Pork Commentary: Lean Hog Prices Break 70¢!

US - Last week, the Iowa-Minnesota average lean price was $71.06, up more than $4.00 from the previous Friday and almost $14.00 higher than March 23 (+25.00 per head), writes Jim Long.
calendar icon 2 May 2007
clock icon 5 minute read

Opinions say prices will continue to move higher, as weekly marketings decline. This past week, US marketings were 1.975 million head, 5,000 head less than the same week a year ago. As weekly marketings move closer to 1.9 million, prices will continue to strengthen. We still are confident lean hog prices will reach 80¢ lean this summer. The reason we feel so confident? No more hogs than a year ago, greater pork demand (mainly from exports) and plentiful packer capacity.

This past week, we received the 2006 Pig Champ year in review data summary. It continues to fascinate us, the high degree of production variation in our industry. One parameter that is used as a benchmark is pigs weaned/mated per female per year. The Pig Champ summary is of 488 farms with an average female inventory of 1278. This producer group is already above average, in our opinion, when you consider that they have decent records and more importantly have the nerve to share them.

Pig Champ 2006

Pigs Weaned Mated Female per Year
Top 10% Mean Bottom 10%
24.75 21.52 16.90

A big difference between the top 10% and the bottom 10%. If you value an early wean pig at $35.00 US, eight extra pigs is $280 per sow per year extra income with little if any extra expenses - how long can a 1250 sow unit stay in business, or competitive, with a disadvantage of $280 plus per sow per year (about $350,000)? It is one of the reasons that we see continual exiting from the business, as the lower productivity producers run out of capital and courage to remain.

The one percent overall productivity gain seen in our industry annually is probably as much about the top percentile producers growing while the bottom percentile exits. The overall average increases as we continue to be an industry of survivors.

On a more personal note, when we look at the 61 Genesus customers who weaned over 25 pigs in calendar 2006, it drives home their excellence. 25 pigs would be in the top 6% of this Pig Champ database. It indicates that 25 pigs continues to be a benchmark of excellence that few achieve. Even more extraordinary is the achievement of 30 pigs by WOODLAND, a Genesus customer. If you want to learn more about this extraordinary achievement please click on the following Woodlands banner to watch its video

Sow Mortality

The sow mortality in the Pig Champ database is also interesting.

2006 Sow Mortality
Upper 10% Mean Lower 10%
13.40 8.84 4.90

The sow mortality mean of almost 9% is reality, but it seems so high. It’s such a challenge to achieve top production when sows are dying at such a rate. As we all know, sows die in gestation, farrowing and breeding. The loss of these sows limits the ability to push production. Indeed, top percentile production cannot be achieved without sows that have low mortality. Dead sows also have no salvage value and then you have to drag them out. A job everyone volunteers for and usually when someone needs to check a sow farrowing.

Feed Conversion

As we all know, feed is significantly more expensive than a year ago. Consequently, feed conversion is something that has become much more a focus. Pig Champ’s benchmark data for 2006 indicates a large variation, just like pigs weaned and sow mortality.

2006 Pig Champ
Feed Conversion
Upper 10 Percentile Lower 10 Percentile
3.54 3.01 2.49

At today’s feed prices $20.00 plus per head difference between the top and bottom. Big Money.

Growth Rate – Mortality
Pig Champ 2006
Grow – Finish
Upper 10% Mean Lower 10%
Average Daily Grain 1.95 1.61 1.27
Days To Market 151 130 111
Mortality 13.55 5.92 0.93

The degree of variation between top and bottom in growth rate and mortality replicates the trends we have already observed. The costs associated with the combination of high feed conversion, high mortality and low growth would be staggering.

Summary – NO EXCUSES

The productivity differences seen on the Pig Champ summaries illustrate the top end productivity opportunities. It shows what the top end producers are able to do. It is doable, but it is hard. Top end production takes 365 day intensity and nothing going wrong. The day to day execution of basics, the right choices in people, genetics, feed, location and facilities. There is no absolute right way, but we observe in the top producers that we have visited good attitude, teamwork and 365 day execution of the basics of pig production. It is not magic. It’s the right people making the right decisions and always aiming higher. Never satisfied with the status quo and not making excuses.

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