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Drought fuels feed cost jitters among pork giants

09/25/2012 @ 2:46pm

While most of the 2012 Pork Powerhouses grind their teeth over rising feed costs, the nation's largest pork producer -- Smithfield Foods -- is poised to take advantage of an earlier investment.

Nearly a decade ago, the company built a port facility in Wilmington, North Carolina. This year, Smithfield is using that facility to ship in millions of bushels of high-quality, low-cost grain from South America and elsewhere. In addition, the company has stepped up its presence and efforts in the local grain market, just as North Carolina and nearby states produced a record harvest.

“Between the strong local crop and the imports through our port facility, we have ample supplies of high-quality corn until our next wheat season,” says Joe Szaloky, vice president of business development, planning and procurement for Smithfield.

The company tops the exclusive Successful Farming/Agriculture.com ranking of the 25 largest U.S. pork producers with 862,000 sows (1.089 million worldwide). That’s a jump of 24,049 sows from 2011.

There are more than 3 million sows in production for the 25 largest firms in the U.S. this year, a gain of about 62,000 from 2011. With no widespread disease issues in the industry, most of the 3 million sows are more productive than a year ago, as well.

At Smithfield, says Szaloky, a three-year effort “to revamp, modernize and make our business more competitive” has made a $100 million improvement to the bottom line. Some old farms were rebuilt, others closed, and new barns constructed. In all, 43,000 sows were moved from outdated farms to modern farms.

 

“When you fix a sow farm it takes two years to see the benefits,” Szaloky says. “Once the herd stabilizes, it clicks.”

The company’s $140 million investment in 2010 has “strengthened herd health and performance,” Szaloky says. “Wean to finish losses were almost cut in half. Cull rates are down to 2%.”

Higher feed costs mean more pigs heading to market at light weights.

“Everyone is taking the weight off,” says Zack MCullen, vice president of swine production at Prestage Farms, Clinton, North Carolina. “We are going to continue to hold weights down – 260 pounds instead of 275 or 280.”

Prestage has been adding finishing space in the Midwest to feed pigs farrowed in Mississippi, but the sow number for the company, 165,000, has not changed in the past year.

Corn at $8 a bushel and lingering drought in the Midwest worry all the largest producers.

“The industry won’t see the kind of contraction we used to see,” says Stephen Summerlin, vice president of live operations for Seaboard Foods, Shawnee Mission, Kansas. “It’s not easy to get out of the pig business. It will be interesting to see what happens in the next year.”

Seaboard hasn’t increased sow numbers for a decade, but productivity gains by their herd has resulted in the company adding 270,000 finishing spaces in the last four years.

Wheat has become a greater part of diets for many farms, including Seaboard.

“We are constantly looking at alternative ingredients and how anything can price into our formulation,” says Summerlin. “If 2013 is not a good crop year, it’s hard to imagine what will happen to the industry. It will test people’s staying ability.”


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Lowest Price Common Denominator.....Family Farmers 12/03/2012 @ 9:48pm Vertical Integrators, Smithfield and others, should simply raise the price of live hogs to offset the higher input costs of corn and soybean meal. An effort by the NPPC and others to try to lower the price of corn for corn producers seems to be misguided. Trying to reduce prices for all farmers to the lowest common denominator is the wrong solution for all pork producers, even the vertical integrators that can charge whatever they want for their processed pork. Instead, why not raise prices received by all pork producers to compensate for the higher corn prices? Bringing pork producers to a profitable level along with corn farmers would have a minimal impact on the consumer while having a positive economic boost for all of agriculture. Most independent pork producers are also corn and soybean growers. They have known for years that cheap corn leads to cheap hogs. In other words, prices for grain farmers and livestock producers will be reduced to the lowest common denominator. This is no longer acceptable and should not be condoned. Family farmers deserve better.

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Re: Re: Lowest Price Common Denominator.....Family Far 04/22/2013 @ 12:04pm This comment makes no sense. Pork producers are price takers, even the big integrators are ultimately price takers because ultimately there are only a handful of packer "customers". Hog producers, even the big ones can't just raise their prices at will. And by the way, its not the pork produers responsibility to ensure high crop prices for you grain farmers. The market will decide that. Corn ethanol has been a disaster for livestock producers and I think they have every right to criticize the grain lobby for using government policy to create an unfair playing field. Personally, I think the RFS should be revoked and we should outlaw the production of fuel from food. That would go a long way toward restoring health to the greater livestock industry.

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