At the close of 2015, the hog business found itself at a familiar intersection of a lower market cycle and relatively cheap grain costs fueling an incentive to accelerate pigs’ market weights.
This time, however, the production road is paved with a higher level of sow productivity industry wide, which will bring lots of pigs and pounds of pork to market over the next 18 months. From a marketing perspective, 2016 could be an ugly year, warns Jim Lowe, D.V.M., Integrated Food Animal Medicine Systems at the College of Veterinary Medicine, University of Illinois. This year, more than ever, it will be crucial to construct a roadmap that guides efficiency to minimize costs and boost profits.
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When all’s said and done, pig farming is about selling meat. “We do not sell sows. We do not sell weaned pigs. We do not sell feeder pigs. We sell 212-pound carcasses,” said Lowe, speaking at the Midwest Pork Conference. “Do not forget everything before that carcass is just a cost center.”
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He stressed the only things that matter are how many pigs hang on the rail and what they weigh. In a low-cost environment, it is important to get the optimal number of pigs to the market at the right weight. Lowe added this year it will be essential for more than one-third of the farm’s market hogs to hit the high-end of the packer matrix. Measuring fixed expenses, a 250-pound hog in comparison to a 300-pound hog will cost 20% more to produce at the same price.
Looking back, past rough roads have taught hog producers that improving efficiencies will always be under construction, but one important place to start is with the sow.
“A sow farm is a cost center. It accrues costs. It does not create value or profit in the global chain,” Lowe said. At the end of the day, a sow farm needs to minimize costs by producing the specified number of pigs per unit of time of the specified quality at the least cost. In order to create an efficient sow farm, decisions must be made in that sequence.