John Lawrence Iowa State University

Publish Date: April 4, 2012

The structure of the pork industry changed dramatically during the 1990s and promises to continue to change in the years ahead. By structural change, we refer to the number and size of operations, who owns them, and how they relate to other firms in the pork chain. Change provides both challenges and opportunities to those individuals who make their living from the industry. Trying to cope with rapid change can quickly become a test of survival. Most of the data for this fact sheet come from USDA publications and industry surveys conducted by the University of Missouri and Iowa State University.

Publish Date: June 3, 2006

There is increasing interest in hog contracting, due in part to the difficulty for many producers to obtain adequate financing. Contracting also is being used to coordinate pork production from genetics and nutrition to the retail meat counter. Currently, a small but growing percentage of hogs are produced, fed, or marketed under contract. It is estimated that about 14-16% are under production contracts, and a smaller percentage under marketing contracts.

Publish Date: June 3, 2006

A pork producer who is not familiar with futures markets and hedging may have many questions regarding how to use this pricing tool. But the most basic question is: why be interested in learning about futures markets? In other words, why do producers hedge? To answer this question, it is first necessary to define futures markets and hedging. A hog futures market establishes prices for hogs that will not be delivered until some time in the future. A producer who uses the futures market to forward-price hogs before delivery is hedging. There are two basic reasons to forward-price hogs. First, the producer may feel that current futures market prices are higher than cash prices will be when the hogs are ready for delivery. Second, a producer may be unable, or unwilling, to accept the risks of prices lower than the current futures price, even though cash prices may be higher at delivery time.

Publish Date: August 23, 2006

Hog prices historically have shown variation from month to month with a tendency for the changes to follow a degree of seasonal regularity from year to year. Because the changes during the year are repetitive or consistent, they are a useful input into production, marketing, or pricing decisions. Seasonal price changes result from changes in the supply of hogs and pork, changes in consumer demand for pork products, or a combination of these factors. Seasonal variations in pork supply are less pronounced now than they were 15 to 20 years ago. With more of the production coming from larger operations, sow farrowings are more evenly distributed throughout the year; however, there is still enough month-tomonth variation in farrowings to bring significant seasonal changes in levels of pork production. Consumer demand for pork and for particular retail cuts and products also varies somewhat from one period of the year to another.

Publish Date: June 3, 2006

Most pork producers are familiar with insurance. Producers insure buildings against fire, equipment against accidents, and their lives against death or injury. Insurance buyers trade a small but certain loss by paying an insurance premium to guard against the possibility of a large but uncertain loss. In pork production, one of the greatest risks faced is that of unfavorable price change. Market hog prices have been so uncertain that many times prices expected to be profitable when decisions were made regarding facility investment, breeding or feeder pig purchases ended up unprofitable instead. Additional risk also may be incurred on the feeding side as feed price increases and may wipe away anticipated profits. Because of these risks, producers might want to insure against unfavorable hog or feed price moves while retaining their ability to profit from favorable price changes. Producers have this opportunity by using the commodity options market.

Publish Date: September 24, 2007

Swine manure contains components that improve soils and facilitate crop productivity. Oftentimes manure is applied in a manner to minimize the cost of application. A rational decision maker focuses on maximizing the net value of manure rather than minimizing the cost. The net value is the value of manure as a fertilizer minus the cost of application. By managing swine manure to maximize its value while holding down its cost, producer income can be increased. Understanding what increases value is critical for marketing manure and maximizing net income.

Publish Date: September 24, 2007

Producers, researchers, vendors, regulators, and policy-makers are evaluating alternative manure management systems. Motivations include reduction of the level and risk of emissions of potential pollutants to the environment (nutrients, odor, particulates and precursors, gases, and pathogens) as well as the capture of potentially valuable constituents of manure (nutrients, energy, and water). Understanding the economic implications of alternative manure management systems is required in addition to understanding physical performance and on-farm practicality of the systems. This fact sheet reports methods, findings, and examples of economic evaluation of alternative manure management systems based on work completed under the agreements between the Attorney General of North Carolina and Smithfield Foods, Premium Standard Farms, and Front Line Farmers. Even though this study was conducted with these pork operations, the basic approach or process for evaluating alternative manure management systems throughout the US may be similar.

Publish Date: June 3, 2006

In the past decade there has been a rapid movement by U.S. hog producers and packers away from selling and buying hogs on the spot market. The decline in spot market sales has been offset by a steady increase in both contractual agreements between producers and packers and in packers raising hogs for slaughter. There are a number of reasons why producers have switched to contracts from spot market sales. First, it simplifies life. It is far easier, especially for larger hog operations, to negotiate a multi-year packer contract than to negotiate the price of every load of hogs. It is easier to arrange and budget transportation when all the hogs go to the same plant. A marketing contract assures shackle space. Perhaps most important, marketing contracts can offer a higher and more stable net price than the spot market.