staff were given high marks for their technical skills, but their soft skills were found to be somewhat lacking.

“To address these needs, our objective was to develop the interpersonal skills students with a bachelor of science degree in animal science will need for careers, graduate and professional school, and other endeavors after graduation. We also wanted to provide a feeling of ownership and investment in the program by these potential employers,” Stalder explains.

Skills Development

The AnS 225 students were mostly sophomores and juniors, while AnS 425 students were seniors or new graduates, some beginning postgraduate course work. The basic swine science class had 125 students, while the swine system management course had 50 students.

In a laboratory setting, Murphy-Brown’s western operations employee development staff, based in Ames, IA, taught AnS 425 students the value of personality assessments and different leadership styles. AnS 225 students received leadership-style training only.

“It was amazing to watch the Murphy-Brown people work through the process with students. It was evident that students had thought about these things, but they didn’t know much about personality assessments or how they might use them in the future,” Stalder says. 

Students were given an opportunity to apply this newfound knowledge in a teamwork leadership activity assignment designed to help them work more effectively in a small team, where personalities and leadership styles differ. 

Each AnS 425 student, serving as a team leader, was randomly assigned two or three AnS 225 students. Their assignment was to develop a PowerPoint presentation that addressed a critical issue facing the U.S. pork industry, such as:

  • Sow pen gestation challenges
  • Response to an undercover video
  • Concern for potential grain shortage
  • Response to a potential moratorium on new construction of swine production facilities
  • Response to a concerned customer about company production practices
  • Generational challenges facing the pork industry
  • Dealing with tight budgets
  • Implementation of immunological castration
  • Alternative topics submitted by students

“Our goal was to increase awareness of the importance of interpersonal communication skills and leadership development. We wanted to provide a framework that would allow students to work together and respond to an issue critical to the pork industry,” explains Baas (at right). “The direction given to students was intentionally minimal, because we wanted to see how students would respond as a team.”

The team activity was worth about 10% of their course work grade. “We wanted to make it enough so they would take the assignment seriously, yet not be a disproportionate focus for the time and effort required,” he adds.

Teams were scheduled for a 30-minute session with Stalder and Baas where they addressed the critical issue and provided their recommendations.

Student Evaluation

Each student was asked to complete an evaluation form with five questions, using scores from “1” (no benefit) to “10” (great benefit). Most of the students completed the evaluation.

The questions were: 

Q1:How beneficial was the instruction by human resources staff in the success of this assignment? Nearly half of AnS 225 students rated it 8 or higher, while only 10% rated it less than 5. The AnS 425 students ranked the lab as effective in helping them understand themselves and in terms of working on the project, Baas notes.

Q2: How did the assignment help you understand your leadership skills? AnS 425 students indicated they better understood their leadership skills with a rating of 8 or higher, while about half of the AnS 225 students rated it 8 or higher. “Fifteen students rated it under 5, which may reflect that they didn’t want to be a leader,” Baas points out. 

Q3:How did the project help you understand the process of working as a team?This was a primary goal of the project. More than half of the AnS 225 students gave a rating of 8 or higher. “They recognized that this activity helped them understand how to work together as a team,” he explains.

Q4:Rate how this project might benefit you with other courses at ISU. The AnS 225 students’ average rating was 7.54. AnS 425 ratings were a little lower, possibly because they were nearing graduation, Baas says.

Q5: Did the project benefit you in terms of your future career? “Over half the students in both classes indicated that the project was beneficial, with a score of 8 or higher. “We took that as a very positive response, and an indication that we had succeeded in developing a project that students saw some value in terms of their careers,” Baas notes. Fourteen of 113 AnS 225 students gave a rating of 10.

When asked if the course should be continued, 74% of AnS 225 and 70% of AnS 425 students said “yes.” Generally, AnS 425 students liked the responsibility, and AnS 225 students liked the idea of adesignated leader, Baas notes.

What Was Learned 

Much like in the real world, the most common challenge students cited was finding the time to meet as a group, the ISU instructors explain.

Some students wanted to work with their friends. “We reminded them that they wouldn’t always have a choice in who they would work with,” Baas says.

Additional key points included:

  • Everyone must participate. In some cases, the group leader did not step up. “That frustrated some of the AnS 225 students, because they were gung-ho to get the project done and they were willing to serve as a group leader,” Baas says.
  • Teamwork is not always easy and not all team members will contribute equally.
  • Assignments must be specific to avoid confusion.
  • Students need to be open to new ideas. 
  • Some are leaders; some are followers.
  • People’s strengths tend to surface to complete the project.

Baas had taught most of the AnS 425 students previously, and he saw some changes in their personalities and leadership styles. “Some former students surprised me in how they stepped up when given a leadership role. It was an indication of them maturing and taking on responsibility. It was fun to see,” he adds.    

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More Bacon, More Pork

More Bacon, More Pork

Nary a week goes by that bacon isn’t in the news. Most news stories are positive, extolling the attributes of this most versatile and sought-after pork cut.

Out of curiosity, I conducted a simple Google search for “bacon.” The search results: 172 million! Maybe we should cure the whole darn pig!

Bacon has received its fair share of exposure on the Iowa State Fairgrounds already this year. When 8,000 tickets for the mid-February Annual Blue Ribbon Bacon Festival went on sale at 35 bucks a pop, they were snapped up in just 12 minutes and 12 seconds.

Pork Checkoffjoined the bacon festivities during World Pork Expo with the theme: “Everything is better with bacon.”

Expo-goers were treated to breakfast burritos and donut holes with bacon, bacon corn dogs, bacon wonder bars, bacon pancakes, bacon brats and bacon Chex Mix. As you read this, the last tantalizing whiffs of sizzling bacon are wafting across the fairgrounds.

Fast-Food Foodies

As defined in The World English Dictionary, a “foodie” is “a person having an enthusiastic interest in the preparation and consumption of good food.”

My qualifications are limited to the enthusiastic consumption of good food. My training as an Army cook probably disqualifies me as an enthusiastic preparer of good food.

However, on the consumption side, I am not an enthusiastic “fast foodie.” But recent announcements by industry-leading McDonald’s and its archrival, Burger King, have caught my attention.

As reported by BurgerBusiness.com, McDonald’s, the king of fast food, has removed its premium burger, the Angus Third Pounder, and replaced it with its old staple, the Quarter Pounder — originally introduced back in 1972. The McDonald’s menu now has three new Quarter Pounder choices: Bacon & Cheese, Bacon Habanero Ranch and Deluxe.

But what really caught my attention was the introduction of a new “thick-cut, applewood-smoked bacon,” which will be featured ontwo of the new Quarter Pounders and all bacon-clad entrees on the menu.

Dueling Rib Sandwiches

As fast-food burger joints clamor to add new twists to the basic hamburger, Burger King challenged its nemesis at the Golden Arches with an in-your-face boneless rib pork sandwich — the BK Rib Sandwich — to tempt loyal McRib sandwich lovers. The new BK Rib sandwich joins the Memphis BBQ Pulled Pork and the Carolina BBQ Whopper (with bacon) on the franchise’s summer lineup.

Burger King’s vice president of global innovation, Eric Hirschhorn, in a USA Today report, stated: “It’s not just about beef anymore.” He explained that the new summer entrees will be tagged with the slogan: “Taste is King.” With the expanded menu featuring pork, that seems fitting.

You can bet the folks at the Golden Arches aren’t going to sit back and watch the BK Rib Sandwich chip away at their popular McRib sandwich market share. I predict the McRib will be back sooner rather than later!

As the fast-food giants engage in a game of one-upmanship, offering new pork sandwiches and adding more and better bacon to their burger options, the pork industry wins. “I’m lovin’ it.”

These burger wars come at a good time. January-April pork inventories were almost 6% larger than the same period last year, and first-quarter 2013 pork exports slipped 16% compared to last year. 

As beef supplies continue to tighten and prices climb higher, consumers and restaurateurs are actively seeking new, nutritious entrees with more appeal and better margins.

Thanks, Pearl

Finally, I’d like to offer a tribute to a lovely lady in central Texas named Pearl Cantrell, who recently celebrated her 105th birthday. As several news reports noted, Miss Cantrell attributes her long, healthy life to a daily diet that includes bacon. “I love bacon,” she declares. “I eat it every day.”

Her comments about bacon so impressed the folks at Oscar Mayer that they sent their famous Wienermobile for a spin around her hometown. With a seasoned sense of humor and a flair for understatement, Miss Cantrell commented: “I will never, ever forget this for the rest of my life.”

This great-grandmother, widowed at 38, raised seven kids with hard work and determination — picking cotton and baling hay. She quit mowing her own lawn just five years ago. At her birthday party, this great-grandmother proved she could still shake a leg by dancing the Texas two-step.

Cheers to you, Pearl. I raise a thick slice of hickory-cured bacon to wish you many happy returns and continued good health. 

Packers Hold Steady

Packers Hold Steady

One year ago, it appeared that packing capacity would become a real issue in the fall of 2013. The concern was well-founded, as producers were expanding the breeding herd by roughly 1% and average litter size was growing at a rate of about 2% per year. The combination suggested that U.S. hog slaughter could grow by more than 3%, year on year, by late 2013.

With hog slaughter already headed toward a new quarterly record of 30.433 million head in fourth-quarter 2013, the prospect of pushing 3% more hogs through the current packing sector looked daunting.

Then the worst drought in 50 years came knocking. Plans to grow the breeding herd and improve litter size slowed. Slaughter levels in fourth-quarter 2013 will likely be lower than last year. But questions about packer capacity loom.

Daily Capacities

The  table at the bottom of the story shows the results of this year’s survey of U.S. pork packers with daily capacities of 1,000 head and more. Each company was polled in April or May, asking for its daily slaughter on a “normal day,” and assuming hogs are plentiful and margins are good.

 

The capacity-limiting factor varies from plant to plant. Some are limited by cooler space. Others will slaughter only as many as they can process in a similar amount of time. Plants with more than roughly 11,000 head/day have capacity to run two shifts.

Daily slaughter counts were updated for all plants except the three that did not respond to the survey. Those are listed at 2012 levels.

There have been no significant changes in daily capacity in the past 12 months. The largest increases were 1,500 head/day at Smithfield’s Sioux Falls, SD, (John Morrell) plant and at the JBS Swift plants in Worthington, MN, and Marshalltown, IA. Rantoul Foods, which began operations in the former Meadowbrook Farms plant in Rantoul, IL, in 2012, increased its capacity by 600 head/day, while Premium Iowa Pork, a division of Lynch Livestock, increased throughput at its Hospers, IA, plant by 500 head/day.

The total increase at the 29 surveyed companies was 5,750 head/day — a 1.3% increase. The 1,000-head-plus plants account for 97% of total U.S. slaughter capacity.

In past surveys, we have included another 27 plants with daily capacities of between 100 and 1,000 head/day. Their total capacity is estimated at 9,245 head/day. The only change we know of in that group is the loss of Avco’s Gadsden, AL, plant to fire. In 2011, the plant’s daily capacity was 210 head/day.

Tracking hog slaughter plants is a challenge. State-inspected plants do not appear in lists of facilities subject to federal inspection. Old plants sometimes get reopened and others seemingly fly under the radar. A knowledgeable industry source provided the names of 12 additional firms operating plants in nine states. We were unable to contact these firms by press time, but our source estimates that they provide another 3,600 head/day of total capacity.

The total for the plants we have always tracked stands at 444,320 head/day — 5,540 head, or 1.3%, higher than last year. When we include the estimated capacity of the unconfirmed plants, total U.S. capacity is 447,995 head/day.

Weekly Capacity

Logic would suggest that weekly capacity is six times daily capacity. Some plants do not operate on Saturdays. Others add Saturday shifts only when margins and supplies dictate it.

Average Saturday slaughter in 2012 was 123,644 head, or about 28% of total capacity, compared to 20% in 2010 and 23% in 2011.

Viewed another way, the U.S. pork packing sector operated roughly 5.28 days/week in 2012, on average. If packers operated at that level in 2013, it would mean the sector could handle an average of 2.365 million head/week. In my experience, the sector can run at 5.4 to 5.5 days per week for an extended period of time, meaning that the practical top would be 2.419 to 2.464 million head. The peak weekly total for 2012 was 2.427 million.

Based on USDA’s March Hogs and Pigs report and some revision of 2012 weekly slaughter data to reflect a more normal seasonal marketing pattern, the highest weekly total in my forecasts for this fall is 2.357 million head, well within the sector’s capability.

My greatest concern is next year, and also, especially, 2015. Normal corn and soybean crops this fall will put breakeven costs at or below $80/cwt., carcass. Current Lean Hogs futures prices indicate sufficient profits at those costs to drive some expansion of the sow herd.

If the industry adds 2% to 3% more sows and average litter size continues its 1.5% upward trend, we could expect 3.5% to 4.5% more pigs by fall 2014. That would put the maximum weekly total at 2.44 to 2.46 million head, very close to the current capacity estimate. Another year of that kind of growth would put supplies beyond the capacity to comfortably process them, likely pushing packer margins higher and hog prices lower.

Marginal Changes Ahead

There is little help on the horizon. Triumph Foods is the only company with definite plans to expand, but its plan to add a plant in East Moline, IL, is on hold, indefinitely.

Hormel Foods has talked about expanding its Fremont, NE, plant to accommodate two shifts, but no concrete plans have been announced. Tyson Foods has indicated it would like to run a double shift in its Madison, NE, facility, too.

The bottom line is that capacity gains will come from marginal changes in chain speed and operating capacity. Producers need to realize that as they make production plans for the future. 

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The management team at KMAX Farms
<p> The management team at KMAX Farms at Elma, IA, consists of Brian Haeflinger(from left), Max Schmidt, Trent Thiele and Duane Bodermann.</p>

Every Friday morning, Max Schmidt rises early to prepare a big batch of scrambled eggs using two dozen eggs, cheese and locally processed pork sausage. There is fresh coffee cake or homemade rolls made by his wife, Georgia, and, of course, a fresh pot of coffee and orange juice. An extra 2 lb. of pork sausage is prepared to top it off.

It’s a meal fit for a king. But for the 70-year-old Elma, IA, pork producer, it’s his way of taking care of his family. Although the four young men crowded around the kitchen table aren’t his immediate family, they are his pork-producing family and all are partners-owners in KMAX Farms LLC.

Energized by a hearty meal, plenty of discussion and laughter, Schmidt and the young team set off to ship two loads of market hogs to an area packer.

Solid Relationship

It’s a good relationship that is built on mutual trust and respect, sharing duties and decision-making among the partners and Schmidt, says Duane Bodermann, a 20-year veteran and manager of pork production for the nursery-to-finishing operation. At age 43, he is the eldest of the employees-turned-partner group. He is in charge of the 6,000 nursery spaces scattered around a half-dozen sites.

Trent Thiele, 30, who joined the team in 2011, is manager of pork production for the 14,000 finishing spaces sited on a variety of locations near partner’s homes, where land adjoins Schmidt’s 3,600 acres of cropland. Siting was intentional to allow manure application locally, appeasing neighbors’ concerns about manure odors and tankers visible on rural roads, Schmidt says. There are eight permitted sites, all within a five-mile radius of the home farm.

Brian Haeflinger, 30, who started in 2008, manages the farm’s computer-automated feedmill, which is capable of producing up to 150 tons of feed daily. Normal operation is 70 tons of feed a day. The mill was built in 2009, when the local feedmill at Elma went out of business. Brian also helps load market hogs, power washes barns and performs other tasks as needed.

Jason Haeflinger, 30 (Brian’s twin), who started in 2005, handles daily chores at many production sites and assists where needed. Jason is also in charge of economic control, checking feeders daily. “Feed wastage is one of our biggest problems. You can’t afford to waste $300-a-ton feed,” Schmidt says.

Operation Evolution

Schmidt says all of the hogs, hog barns and land they sit on, and the feedmill are owned by KMAX Farms LLC, with shares purchased by the partners.

The seeds for development of the LLC were planted about 15 years ago, when Schmidt and Bodermann set up their first agreement. “We built this 800-sow unit together on land that Duane owned. He owned the land and I owned the barn,” Schmidt recalls. “It was based on a 10-year plan, which stipulated that in 10 years I was obligated to sell him the barn and he was obligated to buy it.”

By 2004-2005, when the transaction was to move forward, the hog market tanked and creditors indicated the deal wouldn’t cash-flow for Bodermann, Schmidt explains. So the pair “agreed to get along, because it was all we could do,” Bodermann adds.

“It was a good summer to get out of sows, which were selling for $63/cwt. Baby pigs were virtually worthless and lots of pigs were available for sale. We were buying weaned pigs for $3 [each],” Bodermann says. The sow herd — 800 sows housed inside and 450 housed outside — were all shipped to market.

About that time, Schmidt was serving as environmental committee chairman for the National Pork Board. On a committee trip to Canada, he got a firsthand look at some sow facilities with impressive productivity; few litters were less than 12-13 piglets.

Realizing that he couldn’t compete with the Canadians on sow productivity convinced him to stick to his farm’s strengths, and focus on nursery and finishing pig production.

Schmidt and his team currently buy 1,000-1,200 pigs a week from two sources on contract, one near Faribault, MN, and the other near Rockford, IA. Three-week-old pigs weighing 13 lb. are raised in half a dozen nurseries for six weeks, and then spend the next 18 weeks in the eight finishing barns. Pigs are marketed at 280-290 lb.

Some packers prefer heavy weights, Schmidt says. It also helps spread the cost of the $40-$45 weaned pigs and high-priced feed over more pounds of pork. “When you can put an extra 20 lb. on that pig, you can buy fewer weaned pigs in a year’s time and still come out with the same amount of revenue,” he adds.

Roughly two-thirds of KMAX Farms’ pigs are sold on the open market; the remaining one-third are sold on contract.

“It is one of the problems that I see in the industry: Very, very few producers are on the open market. They all want a contract and don’t want to hassle with it. But I think it is necessary that somebody go out there and do the bidding to maintain the integrity of the hog market,” Schmidt says.

Passing on an Operation

“We all think when we get to retirement age, we can pass the farm on,” Schmidt observes. Speaking from experience, Schmidt says his father couldn’t let go of the family farm, although he kept talking about it. “Farmers just have a tough time of letting go of the land,” he explains.

So as aged, he decided to put together a succession plan. The problem was, neither of his twin sons, Leland or Roland (now 43), was interested in staying on the farm. Leland became a minister and Roland, a teacher. Both reside in Spirit Lake, IA.

 

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In the meantime, numerous employees have come and gone, and the only longtime employee remaining in the operation is Mary Starr, who is nearing retirement.

All four partners in KMAX Farms started as employees. Their rule is that employees must work at least one year before they can be considered to become a partner.

Senior partner Bodermann explains how the LLC actually works at KMAX Farms. “The LLC is a fixed number of shares, and the value of those shares can change. Max is obligated to sell shares to the partners-owners at the value of those shares down to 51% of the shares, which Max will always maintain, as is required by Farm Credit,” Bodermann explains.

“It gives these people the chance to become owners without the huge capital expense of starting their own operation,” Schmidt notes. Each partner is required to invest a minimum amount of capital. For most, that means borrowing money. But it ensures that everyone has “some skin in the game,” he adds.

“It is a good opportunity for us as younger farmers to get started because we are buying into an already-running operation with no startup fees,” Thiele adds. “Max has built up a lot of relationships with the hog buyers and the packing plants, and provides a lot of wisdom. He has made it through a lot of tough times.”

“This obviously puts the onus on everybody to do their part, make this operation work, and gives everybody the opportunity to help their families out in the long run,” Bodermann says.

The five-member team is able to spread out the risk of farming. And Schmidt says he is most proud of the fact that they get the job done without conflict. “We all get along and we recognize that that is important,” he says.

LLC and Corn

The LLC agreement also obligates any partner who produces corn to sell the grain to KMAX Farms. “My corn goes to the LLC, and the LLC can buy it on a weekly basis to match the elevator price locally,” Schmidt says. “The LLC can also take positions on the Chicago Board of Trade, just as I can take positions to shift my risk.”

A year ago, the LLC got hammered by a very poor corn crop in northern Iowa, plus competition from four nearby ethanol plants that reduced the available supply and ramped up local corn prices.

“That’s one of the synergies we have here as grain producers and livestock producers — we are taking money out of one pocket and putting it in the other,” Schmidt relates.

“Last fall, I sat here with a brand-new combine and half a corn crop,” he laments. “These guys asked, ‘How are we going to buy corn?’ and I said, ‘We’ve got to bid more than somebody else.’”

But Schmidt and partners devised a better plan. “We offered to harvest people’s corn for $22/acre, haul it to our mill for free, dry it free of charge and store it for free,” Schmidt explains. The catch, of course, was that the corn had to be sold to KMAX Farms by June 30.

The strategy worked. The farm picked up 100,000 bushels of corn. “It was taking something we had that didn’t cost us cash, in exchange for something of value that we didn’t have,” Schmidt says.

LLC and Manure

“Since the LLC is in the hog business, we regard the manure as extremely valuable. Not only does it have nutrients, it has micronutrients that you just can’t get commercially,” Bodermann remarks.

“The way it works, the LLC sells the manure to whoever in our group needs it, for 40% of the value of manure based on the nitrogen, phosphorus and potassium value,” he adds.

“Last year, I paid the LLC $110,000 for manure and then had to haul it to my fields for application,” Schmidt explains. He maintains and owns the manure-hauling and application equipment, which the other partners are free to use on their land. Bodermann, for instance, operates 150 acres near Elma, IA.

“We figure that it costs 50% of the value of the manure to get it on the land, which runs about $45/acre for all of the equipment, including the manure pump, tractor, manure spreader and the labor,” Schmidt says.

The partners feel the most effective time to sample and analyze manure from finishing pits is when the pits are half empty. Research tests on soils at KMAX Farms fertilized only with hog manure have consistently contained adequate levels of nitrogen, he says.

Leadership

Part of the goal in setting up the LLC was to see its partners become leaders in the community, just as Schmidt has been. He served as president of the Iowa Pork Producers Association in 1999, was a member of the National Pork Board during 2000-2003, when the checkoff program was transitioning, in addition to serving as chairman of its environmental committee. Currently, he is president of the Iowa Pork Foundation, which provides seed money for special projects and scholarships.

Bodermann is president of the Howard-Winneshiek School Board, the third-largest school district, geographically, in the state. Jason Haeflinger leads the after school program for the latchkey kids in Elma. Brian Haeflinger is a 4-H leader and president-elect of the Howard County Farm Bureau. Thiele heads up the roller skating program for kids in Elma in the winter, and wants to become more involved in pork producer organizations.

New Ventures

The LLC is also looking at new ventures. A couple of the partners have interest in feeding Holstein cattle. “This is the hotbed area for new cattle barns in Iowa, so we took a tour of different kinds of cattle-feeding operations,” Schmidt says.

The partners agree a 500-head cattle barn would be the most efficient for the LLC to operate jointly.

Ensuring Succession

To ensure the future success of KMAX Farms, Schmidt took the unusual step at inception of the LLC to designate in his will that the LLC members will inherit $1 million worth of his shares when he passes on.

“My long-term goal in life was to create a viable enterprise that lived beyond me and that has somebody to carry on this operation,” Schmidt says.   

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NPPC President Spronk Outlines Pork Industry Issues at World Pork Expo

During an interview at World Pork Expo, National Pork Producers Council President Randy Spronk provides an update on key issues the pork industry is facing.

"Game-Changing" New Products Featured during 2013 World Pork Expo New Product Tour

Twenty-eight new products were nominated for inclusion as part of the 2013 World Pork Expo New Product Tour. A panel of pork industry experts reviewed the products on behalf of National Hog Farmer's pork producer readers. The panel felt a number of the products have the potential to be "game changers" for the pork industry. Read about the World Pork Expo New Product panel's selections in the July 2013 issue of National Hog Farmer.

See the complete list of products featured during the 2013 World Pork Expo New Product Tour here.

GMO-Fed Pig Study Flawed; Headlines Deceiving

GMOfed pig study conclusions flawed
<p> Photo courtesy of National Pork Board.</p>

The Huffington Post headline this week screamed frighteningly at consumers on the topic of genetically modified organisms (GMOs), “Damning New Study Demonstrates Harm to Animals Raised on GMO Feed.”  Reuters also sought to raise  alarm with this headline, “Scientists Say New Study Shows Pigs Hurt by GMO Feed.” Both stories were referencing a recent study in which pigs were fed genetically modified (GMO) corn and soybeans. The outcome of the study, published in a somewhat obscure Australian publication called the Journal of Organic Systems, is up for debate. Because National Hog Farmer has a long-standing tradition of bringing our readers research-based information, we were a bit skeptical about the way the research was designed.

While the inflammatory headlines and worst-case-scenario reporting were enough to incite fear in the hearts of some consumers, National Hog Farmer staff have come to the same conclusion as other credible researchers that the science to support some of the conclusions seems to be seriously lacking in significant areas.

Food Safety News approached the topic in an article entitled, “Scientists Debate New Study on GMO-Fed Pigs.”  Food Safety News focused on the potential variance in nutritional composition between the GMO and non-GMO grain fed to the pigs in the study. Kent Bradford, director of the Seed Biotechnology Center at the University of California, Davis, told Food Safety News that the lack of a controlled feed-growing environment potentially calls the results of the study into question.  The researchers bought each type of feed from retail distributors, as opposed to growing the feed in a controlled environment.

Mark Hoofnagle, a doctor and defender of science-based research, addressed the research study in his Science Denialism blog.  Hoofnagle notes that the researchers behind the study appear to be active in anti-GMO advocacy groups, and quite possibly had an anti-GMO agenda. He suggests they may have been on a “fishing trip”  to find the results to support their stance. However, he also acknowledges that this study may point to the need for more research.  Hoofnagle says, “So what we have in this study is the first half of a valid study,  but no real hypothesis-driven research to confirm if this 1-in-20 result is real.” He says it is problematic that the researchers didn’t seek to further determine if  the effects could have been caused by the soy component or corn component of the diet. There are no follow up evaluations examining the possible other factors that could have led to stomach inflammation. “So far, one can only conclude that it’s just as likely that this result occurred by chance as it is to be an actual effect of feeding the pigs GMO corn and soybean meal.”

Hoofnagle says that answering for other potential causes and variables is just the first step in a real scientific investigation. “Given the levels of mold researchers measured on their GMO corn, it could have been a result of their source selling them moldy feed,  because the mold levels listed were much higher than are usually found on GMO crops,” he says.

 

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 “So, to summarize, in this paper the authors performed a large, non-specific screen for potential evidence of harm from GMO crops,” Hoofnagle continues. “Of the many analyses performed, one showed statistical significance for severe stomach inflammation on a pathology scale in the GMO group, but this effect rapidly-disappears if one group’s inflammation is based on broader categories. The clinical significance of this finding can only be determined by subsequent hypothesis- driven research into this potential effect, but it is equally likely this is a result of random chance.” 

Mark Lynas, author of “The God Species: How the Planet Can Survive the Age of Humans,” analyzed the research in a blog post entitled, “GMO Pigs Study—More Junk Science.” He says a co-author  of the paper actually has ownership in a firm that markets non-GMO grain. This same firm provided funding for the study.  When evaluating the study results, Lynas notes that 15% of the non-GMO-fed pigs had heart abnormalities, while only 6% of the GMO-fed pigs exhibited heart abnormalities. “Similarly, twice as many non-GMO-pigs as GMO-(fed) ones had a  liver problem.”   Lynas asks, “Why no headlines here?” He proposes that a more accurate headline could have read, “Pigs Fed Non-GMO Feed are 100% More Likely to Develop Heart and Liver Problems, Study Finds.”

National Hog Farmer’s December issue is devoted to reporting on credible, peer-reviewed research results that impact the swine industry. It sounds like this is a topic that is worthy of additional research. We will keep an eye on this issue and keep our readers informed of additional studies as they become available. Where do you stand on the use of GMO feedstuffs in pork production? Share your thoughts in the “Comments” section below, or email lora.berg@penton.com

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Slate of New Officers Elected to National Pork Board

National Pork Board President Karen Richter of Montgomery, MN, sees great opportunity in the year ahead helping consumers understand the value and versatility of today's pork and updating the strategic direction of America's Pork Checkoff.  The Minnesota producer was elected to head the 15-member board at a meeting held in conjunction with the recent World Pork Expo in Des Moines, IA.

“As a producer and board member, I am constantly working to make this industry better for future generations,” Richter says. “There's never a short list of challenges in the livestock industry, but we continue to evolve our programs so that the pork products we provide and the way that we operate our farms improve to meet the needs of our customers, consumers and producers.”

Richter and her family own a 600-head, wean-to-finish operation and contract 3,000 gilts through their feeder-to-finish operation. She also raises corn and soybeans on 600 acres. Richter succeeds Conley Nelson, a farmer and pork producer from Algona, IA, who will remain on the board's executive committee as immediate past president.

Richter is in her second, three-year term on the National Pork Board. She serves on the Checkoff's Domestic Marketing Committee and Pork Safety Quality and Human Nutrition Committee. She has been actively involved with the Minnesota Pork Board serving as president and secretary, as well on the local level with the Le Sueur County Pork Producers.

Also elected were Dale Norton, a pork producer from Bronson, MI, vice president; and Derrick Sleezer, a pork producer from Cherokee, IA, treasurer. The three executive officers will serve one-year terms.

“As we look ahead to this year, the pork industry has versatile, nutritious products that offer great value to consumers,” Norton says. “It's important that producers continue to build trust and share our commitment with customers and consumers.”

Norton is a partner in Kendale Farm, which is primarily a farrow-to-wean operation with 1,450 sows but also finishes about a third of the pigs. He is involved with a cow/calf operation and raises corn, soybeans, hay, peppers for processing and seed corn on more 3,500 acres.

Nationally, Norton is serving his second three-year term on the National Pork Board. He serves as the Pork Checkoff's representative on the U.S. Farmers & Ranchers Alliance (USFRA) and serves on the Swine Health Committee. Norton is the past chair of the Animal Welfare and Finance Committees and has served on the Pork Board's Administrative, Resolutions/Advisements and Domestic Marketing Committees.

Norton is a board member and past president of the Michigan Pork Producers and is the chair of the Michigan Swine Health Committee. He is a member of the Michigan Farm Bureau and was appointed by Governor Granholm to the Michigan Ag Commission, serving from 2005 to 2009.

Sleezer is an owner and employee of Sleezer, Inc., a farrow-to-finish, farrow-to-wean and farrow-to-feeder operation that has 700 sows and markets 15,000 hogs annually. The operation includes 2,000 acres of corn and soybeans. Sleezer also works for Kerber Companies as marketing and product support specialist and safety and compliance coordinator.

Sleezer is serving his second three-year term on the National Pork Board. He serves on the Animal Welfare, Finance and Producer and State Services Committees and represents the Pork Board on the U.S. Pork Center of Excellence Board. He is a member of the 2010 Pork Leadership Academy and an avid Operation Main Street speaker who has given more than 40 presentations, with many in urban settings.

For information on Checkoff-funded programs, pork producers can call the Pork Checkoff Service Center at (800) 456-7675 or check the Internet at www.pork.org.