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Lessons from Large Production Systems That Can Help the Competitiveness of Land-Based Producers

06 February 2013

Kansas Swine Profitability 2012

The Jack and Pat Anderson Lecture in Swine Health Management at the 2012 Kansas State University Swine Profitability Conference was given by Gene Nemechek, DVM, of Pfizer Animal Health.

The large pork production systems have increased in size, controlling a much higher percentage of the total pigs produced in the US. What does that mean for the independent, land-based pork producers? Can the land-based pork producers remain competitive, sustainable and viable in today's pork industry?

In his paper, the author shares some of the observations of the large production systems that he has made over the past 30 years. Hopefully, some of these observations will give the land-based producers in the audience some areas to think about and maybe evaluate and incorporate into their pork production business.

Pork Production as a Stand-alone Business
a Systems Approach

The large production systems early on developed production standards that were used as guidelines for day after day production practices. These standards gave structure and consistency to the productions practices which outlined how things were to be done on the farms. These standards were written down and used for training of new and existing employees. These guidelines outlined everything from feeding animals, breeding practices, building environmental management, heath management, farrowing house management, pig processing, record-keeping and grow finishing management.

This systems approach accomplished a uniformity of production practices across numerous operations and employees, and produced a uniform consistent end product. These standards required a constant regular update process as well to keep up with improvement in technology and production practices. The written standards for production allowed for structured process for training of new employees across the entire production system.


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"Producers must use the records, not just generate them"


Method for Measuring and Monitoring Production Parameters

As the large production systems increased in size and complexity, it became obvious that they required a record system to measure production and financial parameters. Without a method for measurement, business decisions for improvement were difficult. Lenders began to require production and financial records to support lending decisions. The competitiveness and cyclical nature of pork production pressured production systems to adopt record systems to measure the production parameters of their business.

Record systems were developed or purchased to monitor on farm production: pigs per sow per year, individual sow productivity, farrowing rates, weaning performance, death losses, growth and feed conversions. To complement the production records, financial record systems were developed to measure the financial impact of production practices. These record systems were used to measure farm performance differences between units and managers, as well as the production cost differences between farms. Producers must use the records, not just generate them. Pick out the few key parameters and focus on those areas.

The next step involving the production records and production cost moved forward with large production systems interest in comparing how they performed against other large production systems. That demand for comparison allowed for the evolvement of independent record keeping companies that provided a confidential records comparison service that allowed for benchmarking. The benchmarking/records services allowed for large production systems to evaluate their production and cost and revenue parameters when measured against similar production systems.

This benchmarking can measure and compare information such as sow productivity, grow-finish performance, caloric conversion and cost, veterinary and health cost, transportation cost and financial returns between individual production units and between entire production systems.

Pork Production: a 'People Business'

The large production systems realised that pork production was a business that required an investment in human capital. Efficient pork production required a continuous source of qality, talented, educated, experienced and motivated employees. The pork industry is really a people business that just happens to raise pigs. People make the difference in a production system's success.

The large production systems realiszed early on that they needed to hire human resource consultants to hire and train the employees needed to staff the production units and associated business entities. Company employees are continuously trained on new production practices, animal welfare standards, animal handling, company code of conduct and harassment issues.

Turning Feed Ingredients into High Quality Protein

Large production systems typically are not involved in raising and producing the grains for their pig diets. Feed costs are still the highest cost in pork production, regardless of the size of the operation. The large production systems are constantly analysing the nutritional aspect of their business in order to control feed cost, maximise nutritional efficiency and utilise all types of available ingredients.

Large production systems have either hired swine nutritionist or consultants to continuously make ration adjustments based of ingredient cost, availability and nutrient specifications. In addition to the nutritionist's involvement, most large production systems, in an effort to control cost, have also hired consultants to provide ingredient purchasing advice. The Kansas State University Swine Nutrition Group leads the country in providing the swine nutrition guidelines for the US pork industry.


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"The biggest opportunity that all pork producers have today to maximise their revenue is to sell their hogs in the correct matrix weight range for the packer to whom they market."


Herd Health

Large production systems have not been immune to the detrimental effects of swine diseases that adversely impact performance. The large productions systems realised that they needed access to updated information on disease control, testing procedures, disease prevention and disease treatment.

Most large production systems have either hired staff veterinarians or they keep swine veterinarians on retainer for advice on disease control. In many cases, the swine veterinarians are the first line of information for not only disease and herd health but also overall farm management as well. Veterinarians must continue to be educated on the continuous technology and management changes that are occurring in today’s pork industry.

Genetics

The large production systems realised early on the importance and advantage of utilising high producing female lines crossed to high quality terminal sires to produce a uniform, high carcass quality, fast growing and feed-efficient market hog. While genetics companies have made their product lines available to all size customers, volume purchases and the establishment of genetic nucleus herds along with production system boar studs have allowed large systems to lower their overall genetics cost.

The genetic options to produce a top quality market hog are available to all size producers but the health considerations must be a top consideration when making a genetic decision. The length of time required for generation turnover makes it imperative to make the right genetic decision as well.

Purchasing

Volume purchasing and discounts have become a way to reduce the cost of production for the large production systems. The large production systems obviously buy more volume: health products, vaccines, feed ingredients, equipment and supplies. The volume pricing used by many vendors has allowed the large production systems to use it as a way to reduce their cost of production. Many smaller producers and veterinarians have joined together to form buying groups to also take advantage of the volume pricing.

The opportunity to use hedging and the futures markets for forward pricing is not limited only to the large producers, but it has been used by many of the large producers to limit risk. Many large production systems have full time staff totally focused on controlling input costs. My observations have been that these experts do not always make the right decisions.

Marketing

The large production systems used their production volume to their advantage at a time when packers paid premiums to producers who could supply increased volume of market hogs. As packers began to buy based on carcass quality, volume pricing became less of a factor. Today pork producers, regardless of size, can still negotiate with packers to provide top quality market hogs.

The biggest opportunity that all pork producers have today to maximise their revenue is to sell their hogs in the correct matrix weight range for the packer to whom they market. The author stated he would leave the issue of futures pricing of the markets hogs to someone more qualified.

Areas of Opportunity

The following are some additional production practices that many large production systems have implemented to improve performance, increase revenue, and to reduce production and financial risk.

  • Replacement gilt production and grow-out systems that minimise disease risk, maximise performance, standardise genetic performance and reduce overall genetics costs.
  • Production management teams that are separated based on production type: genetic, breeding/farrowing, nursery, grow-finish, boar stud. The specialised production focus generally improves production performance throughout the production system.
  • Three site production: separation of production age groups and all in/all out flow of nursery and grow–finish. Strategic location of production sites based on the potential for reduction of area disease exposure can reduce health risk and improve production.
  • Vaccination crews that are responsible for vaccinating all the weekly production flows.
  • Market hog sorting and load out crews that are responsible the marketing of the hogs.
  • Truck washes with TADD systems that are production system specific to improve biosecurity: truck washes separated for sow and wean pig production, nursery, finishing and genetics.
  • Environmental management teams responsible for nutrient management.

Responsible Pork Production

The National Pork Board and the National Pork Producers Council have implemented and promoted the 'We Care Initiative: Pork Producer's Commitment to Doing What’s Right!'

  • produce safe food
  • protect and promote animal well-being
  • ensure practices to protect public health
  • safeguard natural resources in all of our practices
  • provide a work environment that is safe and consistent with our other ethical principles
  • contribute to a better quality of life in our communities

You can view the full proceedings by clicking here.

February 2013

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