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EVOLUTION OF THE US PIG PRODUCTION INDUSTRY

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Presentation on theme: "EVOLUTION OF THE US PIG PRODUCTION INDUSTRY"— Presentation transcript:

1 EVOLUTION OF THE US PIG PRODUCTION INDUSTRY
- FINANCIAL CHANGES SHAPED THE US PORK INDUSTRY TODAY Randy Stoecker November, 2008

2 PERSONAL HISTORY 1947 BORN WESTERN,KS RAISED BY DEPRESSION PARENTS
1958 SOLD 1ST SL PIGS FOR $0.11/LB Live 1970 GRAD KANSAS STATE UNIV.

3 BUSINESS CAREER BANKER - FINANCED 600 SOW UNIT OWNED BY 5 FARMERS RALSTON PURINA - GREAT TRAINING YEAGER FED 60,000 COMINGLED PIGS TRAVELED TO EUROPE / ENGLAND

4 BUSINESS CAREER JOINED PIC - TALENTED PEOPLE AND HIGH PERFORMANCE PIGS 1987 – JOINED WENDELL MURPHY – TWO DIFF PEOPLE WITH ONE PLAN 2000 – MURPHY FARMS BOUGHT BY SMITHFIELD – A GOOD FIT – GROWTH BY ACQUISITION- NEW CULTURES & SYSTEMS

5 FINANCIAL PRESSURES CAUSE REAL CHANGE
CHANGES IN PRODUCTION PRACTICES ARE THE REACTION!!

6 U.S. Average Corn Price, 1908-2007 1942-1972 30 years Avg $1.26
35 years Avg $0.78 34 years Avg $2.37 Source: USDA/NASS

7

8 Pigs Per Litter, 1930-2007 USDA Hogs & Pigs Reports

9 Average U.S. Hog Carcass Weight, 1930-2007 Note: Some Systems Target 100+ kg Carcass

10 Annual U.S. Pork Production Per Sow, 1930-2007 Note: Top Systems 2,600 to 2800 kg
growth rate: 2.027% growth rate 2.793% 2000 kg Carcass Wt 1400 kg Carcass Wt AUS Today?

11 Exchange Rate: Can $ Per US $

12

13 2007 was the 16th consecutive record year for U.S. pork exports

14 U.S. Daily Slaughter Capacity
Packer Fall Fall change *Smithfield , , ,100 *Tyson 72, , ,200 Swift 46, , ,000 *Excel 36, , *Hormel 35, , ,000 *Triumph , , ,500 *Seaboard 16, , *Indiana Pack 14, , ,000 *Hatfield 10, , Others , , ,040 Total 420, , ,960 * Owns some pig production Source: Steve Meyer, Paragon Economics

15 Iowa Farrow to Finish Profits, 1997-2008
Quarterly Source: John Lawrence, Iowa State University

16 PRODUCTION CHANGES IN RESPONSE TO $$ PRESSURE
1970’s STD was 40 Sows Farrow to Finish OR Purchased Co-mingled Feeder Pigs ALMOST ALL WERE CORN FARMERS FIRST

17 STRUCTURE OWNER- Family to Entrepreneur to SHIP Business/Corp. & Contracting GRAIN Produce > fed, Now< 30%, Produce enough to matter LABOR Family to Local to National & International Mix GENETICS Pure Bred Boars, own gilts, Buy hybrid Boars & F1 gilts, Now 50% own Multiplier w/ 4 owning G Nucleus herds

18 MATING Natural  to All AI since 1995
SOW   FARM Probably 20 ‘Sow Farms’ 10,000 or > MATING Natural  to All AI since 1995 Auto semen pkg. boar studs BUILDINGS One Site – Farrow to Finish Farrow to Feeder w/off-site Finisher Three Site  Now Two Site  W to F FEED Purchased  Farmer mixed   Toll Mill  Own Mills   Mash  Rapidly moving to all Pellets FORMULAT’N No Involvement   Own Nutritionist and R&D Farms  Statisticians & Quality Trial Mgt.

19 FACILITIES Each one diff’t –low Fixed Asset invest.
PACKER- Adversarial (Live) CARCASS Contracts (prem, window, cut out) QUALITY Alignm’t/Ownership (% lean & quality, antibiotic free, etc) FACILITIES Each one diff’t –low Fixed Asset invest. Bought turn key Build their own (lacks innovation) BENCHMARK Lie to neighbor -> listen to Feed Rep ->University systems -> Agri-Stat (Last 12 mths $11.50/hd Profit Av to T25%) FINANCING Dad -> Local Banker/Low Debt -> Regional –> Nat’l/Int’l/Public Mkts

20 Pork Powerhouses – Successful Farming Magazine
1994 2006 Rank Org # Sows 1 Murphy Family 180,000 Smithfield Foods 1,200,115 2 Carroll’s Foods 110,000 Triumph Foods 399,800 3 Premium Standard 96,800 Seaboard 213,600 4 Tyson Foods 95,000 IA Select Farm 150,000 5 Cargill 77,000 Prestage Farms 140,000 6 74,000 Pipestone 130,000 N 7 65,000 The Maschhoffs 116,000 N 8 DeKalb Swine 64,973 X 87,000 9 National Farms 34,000 X Maxwell Foods 76,000 10 Goldsboro 30,000 AMVC Mngmt 75,000 N 11 Sand Systems 27,150 X 70,000 12 Continental Grain 20,000 Progressive 55,200 N 13 Louis Dreyfus Corp 20,000 X Hormel Foods 51,000 N 14 NE Pork Partners 45,000 N 15 Hastings Pork 18,000 Wakefield Pork 41,000 N 16 Clougherty Packing 17,600 Hatfield Meats 36,100 N 17 Gold Kist 16,500 Whitestone 35,000 N 18 Farmland 16,000 X Texas Farm 33,500 N 19 Neuhoff Farms 14,000 Holden Farms 32,000 N 20 Swine Graphics 13,500 Coharie Farms 31,000 N Total 1,009,523 2,693,650 468,000 Christensen – 170,000 Hanor – 75,000 New Fashion – 48,000 TriOak – 28,100 Eichelberger – 20,000 Allied Prod – 58,700

21

22 BENCHMARKING AGRI STAT RESULTS JULY 2008 12 Months Consolidated

23 Feed Conversion (6.98,j) AVG vs.
Top 25%

24 Comb. - Nsy/Fin. Mort. (ps1.1,d)
AVG vs. Top 25%

25 AGRISTAT PROD’N COST SUMMARY USA & CANADA JULY 08 & 12 MONTHS
USA(43) AVG Top 25% CANADA WEANED PIG Month / Year Month / Year Variance Yr Avg Yr Cost/head $33.78 / $29.24 / $2.62 $32.54 P / S / Y / / Weaned / Lit / / (0.12) Feed $ $11.39 $2.43 $13.81 Cal/Gest/Day Cal/Lact/Day 19, ,068 1, ,432 Total Facility Costs $ $10.51 $1.81 $13.58 Labor $5.92 $5.25 $0.67 $6.21 MILLING – ON COSTS per Ton Mills (80-100% Pel) $ $9.48

26 AGRISTAT PROD’N COST SUMMARY USA & CANADA JULY 08 & 12 MONTHS
USA(43) AVG Top 25% CANADA Month / Year Month / Year Variance Yr Avg Yr Nurs Cost/hd Out $ $48.90 $1.86 $58.65 TOTAL COSTS Total Fin $/100# $58.66 / $49.33 $52.19 / $46.49 $2.94 $52.13 Total Fin $/100kg $129.05/ $ $114.82/ $ $6.47 $114.69 FINISHING PIG Feed Cost/100# $28.39 / $22.76 $26.36 / $21.37 $1.39 $19.35 Fin FCR FC Cal/# Gain ADG gm/day Fin Mort % 6.32% 4.62% 1.70% 3.77% Profit/head ($.8.20) / ($11.20) $11.27 / $0.30 $ $29.76 [w/o Corp Int and G&A]

27 THANK YOU


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