Solution-based Analysis for the Long-Haul

This analysis of current PigCHAMP data can help balance your bottom line.

by Mike Porth and Eric Brunton, Ever.Ag

We’ve been using data to analyze past, current, and future hog producer productivity and profitability for some time.

Lately, the industry has seen tremendous volatility as we digest health, weather, productivity, market prices, and even world events.

Examples include the 2009 Swine Flu/media debacle, 2014 PEDv, COVID-19 in 2020, and 2021–2022 grain prices.

Despite the gains in health and productivity, 2023 was the worst year in decades seen by pork producers. Added to that were overwhelming concerns about foreign animal diseases such as ASF (African Swine Fever) that still linger in the minds of producers.

This has never been an “easy” business, but the past decade has thrown multiple curveballs. Some of these are intangibles we cannot predict, while others do have risk mitigation solutions.

Chart 1 and Table 1 below depict health as it pertains to PRRS (Porcine Reproductive and Respiratory Syndrome) incidence from the University of Minnesota over cumulative years, supporting our efforts to understand health and its influence on productivity efficiency. That’s paired with a view of the corn and soybean meal annual cost average based on the nearby CME futures daily close.

graph showing prrs incidence starting july 2009
Chart 1. PRRS cumulative incidence beginning July 01, 2009

table showing cme average daily close from 2204 to 2023
Table 1. CME Average Daily Close

table showing estimated farm size from 2010 to 2023
Table 2.

table showing IA State Far-Wean Feed Cost, Non-Feed Cost and COP
Table 3.

Why, you may ask, pull these two areas? The health of the system can support your goal of being in the U10% or drag you into the basement of those in the B10%, while inputs are involved in ~65% of your business costs through feed. Although inputs have risk management tools, minimizing feed costs is helpful while health issues are worked out via strict biosecurity or depopulating or repopulating, with the hopes of cleaning up the root cause for doing so. Both are critical in our review of the current business while evaluating profitability and the future direction.

PigCHAMP offered us similar opportunities to review past and current trends and gave us the ability to forecast future probabilities, knowing there are always hiccups that could deter projections.

Let us understand what we are going to review in terms of U10% = the upper 10% of production for a specific trait, B10% = the bottom 10% of production for a specific trait, and mean = the average of all data sets in the specific trait(s) being reviewed.

We’ve highlighted 2014 for the PEDv year and 2020 for COVID (as badly as we want to forget).

With the above PigCHAMP data set for the estimated farm size of the three different subsets, you see those in the U10% are larger production systems, while the B10% are smaller farms. What we cannot assume from these subsets is profitability. But digging deeper, there might be some synergies between farm size and profits. Without understanding each farm’s possible niche (ABF, OPG, etc.) or cost, we refer back to a weaner pig cost of production (COP) for calendar year 2023 of $44.08 based on Dr. Lee SchulzEstimated Livestock Returns and Iowa State’s Farrow to Wean model (recap below). We will also assume the $44.08 per weaned pig is as COP for ~T25% production based on key allied analysts and financial institutions’s input.

Another noteworthy mention about the U10%, mean, or B10% producers is that these farms likely have different balance sheets. Those in B10% might rely on family labor, a land base supporting feed inputs, and a minimal debt load.

Meanwhile, the U10% might have higher labor costs with minimal (if any) land base associated with the business, along with a higher debt load from a fixed and operational standpoint. With current interest rates and debt load, these production traits might not confirm profitability but perhaps say more about efficiencies and lost revenue by being in B10% vs. U10% of productivity.

Before we dig into PigCHAMP-specific data, let us compare the most basic information in productivity, and let us assume that PigCHAMP Pigs Wean Per Litter is comparable to USDA’s Hogs & Pigs reporting of Pigs Saved Per Litter and review the data sets.

We could assume that trend lines are directionally upward over time, which is supported by the two data sets (below graph). We then reviewed what areas of production support these trends: genetics, health, facilities, employee support, or a combination of all? It is always good to have comparative data to substantiate your view on the direction of data, markets, etc. while understanding how these two data sets come to their outcomes in diverse ways.

We reviewed comparable data sets above. Now, what if we want to take two different traits, as in farrowing rate (FR) and pigs weaned per sow per year (PWSY)?

Here, one compliments the other toward a more efficient and more than likely lower COP, if you’re in the U10% or even at least in the mean group, compared to B10%. We’re talking about the top production systems that have fewer gilts possibly inventoried while weaning more piglets per sow weaned. It’s all just simple economics, right?

So, going back to Dr. Lee Schulz’s farrow-to-wean model and $44.08 COP per weaned pig and stating this is aligned with the top 25% production, can we imagine COP for B10% production systems or even the mean group? Utilizing valued data from PigCHAMP and a COP review from a well-recognized source such as Iowa State University helps put the puzzle together even with the clouds overshadowing our business.

One area that producers and I are encouraged by is the data around sow deaths.

Although it is not a trend, as the graph below shows, having all of the groups see a leveling off is definitely something to watch for in the future.

This is an area that will need more analysis in the future, but we could say a focus by genetic companies while also seeing better staffing of employees post-Covid must also be attributed to this.

Also, the trend in Total Born and Born Alive traits surely shares what genetics, health, and proper employee staffing could do for these farms in terms of productivity.

If we keep seeing this trend higher in the future, we should question how many sows the industry can handle versus the future packer capacities.

Ultimately, it’s about pigs weaned, and we see the evidence of better total born and born alive carry forward into the Pigs Weaned Per Sow chart below.

graphs showing pigs weaned vs usda saved per litter and sow death loss

graphs showing total born vs born alive and pigs weaned per litter

graphs showing total born and born alive

Total Born and Born Alive

Currently, we have seen the impact of Power BI’s ability to review data sources and the possibility of what stochastic modeling could do in the future. Data reviews provide past, current, and “what ifs” into outlooks.

PigCHAMP provides this opportunity for the farm, along with key benchmarking production traits! Also, as I understand it, PigCHAMP is not sitting still. They’ll be implementing Power BI solutions on their clients’ handheld devices or tablets soon.

Summarizing what we know today via the uncertainties of our business with health updates, marketing plans, and current productivity records, we roll this into COP of the business with current intangibles included.

In closing, the intangibles of our business, as they relate to health, weather, interest rates, world dynamics, and grain and market prices, keep the noise in our minds. But the factual data of PigCHAMP records for your farm and benchmarking against U10%, mean, and B10% supports our understanding of where producers have been and where they might be going. The ability to use current tools to analyze data is changing faster than this review of data.

Capitalizing on those areas to become more efficient in supporting your business’s bottom line is vital for your review and the cost associated with being an average or top performer.

Mike Porth

Mike has spent four years with PFPAg and Ever.Ag as Business Development Manager after 37 years in Corporate Agriculture with Smithfield Foods, Cargill, and ConAgra Foods.

Eric Brunton

Eric graduated from Western Illinois University with a degree in Animal Science and holds an MBA from Upper Iowa University. Eric’s industry background started with Cargill where he moved around the Midwest working for their meat solutions division. He also has experience in the ag finance and lending space. Eric most recently spent nine years with Smithfield Foods before joining Ever.Ag in 2021.