Brumm Speaks Out

As I write this week’s comments, I am still basking in the glow of a Thanksgiving Day spent with family. Yesterday morning I began the holiday by attending church services. When I was on the faculty at the University of Nebraska, I started many Thanksgiving holidays by doing daily chores at the research farm so that the employees at the swine unit could have the day with their families and friends.

Many of the readers of this blog spent part or even all of yesterday doing the many routine and necessary tasks associated with daily care of livestock. As we think about how society now views animal agriculture, one aspect they often forget is that animal agriculture still relies on daily observation and care activities. In thriving rural communities in the midwest, animal agriculture is an important component of the overall economic activity and well being of the community and its citizens.

While many have complained about ‘factory farms’ in reference to the changing ownership structure of animal agriculture in the US, and around the world, it still takes people with significant dedication to do the daily tasks that are part of our responsibility to the animals under our care. Whether ‘factory farms’ or organic farms or alternative production system sites, people remain the key input into the production systems. While many attempts have been made to replace people with technology, at least in pork production this has been met with limited success.

In the early 1980’s, feeder pig coops were very popular in Nebraska. These coops were owned by a group of producers who invested in joint ownership of sows and nursery facilities with the goal of having a reliable and steady supply of feeder pigs for their individual production facilities. The general rule of thumb for labor at these sites was 1 person for every 200 females in inventory.

Fast forward to today’s ‘factory farm’ sow production units. We no longer have nurseries on site for weaned pigs. Instead, pigs are transported to production sites for growth to slaughter at weaning. Instead of 200 females per employee, the general rule of thumb is 300 females. Keep in mind that the biggest difference is that labor is no longer necessary at the farrowing site for the nursery phase of production.

This suggests that over the last 25-30 years, while we have made large advances in genetics, housing systems, nutrition, etc., it still takes approximately the same amount of labor per female to produce a weaned pig. This labor now may be associated with more total employees at a production site as the size of farrowing units has grown from 5-600 sows per site to 3-5000 females. The economic impact remains – people who are involved in animal agriculture live in rural communities. They spend money in these communities, send their children to the community schools, volunteer for community organizations, etc.

Animal agriculture remains a key component of economic activity and community economic well being in the Midwest. I am thankful this year for the small role I play in this industry.

I spent part of today working on a presentation I will be doing next month in Indianapolis. The topic is ‘The Next Generation of Production Systems’. As I worked on this topic, I thought about how the world of pork production has changed. Our parents witnessed a large change in pork production systems, and the associated rewards and risks that are associated with this enterprise. In the past 6 months, with the collapse of many in the financial markets, and the associated impacts on the world markets, the rate of change makes our parents look like someone walking behind a mule versus our plowing with 10 bottom plows.

I think the best illustration of this is feed grain and fuel pricing. Everyone has always talked about risk management in agriculture, but for many producers, cash has been king. This meant that producers with a strong equity position didn’t worry about pricing decisions as much as those who were operating with large amounts of borrowed capital.

In late July and early August, I was hearing tales of grain farmers pre-paying for next years anhydrous nitrogen needs at up to $1050 per ton, which is $0.61 per pound of nitrogen. I’ve heard recent reports of local prices dropping to $750 this fall ($0.436/lb N). Now there is discussion of spot shortages next spring and early summer as farmers aren’t booking and pre-paying for any more fertilizers as the world price for oil and phosphorus continue to decline.

Feed grains another example. Corn was over $8 per bushel this summer and now local bids are very close to $3.20/bu. Soybean meal has dropped from over $400 per ton to producers reporting they have booked meal for the next 9-12 moths at prices under $250/ton delivered.

All of this suggests that the risks involved in financing a production agricultural system today are huge whether that system is feed grain production or animal agriculture. It appears to me that those that will survive and prosper are those that become very aggressive in risk management and the associated decision process. While cash may have been king for many years, the gyrations in input costs these past 6 months have eroded the equity position of many who made the wrong risk decision.

As I worked on my presentation, one of the points I intend to make to the producer group is that to prosper in these times of rapid price gyrations, the successful producer will rely on an advisor team. Notice that I stressed team, and not advisors as individuals. In my experience, there is much to be gained in strategic planning by producers of all sizes and types of agricultural enterprises when all of the individuals a producer relies on for advice are involved in the discussion and decision process. It is very frustrating to have to offer advice to a client when you don’t know the whole story behind the decision process. It is quite possible that my advice will differ if I have access to all of the facts, rather than my observations based on conditions the day of my visit.

I also think members of this advisory team should be selected in part for their access to others with advice and experiences that will make the decision process better. In other words, look for advisory team members who aren’t afraid to turn to others to make their input into the decision process even better.

This week I have had calls and conversations with producers from several locations in the Midwest regarding pits foaming thru the slats. While I’ve had an occasional call or conversation with a producer regarding the phenomenon in past years, the large number in one week is causing me to think about possible causes and solutions.

The callers have had 2 basic questions – what is causing the pits to foam and what do I do about the foam?

Let’s think about what is happening in manure pits. They are full of actively growing microorganisms that are giving off by-products of their metabolism as they feast on the ready source of nutrients available in the manure. Because the pits lack oxygen, the by-products of this metabolism are not always ‘user-friendly’, a polite way of stating that the by-products often have an offensive smell to many people.

If there was sufficient oxygen present in the pit, the by-products would be such things as carbon dioxide (CO₂), nitrates (NO₂) and sulfur dioxide (SO₂). Because of the lack of oxygen as the final electron acceptor in the metabolic process, we end up with by-products such as methane (CH₄), ammonia (NH₃) and hydrogen sulfide (H₂S). While ammonia is water soluble as ammonium (NH₄⁺) if the pH is lower than 7.0, the other 2 products are gases that are emitted from the pit.

In a typical pit, when these gases erupt from the pit surface, they often form tiny bubbles that readily burst. However, in the pits that are foaming, something is causing the surface tension of the water surface to change. This means the thin layer of surface water atoms that forms the bubbles now has sufficient electrical and chemical bonding ability to cling together.

The increase in foaming in late fall is most likely a function of increased biological activity in the pit due to warmer conditions. The pits have had all summer to accumulate heat, and while there may have been some foaming occurring all summer, with the pit nearly full prior to fall pumping, foam is now coming up thru the slats into the pig zone. If we think about it, the pits are probably at their biological activity peak in late September and early October. I suspect that the foaming problems will decrease as the pits cool with the return of cold weather to the Midwest.

The immediate solution to the problem is to add a surfactant to the surface of the pit.  An option would be the use of crop oils such as the ones routinely added to herbicide sprays. These disrupt the bonding and don’t allow the formation of the bubbles that make up the foam.

As to the cause of the increased foaming, are the pits more biologically active resulting in a greater release of gases from the pit, or is the surface tension of the pits different today? I don’t know the answer to this, but I think the answer may be related to our changing dietary ingredients.

In conversations with nutritionists in the past few days, everyone cites the increased use of distillers grains (DDGS) and the recent wide-spread use of phytase. Is their increased usage related to the foaming problem or is the foaming due to another variable that we haven’t accounted for? For example, I don’t know how crusting of the pit surface is affecting foaming – is foaming worse in pits that have a minimal crusting on the surface?

Last week Statistics Canada released its estimates of the October 1 Canadian pig inventory. At the same time, USDA and Statistics Canada released a joint report estimating the combined inventories using the September 1, 2008 USDA estimates for US inventories.

The combined Canadian and US breeding herd is now estimated at 7.663 million head, 97% of the estimate 1 year ago. This is the first time the breeding herd has declined for 2 quarters versus the year previous since the summer and fall estimates from 2003.

The kept for market category is estimated to be 72.556 million pigs, 100% of 1 year ago. This is the first quarterly report that did not show an increase over 1 year ago since the fall of 2005.

The estimates for both the breeding herd and the kept for market inventory suggest that we will continue to have a plentiful supply of pigs in coming months. While the Canadian breeding herd is down just over 6% from 1 year ago, the US inventory on September 1 was down only 1.6%. In the past months, I have been at sites or seen pictures of on-going construction for over 13,000 new sow spaces in the US. All of this suggests that the majority of the reduction in North American inventory will continue to occur in Canada.

The obvious question – will Canadian’s sell off sows fast enough and deep enough to make a difference in our market numbers? In part, the answer will depend on how COOL is implemented in the coming months. In the western cornbelt, we continue to import large numbers of Canadian born feeder pigs. Except for the week of July 4, 2008, we have imported over 100,000 Canadian weaned and feeder pigs every week since January 1, 2007. Over this almost 2 year period we have averaged over 128,000 imported pigs per week into US production facilities.

If the number of Canadian pigs into US facilities declines, I would expect the demand for US born pigs to replace these pigs will increase. Fixed costs for wean-finish facilities are large, and the demand for the manure from a production facility now adds almost $20 per pig space to the value of the facility. This suggests that US producers are not facing the same economic decision as their Canadian counterparts. It appears to me that US producers will continue to be slow on selling off the breeding herd in response to low prices, with the Canadians continuing to loose inventory more rapidly.