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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:
Does the Data Support Ikerd’s “Economic Fallacies of Industrial Hog Production”?
Posted in: Economics by admin on January 1, 2007 | No Comments
While managerial ability may be useful in explaining the cost competitiveness of small hog farms, it is not easily measurable. In this report it suggests that another potential source of cost-competitiveness – which is measurable but
remains virtually unexplored in the literature on hog production, is vertical scope economies. It was found that farrow-to-finish benefited both large and small, depending on the farrow-to-feeder and feeder-to-finish mix. This result partially supports Ikerd’s claim that “family hog farms are as cost efficient as are the large-scale, corporate hog operations.” I say partially because, although vertical scope economies are positive for all the farrow-to-feeder and feeder-tofinish mix, they may be offset at some point by stage specific diseconomies. That is the subject of future
research.
How do you straddle hogs and pigs? Ask the Greeks!
Posted in: Economics by admin on | No Comments
One objective of this study is to present the first known empirical application of the event induced trading strategy approach with respect to an agricultural commodity futures options market. The second objective of the study is to demonstrate a method for decomposing returns to a portfolio of options in such a manner that allows the researcher to distinguish between returns attributable to changes in volatility, changes in underlying futures prices, or any of
several other factors that affect options returns. The conclusion reached was that options markets could be inaccurately reflecting a combination of both futures price changes and volatility changes. The empirical evidence suggests that small but unidirectional price moves occurring in anticipation of the reports was also making a significant contribution to the long straddle returns.
Energy Efficiencies – Strategies for Minimizing Utility Costs in the Barn
Posted in: Economics, Energy, Pork Insight Articles by admin on April 5, 2006 | No Comments
Heating, lighting, and ventilation are necessary to keep pigs at optimal performance, but there are strategies to reduce costs without impacting performance. For energy, a longer term contract may be beneficial, as energy prices have risen and are expected to continue up. Heat and ventilation need to be balanced, especially in the colder seasons. Heat loss from ventilation increases with pig size, but reducing ventilation will affect air quality. In rooms with multiple fans it is a good idea to have one capable of reaching winter minimum and one for summer maximum. In smaller rooms, an oversized fan can be used by setting it on a timer. Heaters, unfortunately, are usually oversized to be capable of heating during the lowest temperature, a second heater or split burner can reduce this, but requires capital cost. Convective heaters systems can use direct-fired forced air or hot water heating systems, and radiant heating systems can be gas tube heaters, open flame brooders, or in-floor radiant. Costs and advantages/disadvantages vary for each system. Wiring, amperage, voltage, CFM/W, size, wind breaks, and chimneys can all increase ventilation efficiency. Currently the most durable and efficient light bulb is the T-8 fluorescent tube, or high intensity discharge fixtures can be used with higher ceilings. Simply taking time to understand the controls for heating and ventilation can help reduce energy usage as well. Heat exchangers can help recover heat lost through ventilation, but require maintenance and can cause drafts. Alternative fuels and renewable energy show promise, but have problems that need to be worked out before use in a commercial barn.
To What Extent Does Wealth Maximization Benefit Farmed Animals? A Law and Economics Approach to a Ban on Gestation Crates in Pig Production
Posted in: Economics, Welfare by admin on January 10, 2006 | No Comments
This paper discusses the potential impacts animal activists could have on animal welfare if they attempted to push there wants through the courts by showing the potential increase in value of converting from gestation stalls, rather than trying to make change through public opinion. The economic theory of wealth maximization is proposed as a way to improve animal rights, stating: while people increasingly try to improve there own wealth and promote there own interest, people will be able to represent animal interests through there own. The paper sites that three quarters of Americans agree that farm animals should be free of controversial farming practices such as gestation crates but because of lack of information industrial agriculture producers continue to operate systems in which the public allegedly does not agree with. The paper suggests that legislation has potential to correct this market failure. Evans proposes that animal activists should focus on economic benefits when pushing legislation reforms. There are varying opinions about the economics of gestation crates but the paper argues that there are more positive economic results than negative. There are several studies which show welfare improvements to sows when using alternative housing systems which leads to the argument that the public is willing to pay more for pork if it is raised in a humane way. Also stated is that pork has an inelastic demand, meaning if prices were to go up demand would not change significantly. Evans argues that even if there is an increase in cost to farmers from converting from gestation crates the marketing benefits will supplement the costs.
To What Extent Does Wealth Maximization Benefit Farmed Animals? A Law and Economics Approach to a Ban on Gestation Crates in Pig Production
Posted in: Economics by admin on January 1, 2006 | No Comments
To understand whether wealth maximization will work to advance the protections of nonhuman animals, and farmed animals in particular, it is important to first evaluate whether, on a theoretical level, valuing human interests can achieve such protections. Accordingly, part II of this article discusses the basic principles of Posner’s wealth maximization theory. Part III discusses the extent to which humans can provide for nonhuman animal protection through economic evaluation. Part IV changes course from the theoretical to the practical and discusses the attempts of animal advocates to influence the market and the need for legislation where the economic system fails to reflect human valuation of nonhuman interests. Part V discusses the first of what may become many animal welfare measures for farmed animals: the Florida ban on gestation crate usage in pig production. Part VI examines the economic aspects of this ban, including the efficiency of alternative housing methods and the elasticity of demand of the pork market. Part VII draws the conclusion that the economic arguments for animal welfare protections might weigh in favor of those protections, and that it is essential that animal advocates make strong economic arguments to gain protections as quickly as possible for the billions of farmed animals that need help each year.
Consumer Demand for a Ban on Antibiotic Drug Use in Pork Production
Posted in: Economics by admin on | No Comments
This study investigated consumer demand for pork from swine that were not administered subtherapeutic antibiotics. Over 440 individuals took part in valuation experiments held near the meat counter of a grocery store. It was found that the net welfare effects of a ban are difficult to quantify. The results depend heavily on assumptions about consumers’ awareness of antibiotic use in pork production and the extent to which consumers are able to currently purchase antibiotic-free pork.
This Little Piggy Went to Market with a Passport: The Impacts of U.S. Country of Origin Labeling on the Canadian Pork Sector
Posted in: Economics by admin on | No Comments
The objective of this paper is to trace the added costs of COOL as they are passed through the hog/pork market and to determine who gains and who loses. A partial equilibrium model of Canada–U.S. trade in hogs and pork is developed. The model accounts for producer and processor behavior with respect to live hogs, and then links processed pork to the final demands of the consumer. Within the United States, processors stand to lose the most from COOL. It was found that the welfare implications of this study are clear, and hold up under alternative scenarios:
• COOL will do little to help U.S. consumers, producers, or processors.
• Canadian hog producers stand to suffer significant losses under COOL.
• Canadian consumers gain modest benefits through lower pork prices.
• Canadian pork processors stand to earn significant increases in their margins under COOL.
Marketing Opportunities for Certified Pork Chops
Posted in: Economics by admin on | No Comments
The economic information concerning consumer willingness to pay becomes particularly
insightful when allowing for heterogeneity in consumer preferences. The findings presented
here show that it is essential to account for preference heterogeneity, particularly
when modeling consumer demand for food with credence characteristics. The results indicate
that the majority of respondents are concerned about credence characteristics related
to the environment, animal welfare, and antibiotics. These consumers view the certified
products as imperfect substitutes for the conventional product and have a significant
willingness to pay for schemes that guarantee these attributes.
The attribute-conscious group, which represents 16% of the sample, has the highest
willingness to pay. However, there is a great variation of the preferences for credence
certification and so the standard errors are relatively large. The second group, referred to
as the price-conscious group, has the lowest willingness to pay. The associated class probability
for this group is 41%. The class probability for the third group, referred to as the
concerned shoppers, is 43% and their preferences are situated in between the attribute and
the price-conscious groups. The concerned shoppers have a positive significant willingness
to pay for the certification programs. However, the concerned shoppers are not willing to
pay as high price premium as the first group and opt for the conventional product if the
price is too high. Therefore, from a policy perspective, it is crucial to investigate how the
degree of consumer heterogeneity affects the economic viability of a voluntary certification
scheme because the conventional product may be viewed as a perfect substitute by a
large population share.
Comparing the cost estimates presented by Roller (2004) and Foster (2004) with
the willingness to pay estimates seems to indicate that there is some market potential
among the concerned shoppers and the attribute-conscious groups for the certification
programs. Therefore, if a labeling program targets the group of consumers who perceive
that credence characteristics are important, it is also important to analyze how other
consumer segments view the certified products, and moreover consider the welfare impact
of voluntary labeling policies on consumers and suppliers.
2006 Michigan Swine Business Analysis Summary
Posted in: Economics by admin on | No Comments
This report summarizes the financial and production records of 14 Michigan swine farms. To be included, the farms must have produced at least 50 percent of gross cash farm income from one or a combination of fat hogs, feeder pigs and cull breeding hogs sales. The records came from Michigan State University’s TelFarm project and the Farm Credit Service system in Michigan. The values were pooled into averages for reporting purposes.
Farm records were included if a farm financial summary was completed on 2006 data including beginning and ending balance sheets, plus income and expenses. The data were checked to verify that cash discrepancy was less than 10% of gross cash inflow and that debt discrepancy was less than $1,000. While considerable variation in the data exists, average values are reported in the summary tables listed in this article.
Survival analysis of culling reasons and economic examination of production period in sow culling
Posted in: Economics by admin on | No Comments
Our investigations were performed in a Hungarian large-scale pig farm in Hajdú-Bihar County, where pork production, its conditions and key indicators were studied. Data were collected by questionnaires, interviews and methodical observations. Our estimation was prepared by one of the non-parametric forms of Survival Analysis, the Kaplan-Meier analysis. Mortality intensity was quantified by one of the other models of Survival Analysis, the log-rate exponential model. We find that the most significant culling reasons: due to abortion, lack of being heat for pregnancy test, low farrowing performance. As a conclusion we can state that production efficiency can be increased in a fattening pig farm if the farrowing numbers of sows are taken into consideration and the place of cost minimum is calculated by the input prices of the given period. By this the optimal point of time as long as sows are worth keeping in production, can be calculated. Therefore, considerable cost savings can be attained on a big farm.