Brumm Speaks Out

In the past 3-4 weeks I’ve given presentations to producers and their advisors at meetings in Indiana, Illinois, Missouri and Minnesota. At each of these sessions I’ve included a discussion of ventilation management strategies to reduce the likelihood of pig deaths associated with pit pumping activities. At each of these sessions, there were producers and advisors who have been involved in sudden pig deaths because of these activities.

As you gear up for the fall harvest season and the associated land application of stored manure, a reminder that some pre-planning may prevent both human and pig deaths associated with these activities.

In August of 2008, I was part of a webinar co-sponsored by the University of Minnesota and the Minnesota Pork Board. My topic was ventilation strategies for swine facilities during agitation and removal of stored manure. This webinar is archived and available for viewing at: http://www.extension.umn.edu/swine/porkcast/barnventilation.html .

Also available at this web address are fact sheets on recommended pumping guidelines, action plans and use of lock out tags for persons who might enter a facility during an agitation and/or pumping event. These lock out tags are designed to be hung from all entry points to prevent or at least reduce the likelihood of someone entering a facility during these activities.

These tags are available in both English and Spanish in any quantity for free from many state pork producer associations or from the National Pork Board at: http://www.porkstore.pork.org/producer/default.aspx?p=viewitem&item=NPB-02742&subno=&showpage=4&subcat=11 .

On Wednesday of this week I was a speaker at the Midwest Pork Conference in Indiana, sponsored by the Indiana Pork Producers. In spite of tough current economic conditions, attendance at the meeting was surprisingly good. I spoke with several vendors who were pleased with the attendance and the interest shown in their products and services.

All of the producers that I spoke with expressed the opinion that they would weather this period of no-profit and be around when profit returns. In other words, they weren’t going to be the ones selling sows and reducing production. What they were doing was tightening their belts even more and continuing to get even better at doing all of the little things right. Some were taking this opportunity to do depop/repops, with the repops being a gradual phase-in rather than using off-site breeding projects. During these repops, producers are utilizing their employees to do repairs and updates to their facilities.

Proof of this optimism is in this weeks weaned pig pricing. Every Friday, USDA issues their weekly feeder pig pricing report. This weeks report, based on 82,394 SEW pigs, quoted a weighted average price of $25.92 per pig delivered price. For the week ending August 21, the quoted weighted average price was $15.32. The spot market price for weaned pigs averaged $19.67 per pig, up from $10.43 per pig for the week ending August 14. Historically, weaned pig prices reach their low for the year in early September, and then climb to a high in December and January. Spot prices of almost $20 per pig, while not enough to cover all costs of production will cover almost all cash expenses for many producers. With the very strong likely hood that weaned pig prices will continue to climb this fall, the pressure to sell sows is very much reduced for SEW sellers. If they’ve made it this far, there appears to be a glimmer of light for their future chances.

 I have known many of these Indiana producers for a number of years and for many, pork production is tied to a land base that produces the feed grains fed to the pigs. As one producer in Iowa told me this summer – for years the pigs paid for my grain habit – now my grain habit is paying for my pig habit. I think this downturn is once again highlighting that producers who grow their own grain and capture all of the fertilizer credits from the manure from pigs fed this grain are in a much better long-term financial position. The challenge to these producers is to identify the right set of advisors so both their grain production and pork production enterprises operate at levels that are competitive long term.

Once again, the common question was – when will somebody else throw in the towel and sell sows? The sharp uptick in lean hog futures early in the week on rumors of a possible large Russian purchase of US pork and the continued prospect of a very large corn crop keeps delaying the towel toss for many. There appears to be just enough optimism in the futures market for both pork prices and feed grain prices that many are deciding that they can hang on for a little longer.

On another note, I saw my first combine in a bean field late on Wednesday. At least in the Mankato area of Minnesota, we are not expecting a bin busting year for both corn and soybeans because of drought. I pulled up the data from the National Weather Service for North Mankato. For the May thru September period, we have had a total of 10.6 inches of rainfall. This contrasts with 10.4 inches in 1988 and 10.9 inches in 1976. Unless it rains quite a bit in the final 10 days of the month, we are on track to have the second driest 5 month period on record since 1970. Many of us remember the drought of 1988 because the lack of rainfall was accompanied by many hot days that added to the stress on the growing crops. The cool weather this summer has been a blessing in our area as it allowed the limited moisture to be available for crop growth, rather than being evaporated rapidly on hot days.

There are days I’m really glad that I’m not the commodity risk manager for a production company. In addition to trying to outguess the weather impacts on prices, keeping track of the basis for feed grains and soybean meal can be a challenge.

Because of my location at Concord, Nebraska during my career at the University of Nebraska, I have followed the soybean meal bid from Cargill at Sioux City. I continue to keep my eye on this pricing while recognizing the basis for southern Minnesota and northern Iowa region that I now live in may vary somewhat due to localized conditions.

For those that have been pricing soybean meal, you know that meal for the second ½ of September currently is priced approximately $50/ton cheaper than for the first 10-15 days. October meal drops another $50/ton. Meal for the second ½ of October thru May is currently priced at $293-299.50 per ton at Cargill.

The interesting item in this pricing is that all of the pricing is based on a +$10 per ton basis. While I don’t have written records to display, my recollection is that the historic soybean meal basis at this plant was often -$7-12 per ton. I know that for purposes of pricing swine diets, etc, I often assumed trucking was about equal to the basis for much of northeast Nebraska. Thus, I could be reasonably safe in using the CME price as a good estimate of diet costs.

Currently, this swing is basis is worth about $1 for every pig marketed. Not a big number, but when you’re struggling to survive, every penny counts.

On another note, I have been hearing stories of country elevators being almost full with old crop corn, almost all of it unpriced yet. If the US crop comes it at 13 billion bushels, where will we put all of the grain? This suggests a very large basis is coming for the harvest season. Western Iowa points are currently bidding $2.75-2.85 for old crop corn with new crop priced about $0.05 less. Assuming we don’t have an early frost, will new crop corn get as low as $2.50 per bushel at local buying points? I sure appears that way to me.

I am a member of the Minnesota Pork Board’s research committee. This committee is charged with making the call for research proposals (RFP’s) and then deciding which proposals to fund using producer’s checkoff dollars.

Have you given thought to how your states producer group should spend its research dollars? Not an easy question when you delve into it.

At the top of the list, should the money be targeted towards production research (how to do more with less), market research (for example, defining how consumers will react to xyz) environmental work (what is the carbon footprint of the Minnesota pork industry), health (develop a vaccine for xyz disease that appears to be a future threat) or some other area? Should the money be targeted at production, environmental and social problems unique to the Minnesota industry or should we go after big picture issues that impact the US industry?

Should we target our money towards problems that the University of Minnesota has the capabilities to work with or do we open the door to problems that researchers from other institutions across the US may have the expertise to address?

What about pooling resources with another state (such as South Dakota or Wisconsin) to have a bigger pool of dollars to work with?

This leads to the next dilemma for a research committee – do you list specific areas of research that you will target for funding, or do you put out a general call for proposals and see what comes in? Targeted funding requests lets researchers know where the funding committee priorities lie. At the same time they tend to discourage innovative research that may be the solution to a future problem if the research can’t be shoe-horned into the targeted areas.

As you can see, what starts out as a very good idea (spend checkoff dollars on research), quickly grows into a very serious listing of priorities that need to be defined.

I have been the recipient of research monies from both the National Pork Board and the Nebraska Pork Producer Association during my career at the University of Nebraska. While the dollars involved were relatively small, they were important to me and allowed me to address production problems that I was running into as an extension specialist.

Producer funded research is increasingly important for production problems in agriculture, whether in pork production, livestock production in general or feed grain production. As federal and state funding to support production agriculture research continues to decline, every dollar that producers can input into the process has a better opportunity for a big return, since the research often won’t be done without these dollars.

At the same time, land grant university administrators are often discouraging faculty from pursing commodity group research dollars. Their reasoning is that these ‘small’ grants don’t return overhead dollars to pay for the support services that allow research to occur on college campuses. These support services include such items as library services, heating of laboratories, administration of animal care and use committees, etc. In the past, many of the costs of these support services were partially or fully funded by formula funds from the Department of Agriculture’s allocation to land grant universities. As these funds have dwindled in the past few years, university administrators are left to scramble for dollars to keep the doors open so to speak.

Producer groups on the other hand respond that the land grant universities have research capabilities that have already been paid for by the tax dollars of the citizens. Yes, it is right for producer checkoff dollars to pay the direct costs of a research project. However, there are so few checkoff dollars available relative to the total cost of research that having to pay overhead fees (often at a level approaching 50% of the total research grant) means only a very few projects can be funded.

What I hope the above discussion has done is to highlight the dilemma production agriculture is in when it comes to publicly funded research. As federal dollars for production agriculture research decline, where does the money come from for new discoveries and solutions to vexing production problems? If research is increasingly becoming private, what are the opportunities for small to mid-sized producers to access the technology that will keep them competitive? If research becomes private, where does the producer of the future see evidence that both supports or refutes product claims?

The role of everyone involved in production agriculture is to make our needs known. Can the US continue to be the leader in food production if we don’t continue to invest in research?

While the overall budget of the research committee of the Minnesota Pork Board is relatively small, the results from the dollars spent can have a big impact on the Minnesota industry. Our challenge – to make the right allocation decisions to get the biggest bang for the dollars we have to spend.