Brumm Speaks Out

This week’s blog won’t be limited to a single theme – instead I want to visit about a variety of topics that I’ve come across in producer contacts this past week.

Let’s begin with the topic of added fat in swine diets. Last summer, many of you dropped fat from your diets when the price of fat went beyond $0.50/lb. This past fall, it became economical to add fat as an energy source again. Now I’m hearing quite an array of prices being paid for fat, either a blended product or choice white grease. It appears that the decision on fat addition is once again variable.

I mention this because summer will upon us fairly soon. Many of the readers of this blog increase their use of fat in swine diets in summer since it helps maintain daily gain in summer heat. As you consider what to do this summer with your grow-fin diets, pay close attention to the cost of this dietary ingredient. Currently it appears to be extremely volatile and making the decision on its use is not a clear cut as it may have been previous years.

Second on my list is feeder adjustment. We’ve come a long ways in terms of consistent feeder adjustment, but I still get into a lot of barns where closer attention to this detail will return big dividends. To improve the chances of consistent feeder adjustment, I suggest that you walk the barn with the pig owner, the production supervisor, your employee, etc. When the person responsible for the daily adjustment and the person owning the pigs agree on a feeder adjustment, take a picture of this feeder. Post this picture in the hog barn. Now there should be no disagreement on feeders since everyone involved has reached an agreement on what is correct.

Recently released Kansas State University data supports earlier data from the Prairie Swine Centre in Canada regarding appropriate grow-fin feeder adjustments. Both suggest that feeder adjustments are correct when approximately 40-50% of the feeder pan is covered with feed. If there is more feed than this in the pan, wastage increases and feed tends to build up and become stale in the feeder corners. Less than this and feed intake may be restricted enough to reduce daily gain. You can access the pictures of Kansas State University recommendations at: http://www.asi.k-state.edu/DesktopDefault.aspx?tabid=1223

Everyone is asking – when will prices get better? I keep reminding those that ask for my opinion that if I knew the answer, I would be invested in the futures in Chicago – and I’m not. Every indication that I’m hearing is that the numbers of pigs going to slaughter will slow significantly in the coming weeks. What impact this will have on prices depends not only on the numbers coming to market (supply), but on the ability to export product and to convince the American consumer to buy the product (demand). COOL will be fully implemented next week which will also impact markets as packers adjust fully to the new labeling requirements.

COOL and low prices is already impacting pork production in southern Minnesota and northwest Iowa. There are a lot of reports of barns coming open due to the decline in the number of Canadian feeder pigs coming South.

If we assume that 2/3 of the Canadian pigs are weaned pigs and 1/3 are feeder pigs, the average finishing ‘space’ that people think of is occupied 21-22 weeks. Right now, the US is averaging about 50,000 fewer Canadian feeder pigs per week than last year at this time. This translates into just over 1 million fewer pigs in the US finishing inventory (pig spaces).

As I’ve written earlier, to shift slaughter 200,000 head per week, we need to have over 4 million open spaces. I don’t think we’re there yet. We had 60.6 million pigs in the kept for market category in the December 1, 2008 USDA Hogs and Pigs report. Somewhere around 45 million of these pigs were housed in finishing ‘spaces’. This suggests that we need to have 10% of our finishing capacity standing idle to impact slaughter 200,000 head per week. I don’t think we’re there yet, suggesting it will be a while before we have a dramatic increase in profitability.

In the past 2 weeks I’ve been to 2 professional meetings. After attending the American Society of Animal Science Midwest Section meetings in Des Moines and the American Association of Swine Veterinarians meetings in Dallas, Texas, I’m full of enthusiasm for the many new products and applications that will become available in the future.

At both meetings there were several presentations on the use of circovirus vaccines. Everyone is in agreement that the widespread adoption of vaccine circovirus vaccine usage has greatly improved pig performance and reduced death loss in finishers. While the vaccine is relatively expensive ($1.50-1.75/pig is a common cost estimate), most producers still view use as a very worthwhile investment.

However, there are increasing reports of negative pig responses to the vaccine immediately post injection. Researchers from Kansas State University reported on trials where use of a 2 dose protocol resulted in a decline in daily gain and daily feed intake immediately after administration of the second dose. This decline resulted in an approximately 1 pound lighter pig at the end of the nursery phase of production. Likewise, administration of the vaccine at weaning resulted in a delay in pigs eating feed, etc.

There is considerable interest in use of products that offset or at least reduce this negative impact. In the coming months you will be hearing several companies talk about water and feed additives that reduce the 1 pound lag noted by K State researchers. While not all of the data is in yet, it does look like there may be some merit in the idea of setting up the pig’s response to the vaccine.

I’m not a virologist and don’t fully understand all the implications of vaccine use and the pigs antibody and other defense mechanisms response to the vaccine. However, as scientists gain a better understanding of these mechanisms, we can expect to see vaccines targeted at specific components of the response mechanism, as well as products that enhance the response of this component that are given via feed and water.

As always, when you are presented with these products, be sure and ask for data to support the claim. When evaluating the data, consider the conditions of the trial, the replication of the treatments, and the variation in the response.

Well conducted and replicated trials, with appropriate statistical analysis are worth quite a bit when making product decisions, especially if the only alternative is ‘We did one barn with xyz and the other barn with abc and xyz was better’. A healthy dose of skepticism should be used in these situations.

Many of you have noted that I didn’t write a blog last week. I was attending the annual meeting of the American Association of Swine Veterinarians in Dallas, Texas and conducting a ventilation workshop. Probably the most common topic of conversation at the meeting was – when will prices improve?

I received a phone call from a client this morning asking the same question. Here are my current thoughts on this topic.

Who is selling sows? Not enough people is the short answer.

Many of the small (small is anything under 1000 sows today) producers who would normally be looked to as most likely to reduce female inventory are in fact in the drivers seat in this downturn. Most of them grow all or at least a majority of their corn so their input costs last year were at cost of production for corn, not $6-8/bu if you bought it last summer like Smithfield did. This past fall, their hog manure on their ground had a value as high at $20/pig space in fertilizer replacement value. Put this together and the ones I talk with say last year wasn’t a bad year in farming. These producers have joked that in a normal year, pigs paid for their cropping habit. This past year, crops paid for their pig habit. The net effect is that this group isn’t likely to quit unless quitting is their exit plan from the industry as they approach retirement age.

Producers with large sow units don’t want to close the doors. If they close a sow unit, most likely there is debt associated with the unit, so the lender will pressure owners to sell empty units to service that debt. However, empty sow units don’t sell very well. People who are looking to buy sow units want them to be in production as cash flow from the unit begins on the day of sale if the sale includes animal inventory. Empty sow units are not an attractive property to potential buyers. Thus, even those with plans to get rid of a sow unit have an economic incentive to keep the units in production pending sale of the unit. The net effect – pigs continue to be produced from the unit in spite of very bad economics.

Many US producers are waiting for Canadians to sell sows. However, the direct cash payment in Saskatchewan last week for all hogs sold to slaughter and all weaned pig sales has made all Canadian producers pause. While the payment was by the provincial government of Saskatchewan, producers in other provinces can’t help but speculate about their odds for government support.

We are hearing reports of empty pig spaces. However, as I wrote on this site a few weeks ago, we are no where near the 4 million+ empty spaces we need to alter slaughter 200,000 per week. Also, other than sites with PRRS problems, everyone is reporting very good to outstanding pig performance this winter in the upper Midwest. Mark Greenwood from AgStar Financial Services here in Mankato has worked the numbers to demonstrate that many of the empty spaces in the industry are associated with improved performance (less days to market) so this makes the 4 million spaces due to less pig numbers even more distant.

On the other hand, Canadian market pig exports to US slaughter plants has really dropped. Last year at this time we were importing 50-60,000 slaughter barrows and gilts per week from Canada. This year we are importing only 8-10,000. This is 50,000 less slaughter barrows and gilts per week going into US plants. What the impact of MCOOL will be in the next few months remains to be seen.

In the past 6 weeks, I have been a speaker at pork producer trade shows in Minnesota, Iowa, Virginia, Ohio and Nebraska. At all of these shows, a common thread of discussion was prices, both for feed grains as input costs and for pigs at packing plants.

Everyone remains concerned about who will remain as we continue with this extended run of no or very limited profit months. An obvious question is – who is going to quit first? While there have been a few producers who have sold their breeding herd, it appears that the majority of US producers are still waiting for their Canadian counterparts to sell more females.

The combined North American breeding herd (December 1, 2008 USDA Hogs and Pigs report and the January 1, 2009 Canadian Inventory Estimate) stands at 7.486 million pigs. This is 96.5% of the inventory one year ago. While the reduction in the breeding herd is good news to those who remain in the business, I’m convinced we have a long way to go.

As I’ve written in previous weeks, we need to have over 4 million empty finishing spaces in the US to reduce our slaughter numbers 200,000 head per week. While reports of empty spaces are increasing, I don’t think we’re anywhere near this number.

In addition to the lack of sell-off of the breeding herd, we are also having one the best years ever for pig performance. As I surveyed the audiences in my presentations at trade shows, it was not uncommon to have producers relate death rates in nurseries of less than 1.5% and under 2% in grow-finish. In addition, they all talk about relatively fabulous rates of gain this winter. This suggests some of the empty facilities are due to better than expected pig performance, not fewer pigs.

How many females do we need to remove from the North American inventory to result in a major increase in price due to fewer pigs coming to slaughter? I don’t have a degree in economics, but my back of the envelope pen scratching suggests we need to get down to 6.5-6.8 million pigs in the breeding herd as a minimum. There are some that have suggested a long term number closer to 6.0 million is where this shakeout will ultimately end up.

Of course, government policies will have a major impact on this. In the US, will Congress heed the call of the ethanol industry for bail-out funds, while ignoring the plight of the livestock industry?

In Canada, will the Federal government approve a bailout plan for livestock? This past week, the Saskatchewan government approved a bail-out plan for their livestock industry. Checks will be provided to hog producers for animals they sold between July 1, 2008 and Jan. 31, 2009. The payments will be $20 (CA) per animal for market hogs and $10 (CA) for weanlings. Producers will get $40 (CA) per head for all breeding cows and bred heifers on a farm as of Jan. 1, 2009.

While not enough money to cover all of the losses these producers incurred the past 6 months, this infusion of cash will slow the exodus of Saskatchewan producers from the industry.