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Hog producers ready to make last-resort moves to stay in business
Some pork producers are ready to scrape the bottom of the barrel to stay in the hog business.
Speakers at the Michigan Pork Expo gave tips for doing just that during a Feb. 4 session devoted to "Cutting production costs even further."
Because of the current hog-price crisis, the United States stands to lose some 30 percent of its swine operations, according to Ron Plain, University of Missouri Extension economist. Hog inventories will plummet unless a massive surge of capital comes in from packers, other agribusinesses or corn growers.
Plain said cheap corn just may prompt growers of the grain to invest in hogs because, "There's this real tendency to try to add value to corn by walking it off the farm."
Though Plain says there is a dim light at the end of the tunnel and predicts producers could see $60 hogs by the summer of 2000 or 2001, Michigan State University experts offer these last-resort tips for getting by in the meantime:
Pull replacement gilts from the finishing barn
Keeping back gilts normally bound for market to use as sows can save producers from shelling out cash for replacements, according to Ron Bates, MSU swine genetics specialist. However, he warns the strain it puts on a breeding program may not be worth it in the long run.
Bates ran the numbers through a typical hog farm scenario; results showed the practice reduces cash costs, but carries unfavorable long-term management and production ramifications. In his model, a farm that saved gilts for six months lost $71,092, while the same farm purchasing replacement gilts still lost money, but lost less at $52,784.
"We achieved what we set out to do - cut cash costs," Bates said. "It might be something you could do for a couple months and work your way back out of it."
Sell hogs the precisely right day
The right time to sell hogs according to Laura Martin, MSU livestock industry management economist, is when the cost of feeding them another day is the same as the value of selling them another day. Sounds simple, but it requires some basic pencil pushing.
Completing these calculations will show what day to sell hogs within a window - usually one week - that doesn't back up the farm to where it is farrowing less often. "We're talking about in this window, what day do I sell my hogs?" Martin said.
Martin recommends producers know their hogs' average daily gain at finishing-weight range and the cost of feed per pound. Figure out the daily feed intake for the hogs soon to be sold and know what hog prices will be over the next week. The key is to "keep feeding until you get equal bang for your buck," she said.
The formula:
(average daily gain x hog price) = (feed price x daily feed intake)
When both sides of the equation are equal, it's time to sell the hogs. Martin does warn, however, that producers should not let pigs take on extra backfat and that hog prices are subject to change over the week-long window.
Martin said making selling decisions based on these calculations could yield $50 to $274 per semi-load extra cash, depending on average daily gain.
Remove supplements from the ration
Pulling supplements from the ration could save some money without much performance difference, according to Dale Rozeboom, MSU swine nutrition and management specialist. Studies in Kansas, Canada and at Michigan State University have shown little difference in pig performance when trace minerals and vitamins were taken out of feed in the final finishing phase - for approximately four weeks.
The nutritional quality of the pork changes, but only slightly. Without the vitamins, lipids increase and thiamin is reduced.
While more research is needed, Rozeboom said no slaughter complications have been reported (e.g., weakened ribcages) when supplements were removed from feed. However, disease is a risk and the possibility of public awareness of the practice is of great concern. While sparing the supplements can save some cash for the short term, Rozeboom warns not to try it on replacement gilts.
Restructure debt
Converting short-term debt to long-term debt may pull some pork producers through the current farm economic crisis, said Gerry Schwab, MSU farm management economist. But he said the old adage, "There's no free lunch," is true here, too. Restructuring debt involves a tradeoff between more cash up front versus paying out more total interest.
Schwab offered an example of a $100,000 loan at 8 percent interest. Annual payments on the loan spread over five years would be approximately $25,000, making the total payment over the lifetime of the loan $125,000. Spreading the loan over 10 years reduces yearly payments to $15,000, but increases the total payment to $149,000. Likewise, a 15-year loan requires just $12,000 a year, but brings the grand total to $175,000 over the loan's lifetime.
Ron Bates summed up emergency measures that leave pork producers scraping the bottom of the barrel for cash: "Short-term cash flow strategies should always be evaluated for long-term ramifications."
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