Brumm Speaks Out

Yesterday the USDA and Statistics Canada released their combined quarterly estimates of the Canadian and US Hogs and Pigs inventory. The US numbers came from the June 1 estimate while the Canadian numbers are their July 1 estimate.

The combined breeding herd was estimated to be down 3.0% from last summer’s inventory at 7.347 million head. While this 3% reduction versus 1 year ago sounds like we’re headed in the right direction in terms of reducing our over production of pigs, inventory doesn’t tell the whole story.

Included in the report are the pig crop estimates and the number of sows farrowing in each quarter. Productivity in the breeding herd continues to rapidly improve. For the first quarter of 2004, the combined herd had a pig crop that averaged 9.01 pigs per sow that farrowed. 48.8% of the kept for breeding inventory farrowed in that quarter which works out to 1.95 farrowings per female per year.

Contrast that number with the numbers in the just released report. For the spring quarter just ended, producers farrowed 50.5% of the breeding herd which works out to 2.02 farrowing per female per year. This contrasts with a 49.3% farrowing rate for the second quarter of 2004 which works out to 1.97 farrowings per female per year.

In addition, the pig crop was a whopping 9.66 pigs per sow that farrowed. Since the first quarter of 2004, the pig crop per sow farrowed has increased at the rate of 0.028 pigs per quarter or 0.11 pigs per sow farrowed per year.

These increases in productivity are huge, especially in light of a summer that saw sale weights at record levels.

When we combine the rapid increase in feed grain prices from the past 2 years with the increases in productivity and the increases in sale weight, it is no wonder that we have a glut of pork coming to town. Part of the problem is that the rules the industry used to make production decisions have changed. No longer do we hear discussion of a hog-corn ratio as the deciding factor for whether the industry contracts or expands. Rather, we worry about the price of a barrel of oil as a predictor of feed price.

No mention is made of the decrease in seasonal variation in production that was a very strong source of seasonal variation in prices received. In the data series from the combined USDA and Statistics Canada report from yesterday, the productivity of the sow herd didn’t increase from the third to the fourth quarter for the past 5 years like it did for the first two quarters of every year. On the other hand, it did not regress, as it typically would have done 10 years ago. Producers in both countries have become very good at capturing the production potential of the breeding herd in all seasons of the year.

With this improved capturing of potential comes the increase in production. This implies that the decrease in the breeding herd necessary to return profitability to the US and Canadian production sectors will have to be even larger than many thought.

There are reports of increased numbers of sows being offered to packers, and of some small to mid sized operations making plans or in the process of ending their farrowing activities. However, if Mark Greenwood of AgStar Financial Services is right in his estimate of a need to reduce the US and Canadian breeding herd by 500,000 head, we’ve got a long way to go.

We are all aware of the negative impact on our industry from the use of the term Swine Flu during last springs world wide outbreak and spread. Just last week, Korea re-opened its borders to our products and live animals, and we are still awaiting full border openings from China and Russia, following their bans.

While all scientific evidence supports the US position that the virus cannot be isolated in pork products (it is a respiratory disease), many countries have used this perceived health risk as reason to implement trade barriers in pursuit of other political agendas. Unfortunately, we are the industry that is getting caught in the cross-fire.

At the George Young Swine Health Conference held in South Sioux City, NE last week, Dr Rodger Main, Director of Operations for the Iowa State University Veterinary Diagnostic Laboratory, gave a status report on the implications of the outbreak on US production systems. One of the problems with the outbreak is that the H1N1 virus is a reportable disease in humans, but not in livestock. This means that if a patient is confirmed as having the H1N1 virus, the treating doctor must report the case to health authorities, which ultimately means reporting to the CDC (Center for Disease Control).

In this case, if the patient with the virus is indentified with a swine production unit, the state veterinarian will be contacted to perform a diagnostic evaluation at farm sites. The current USDA-APHIS policy is that pigs at these sites will be allowed to move to slaughter, even if they test positive for the virus, once they have fully recovered from the viral infection. Limited movements of pigs between sites will also be allowed meaning farrowing sites will be allowed to continue to wean pigs, etc. under regulatory guidance. USDA’s guidelines for state veterinarians are focused on viral containment.

However, on the pig side, reporting of the disease is voluntary. That is, if a sample is submitted to the Iowa State Diagnostic Laboratory, the submitting veterinarian/producer must check a box on the input form allowing the Diagnostic Laboratory to submit information about the case to CDC. At the meeting, none of the veterinarians in attendance were checking the box because none of them wanted to be associated with sample submission for the first US swine herd confirmed positive. It appears that while pigs can contract the H1N1 virus, it’s impact on pig health isn’t any worse than the many other flu strains that we’ve been faced with over the years.

All of this suggests a somewhat muddy picture of what will happen in the US this fall if the H1N1 virus spreads according to the predictions of public health agencies. While the regulatory process for producers is somewhat clear, what is unknown is whether packing plants will accept pigs from sites confirmed with the virus.

That was the problem with the herd in Alberta which had the first confirmed outbreak in swine. The public pressure on packers (make that the public fear and ignorance) was such that no packer wanted to risk their brand name being associated with this virus, even when every health agency stated that there is no risk of contracting the virus from pork products.

The same may be true in the US. An increasing amount of pork product in the meat case is now branded, meaning a packer has put their name on the product. Suppose Hormel, or Seaboard or other packer is identified as the purchaser of pigs that have been confirmed with the virus, even though the pigs have recovered and are cleared by USDA-APHIS for slaughter. What is the risk that shoppers in New York, or Arizona or Florida will stop buying all of their branded products because of the hysteria in the popular press, or because of Facebook or Twitter social networking inaccuracies? This is a very real risk to packers and because of this social pressure makes the consequences to the industry uncertain at best.

While we all hope that the virus doesn’t enter the US swine herd, if the virus spreads rapidly this fall into the US population, there is a good chance that someone who has the virus will show up for work in a finishing facility and infect the pigs. It has already happened in Canada, Australia and Argentina. Behind the scenes, our veterinarian community has been working very hard with regulatory agencies to minimize the impact on the swine industry, and the scientific information available supports their efforts. However, like welfare, the social networking of consumers and the impact of consumer decisions on packers will be the ultimate decider of our fate.

Last week I had the opportunity to tour RiverView Dairy at Morris, Minnesota. I was part of group of ag engineers who were interested in viewing the application of evaporative pads and tunnel ventilation to a 5000 cow dairy barn.

While the ventilation system and the challenges something this large presents were interesting, the big take home message for me was the comment that the director of human resources for the Dairy made while guiding us around the site – What are you doing for your social license? The owners of this dairy feel that they must not only meet and exceed every permit requirement imposed by federal, state and local government agencies, but also must work at making the community feel good about having them in the community. They refer to this as their ‘social license’ or their public perception in a community.

Have you as a participant in the pork industry thought about your efforts in support of your social license? I know that I have thought somewhat about how the public has perceived the research sites I’ve been involved in during my career. I also know that many of you work hard and take pride in how your facilities look.

The challenge for the livestock industry is to get everyone involved in production to think in terms of their social license. As we know, the outside challenges to our production methods continue to increase, be it a challenge to how we store and land apply manure, challenges to our housing systems on the basis of perceived animal rights and welfare criteria, or challenges to our business models of limited liability partnerships and corporations. All of these challenges suggest that as an industry, we have been less than effective in communicating with our communities as our industry has evolved.

Communication with our surrounding community members is a key component of the ‘social license’ that we most often have failed to consider as we do our daily production routines. As production agriculture continues to evolve, and fewer community members have first hand knowledge of our production methods and decisions, the idea of managing with regard to your ‘social license’ will increase in importance.

As part of my consulting business, I am in a large number of swine facilities every year. When added to my years of experiences while an Extension Swine Specialist at the University of Nebraska, I like to think I’ve seen a variety of ‘front-doors’ when I’ve gone to visit production sites.

However, this week I had a first – a continuous flow wean-finish site with laminate hardwood floors in the office area. Along with the flooring was oak trim around the windows and door frames and finished and painted sheetrock wall coverings. The facility was 2 years old, but it could have been the first turn of pigs thru it based on how it looked.

On the return flight home, I got to thinking about all of the front-doors I enter thru every year. In most cases, the front door has been a good indicator of the state of repair for the facility when I finally entered the pig space.

Like it or not, our industry is judged in many cases by the front-door appearance of our production sites. While we don’t necessarily need hardwood floors and oak trim in our facility entry areas, I think we do need as an industry to strive harder to be sure we have a front-door at each of our production sites that demonstrates the pride that goes into a successful production unit. This pride is not only in maintenance of the production facility, but pride in the daily care of the animals under our supervision.

Yes, we can all think of someone in our neighborhood or region who could use some motivation in demonstration of their pride in production, but my message today is the fact that what you have for your front-door sends a tremendous message to both supporters of our industry, and to our critics. Have you done your part to be sure your front-door contributes to a positive image for the prok production industry that you are a part of?