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Prairie Swine Centre is an affiliate of the University of Saskatchewan
Prairie Swine Centre is grateful for the assistance of the George Morris Centre in developing the economics portion of Pork Insight.
Financial support for the Enterprise Model Project and Pork Insight has been provided by:
Economic weights for sow productivity traits in nucleus pig populations
Posted in: Production by admin on January 1, 2006 | No Comments
Role of Cooperative in Improving Accessibility to Production Resources and Household Economy of Backyard Pig Raisers in Batangas, Philippines
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Backyard pig operation is characterized by the main use of available household resources. The size of animal holding per farm is relatively small and usually accounts for only 2-4 % of the commercial farm. The ownership of household labor at low opportunity cost is one of their comparative advantages with those commercial operators that require more hired labor to run their enterprise. However, being a resource poor and non-organized, they are unlikely to get, on their own, access to the limited resources relating to high quality genetic stocks, animal nutrition and health services and premium markets for output. Backyard pig raisers have been shown to be a heterogeneous entity. Nevertheless, it has been regarded as forefront of the country’s agricultural growth by contributing the highest and consistent average annual growth of 4.6% in gross value-added in agriculture from 1990-2000 despite the financial crisis which struck Philippines and other Asian countries in the latter part of this decade. For years, this sector dominates the country’s pig industry by producing 70% of the total domestic pork supply; comprising 80% of the aggregate pig inventory and providing livelihood to 3.8 million dependents that rely on this livestock activity as their substantial source of income (Tibayan, 2003).
Costales’ (2002) study on backyard pig raisers’ production and market characteristics in Southern Luzon revealed that access to scarce production resources necessary for expanded smallholder participation is not a sole working of the market force and is unevenly distributed across locations (provinces). It is found greater in areas with institutions like cooperatives where members are encouraged and taught to pool together their available scarce resources to benefit
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everyone in the group. As everyone gains access to these resources, they are enabled to expand their operation, which consequently empowers them to gain more revenue, better profit, and greater income for the household. Thus, the challenge to assemble these backyard pig raisers into institution like cooperatives, which adheres to principles of cooperation, is viewed as a potential measure to directly link them with the whole spectrum of market chain ranging from the acquisition of available production resources and services to the efficient marketing of their differentiated final products. Based on a field survey1, this paper aims to highlight the role of the cooperatives in improving the backyard pig raisers’ access to various production resources and their household economy.
Contract Finishing: Getting Your Facts Straight
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Labor shortage and the rising Canadian dollar are concerns in the hog industry and have brought about the idea of contract finishing and contracting out manure. Upon analysis, Western Canada should be able to slaughter 1 to 2 million more pigs per year for the next three years with the planned construction of packing plants in Saskatoon and Winnipeg. Higher prices for finished hogs in the U.S., a shortage of Western Canadian slaughter capacity, and an arguable advantage in the U.S. contract finishing cost of production appear to be the reason for increases live exports. This trend will continue if Canadian packing plants cannot offer competitive prices. The general consensus among several large-scale producers is that yes, the U.S. can and will offer better prices over the next few years. Factors that influence the desire to slaughter in Western Canada includes increased slaughter capacity, enough pigs being finished to warrant a double-shift, and low feed costs. The most negative factor was the exchange rate. Contracting finisher barns usually involves the hog owners providing everything necessary for the pigs, but sometimes the barn owner will provide the labor. A 20-year economic model was created for a 2400 capacity finisher operation with earthen manure storage (EMS) and four 2400 finisher capacity operations without EMS. The single 2400 unit produces 1,638,120 gallons of manure per year. Given that the manure is spread on the land once every 3 years, a total of 819.15 acres are needed within close proximity, approximately 2 miles from the barn (the 9600 head unit requires 3,276.24 acres!). Hauling the manure extra distances would add numerous complicated costs to the model.
Bogies and Birdies of Pig Production
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Things have been pretty good since 1998. In fact, pick out any 10-year period since the 2nd World War and they all have been great. Hogs have been the “mortgage lifter” for the farmer. It is a fact that over time the hog production business is and will probably continue being a highly profitable business providing you can overcome swine disease and avoid going broke during “market adjustments”. One strategy is to partner with your packer by having a packer marketing agreement. A market price window relating to the cost of production seems a fair deal to both packer and producer. If spot prices are over the window you, the producer, receive only part or none of the price overage and vice versa for prices below the price window. An important thing to remember is that over time an efficiently run pork production business has had a better return on capital than the packing business. This means the marketing window may not be as high as you might have thought fair. But in return for this lower price window, your partner, the packer, is taking on part of your marketing risk. A packer agreement is a must if you are planning a major increase in the size of your production system by taking on a lot of debt. In fact, it is usually impossible to borrow large amounts of capital without some sort of packer marketing agreement. However, over time, taking on all the price risk is the best strategy. No hedging or no marketing agreement! When you got into the pork production business you correctly assumed it would be profitable enough in the winning years to far offset profit losses in losing years. But, somehow you must avoid going broke during bad years. That’s the paradigm of any cyclical business. How can you do this without hedging or a marketing agreement? This can be accomplished by having enough financial resources behind the hog operation to absorb losses taken during hard times or for that matter when your operation has unusual losses due to disease or other unexpected production problems. What resources do you need? A rule of thumb for farming operations in general is to maintain working capital equal to or greater than one year’s operational expenses plus personal living expense (drawing account). Working capital is short-term assets (cash, hogs, feed and supplies) minus short-term debt (accounts payable and notes due within one year). If the hog operation goes into a negative cash flow, working capital is maintained by taking on long-term debt on other assets or actually selling other capital assets, such as land or stocks. When market prices are low it seems like an everlasting event as you watch your balance sheet slowly deteriorate. This is the paradigm of any cyclical business especially a commodity business. The slightest change in supply or demand has a multiplying effect on the price of the commodity. However, don’t be a masochist and just sit there and go broke. Prepare your financial situation or obtain a packer marketing agreement and above all, operate at maximum efficiency at all times, but especially during times of low profitability.
Challenges in Pig Artificial Insemination
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Risks to Canada’s Domestic and Export Markets
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The growth of Canadian hog and pork production over the last 15 years is one of the major achievements and outstanding phenomenon of Canadian agriculture and food. Success of the industry is based on quality, efficiency, productivity and entrepreneurship. Since 1995, the Canadian sow herd has grown by over 40%, Canadian hog slaughter increased by 45%, and US slaughter increased by just 7%. While Canada is very small in terms of production, we are the largest single exporting nation in the world. The average size of hog operations is increasing while the number of operations is decreasing. The pork packing industry is at a lower capacity, which gives it more room to change. Pork packing has increased by 45% over the past 10 years. The five largest plants in Canada have an average weekly capacity of 42,000 head per week (8400 per day). Maple Leaf and Olymel are the leaders in this industry. Exports are the source of all of Canada’s growth. This export increase can be attributed to specialized US hog production, increased demand for feeder pigs in the US, general expansion of hog production in Canada, cost-competitive production in Canada, proximity to major hog-finishing areas of the US, and favourable exchange rates.