Brumm Speaks Out

The threat of a trade dispute with Mexico and the Russian announcement of a possible major reduction of imports of pork and poultry were reminders this week of the impact of world trade on US pork prices. At the current pace of exports, almost 25% of the pork we produce in the US will be in the export market this year. For the first 6 months of this year, exports accounted for 21.5% of all pork produced in the US. According to University of Missouri calculations, for the first 6 months of this year, exports contributed over $42 per pig to the value of our pigs at slaughter.

            According to Steve Meyer and Len Steiner (www.dailylivestockreport.com) exports for the Jan-Jun 2003 period were 851 million pounds and represented 9% of US production. For the same 2008 reporting period, exports of pork products was 2.5 billion pounds, 21.5% of US production. In 2003, Russia and China/Hong Kong combined imported 0.5% of our total production. In 2008, these 2 countries imported 7.4% of our production, with Russia at 2%. Thus, the Russian announcement of a possible curtailment or at least major reduction in imports hinted at a major market impact.

            All of this suggests that the long term financial well being of pork producers is more closely tied to world politics than ever before. With the +$40 per pig benefit of export trade comes the risk of the loss of this benefit at the whim of government policies that may or may not be related to animal agriculture.

            On Thursday of this week I traveled with Larry Sitzman, executive director of the Nebraska Pork Producer Association. We did producer meetings in Bloomfield and Humphrey, Nebraska. At both sites, producers and allied industry friends that I worked with during my career as an extension swine specialist at the University of Nebraska asked for my ‘take’ on many of the political issues and their impact on the pork industry.

            I think Larry explained it best when he responded to a question on the status of the free trade agreements that are in congressional hands for approval. While many of our Midwestern congressional delegations and senators support these agreements, there will be no votes in congress on approval of these agreements until next January at the earliest. Neither political party wants to cast a vote for or against any possible controversial bill as this vote may be used as ammunition in this falls political campaign.

            All of this highlights what I have been talking with producers for years about – the successful pork producer of the future will have knowledge of global issues. Along with this knowledge will come the acceptance of the fact that successful producers will be involved in the political process. Successful producers will take the time to become familiar with their congressional delegation and become involved in letter writing, phone calls, etc. to keep the delegation informed about the impact of legislation on pork producers. Without involvement in the political process at all levels (county, state and US), pork production becomes an industry that has to take what ever is handed to them in the way of regulation, export opportunities, etc. With involvement comes the opportunity to be part of the process. The future of pork production in rural communities is to important not to participate.

Every year those of us involved in pork production hear tales of pig deaths associated with manure pit agitation and manure removal from confinement facilities. These deaths range from a ‘few’ pigs in a corner of a curtain-sided wean-finish facility to hundreds of animals. In recognition of the risks to both pigs and people working in these facilities, the University of Minnesota and the Minnesota Pork Board sponsored a webcast on the topic of ventilation management during pit pumping last Wednesday (http://www.extension.umn.edu/swine/porkcast/).

As the presenter of this program, I spent considerable time in the past 2 months reviewing the limited information available on the topic and developing a set of ventilation guidelines. I also talked with insurance agents and commercial applicators about many of the issues associated with this activity. In conversations with commercial haulers, it soon became evident that they do not want to have anything to do with setting the ventilation systems in facilities they are agitating and removing manure from. As they point out, there are too many variations in controllers, fans, pig ages, etc. for them to be able to get it right at every site. In addition, many sites prevent access to facilities, which means access to ventilation controllers is often limited. The end result is a fact sheet developed in cooperation with Dr Jay Harmon at Iowa State University that outlines what we believe to be a reasonable strategy for management of the ventilation system during pit agitation and pumping. The fact sheet is available from the Minnesota Pork Board.

Not included in the fact sheet are some of the legal and insurance issues associated with manure agitation and removal. Increasingly, commercial manure haulers are asking producers to sign waivers of liability. These waivers basically say that the person signing the waiver will not hold the commercial hauler liable in the event of pig deaths, etc. In many cases, having a signed waiver for each site/facility is a requirement in the commercial haulers liability policy.

As pointed out to me by an insurance agent in Iowa who specializes in insuring contract grower sites, this waiver has a severe limit that contract growers and commercial manure firms need to be aware of. This limit is that the contract grower has no ownership or financial right to anything associated with the pigs. In the event of pig deaths, it is the pig owner who suffers a financial loss, not the contract grower. Thus, a grower’s signature on a waiver of liability cannot be linked to the pig owner as the grower is not an agent for the pig owner in most cases and does not have the right to sign the waiver for the pig owner.

If pig deaths occur during agitation and pumping, will the contract grower be liable for negligence under the terms of the grower contract? Does the pig owner have a written set of ventilation guidelines for this situation? If yes, there generally isn’t negligence on the part of the contract grower if these guidelines are followed. If the pig owner doesn’t have a set of guidelines, can the grower be negligent since there were no directions or guidance?

I suggest that every pig owner, contract grower and commercial manure firm visit with their insurance agent to be sure all parties understand the trail of liability associated with manure agitation and removal. The entire issue of liability and ventilation strategies to prevent pig deaths and the associated liability represent a major financial risk when one considers that the recent strength in hog prices mean every pig delivered to slaughter is now worth $165-$170.

Later this week, Canadian government bean counters will release their July 1 inventory numbers. Everyone expectation is a continuation of the decline in sow numbers and on-farm grow-finish inventory.

That leads to the over riding question that I have been getting from clients and others involved in the swine industry the past few weeks – have we lowered the North American breeding herd enough? I don’t get a sense that we have.

In my travels across the upper Midwest and in my conversations with industry people, I can’t put enough names on enough sows sold to slaughter to convince myself enough liquidation has occurred in the US to position our industry for a very profitable year next year.

There is no doubt that Canadian producers have liquidated many females from their inventory. However, not all of the liquidation was via the Canadian Government buy-out. The buy-out specified that an entire facility must be emptied and that no pigs could go back into that facility for 3 years. I’ve heard stories of producers selling sows, but not participating in the buy-out as they wanted the ability to return to production sooner than 3 years. I think these stories are reasonable in light of the current weakening of the Canadian dollar and the dramatic decline in feed grain prices.

In the US, the rapid decline in feed grain prices in the past 4 weeks, along with the unexpected increase in market hog prices due to strong export markets has me suspicious that any large scale sell off of breeding stock has been curtailed. Many producers now sense a light at the end of the tunnel – so why sell sows which represent the pigs that would go to market next summer? Both feed grain and hog futures suggest that next summer will see a return to profitable pig prices.

One of the dark clouds on the horizon is a slowly strengthening US dollar. The year to date increase in pork exports is dramatic by any account and everyone I know suggests they are the reason live hogs are above $60/cwt in late August when we are slaughtering over 400,000 pigs per day. US pork products represent a good value to our foreign buyers, both because of our producer’s attention to quality production systems and the weak US dollar.

As the US dollar gains strength relative to the Canadian dollar, in some markets Canadian pork products will once again become competitive with US products. I don’t have anything against our fine neighbors to the north, but I don’t think we want to see our export markets shrink due to a rapidly rising dollar and experience many of the problems the Canadian industry has had in the past year due in part to their strong dollar.

Yes, we have much larger domestic market as a percent of our industry than Canada has, but exports have become our salvation when we consider that we are selling all of the product daily kills of over 400,000 head represents. As we go into the fall months when slaughter numbers historically increase we need every market channel we have to keep product moving. If something were to happen to our export markets, we have too much production to consume it all at current prices in the domestic market.

Long term, I think the North American industry (Canada plus US) needs to continue to lower the number of sows in the breeding herd to assure another string of profitable production years. I don’t know what the ‘right’ number of females is, but until we can demonstrate a significant increase in domestic usage, we currently don’t have the ‘right’ numbers for the long-term well being of our industry. The large export numbers we are currently seeing have been our salvation this summer – but should we continue to put our future success on something that is subject to government interventions and weak vs strong dollar signals? I am all for having a strong export trade, but with this trade comes a risk that many producers no longer can accept in light of record high feed grain prices.

This past week I spent several days working with a production system doing grower meetings. One of the topics of discussion was emergency plans for wean-finish facilities and insurance coverage of these facilities.

My presentation included a section on maintenance and documentation of emergency systems. In the past 2 years, I have unfortunately become involved in several cases of pig deaths due to ventilation failures. I can’t stress enough that everyone involved needs to have a thorough understanding of the coverage inclusions and exclusions. When there is a sudden death event and hundreds of pigs die, the monetary loss can be huge.

Whether your facilities have on-site stand-by generators, emergency drop curtains or other emergency devices, routine testing and documentation of the testing is a must. For sites with on-site generators, logging of the generator hours (assuming the generator has a weekly auto-start feature) is not sufficient as it only verifies that the generator has run. On a regular basis (week, bi-weekly, monthly) the system needs to be tested to ensure that the automatic transfer switch works properly and properly disconnects from the electric supply grid and transfers to the generator.

For facilities with automatic curtain drops, these need to be tested on a routine basis, but probably less frequent than generator transfer switches. In all cases, keep a written log which verifies the results of the test, the date of the test and the signature/initials of the person doing the test. In the event of a failure, this log becomes important evidence for an insurance claim that the emergency system was maintained and functional. This routine testing and log may also qualify the site for a reduced insurance rate since there is now a plan for maintenance of the emergency system which reduces the risk to the insurance underwriter of a claim.

Emergency notification systems also need to be tested. Be sure the emergency notification system includes a long distance or cell phone number. I’m aware of a loss where the pig owners claim the emergency notification device malfunctioned. However, there was no way to verify this claim as all of the phone numbers were local numbers. Having a cell phone and/or long distance number in the calling directory increases the chance that there will be a record of that number answering the call.

All of the above sound relatively simple, but it continues to amaze me at how many facilities I work with that have emergency curtain drops disconnected. Many of the owners of these sites respond that they live on-site or on the same electric supply line and will know when the electricity is interrupted due to an ice storm, wind or other cause of an outage. This only works if someone is at the home site 100% of the time. The investment in pigs and facilities is too large to put it at risk from something as simple as not being there when an outage occurs.

In another 6-8 weeks, many of the readers of this blog will be thinking about issues associated with the pumping of manure pits. In southern Minnesota, many custom applicators will begin applying manure for some clients in the next few weeks following sweet corn harvest. For many production facilities, fall harvest can come none too soon as their pits are approaching being full.

All of the land grant universities in states with swine production have faculty involved in research and extension activities dealing with the fertilizer value of swine manure. This is a hot topic as many cash grain farmers are now seeking linkages to swine production units (especially wean-finish or grow-finish barns) in order to access the manure.

One of the big issues in deciding on the manure application rate as a fertilizer resource is the concentration of N-P-K in the manure. Waste water, most often from leaking drinkers, is a major item affecting the final concentration of these nutrients in the manure.

This week in a meeting with 2 production groups, we got into a discussion of how much water do leaking drinkers really produce. This morning I decided to test how fast leaking drinkers contribute to manure volume. I set my kitchen faucet to drip at 15 drips per 10 seconds. This is a rate where you can easily count the drips. When I collected the drips, I had 20 ml of water in a syringe after 1 minute. This doesn’t sound like much water. However, over 24 hours this 20 ml/minute rate adds up to 7.6 gal.

Seven to eight gallons per day doesn’t sound like much until you consider that this fall many producers will be paying commercial manure applicators $0.01 to $0.0125 per gallon for the removal and land application of their manure. This means every leaking drinker dripping at the rate I set my kitchen faucet adds $0.08-0.10 to the manure application bill.

When I walk client’s facilities, it is not uncommon to identify several leaking drinkers, either cups or nipple drinkers. Even wet/dry and tube feeders leak and overflow. At the time, a small drip doesn’t seem like a big deal. However, at $0.10/day/drinker, it soon adds up to a major expense to a production unit. Those small drips can become big expenses.