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 TODAYRandy Stoecker November, 2008
2 PERSONAL HISTORY 1947 BORN WESTERN,KS RAISED BY DEPRESSION PARENTS 1958 SOLD 1ST SL PIGS FOR $0.11/LB Live1970 GRAD KANSAS STATE UNIV.
3 BUSINESS CAREERBANKER - FINANCED 600 SOW UNIT OWNED BY 5 FARMERSRALSTON PURINA - GREAT TRAININGYEAGER FED 60,000 COMINGLED PIGSTRAVELED TO EUROPE / ENGLAND
4 BUSINESS CAREERJOINED PIC - TALENTED PEOPLE AND HIGH PERFORMANCE PIGS1987 – JOINED WENDELL MURPHY – TWO DIFF PEOPLE WITH ONE PLAN2000 – 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 yearsAvg $0.7834 yearsAvg $2.37Source: USDA/NASS
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, , ,200Swift 46, , ,000*Excel 36, ,*Hormel 35, , ,000*Triumph , , ,500*Seaboard 16, ,*Indiana Pack 14, , ,000*Hatfield 10, ,Others , , ,040Total 420, , ,960* Owns some pig productionSource: Steve Meyer, Paragon Economics
15 Iowa Farrow to Finish Profits, 1997-2008 QuarterlySource: John Lawrence, Iowa State University
16 PRODUCTION CHANGES IN RESPONSE TO $$ PRESSURE 1970’s STD was 40 Sows Farrow to FinishORPurchased Co-mingled Feeder PigsALMOST ALL WERE CORN FARMERS FIRST
17 STRUCTUREOWNER- Family to Entrepreneur to SHIP Business/Corp. & ContractingGRAIN Produce > fed, Now< 30%, Produce enough to matterLABOR Family to Local to National & International MixGENETICS 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 1995Auto semen pkg. boar studsBUILDINGS One Site – Farrow to FinishFarrow to Feeder w/off-site FinisherThree Site Now Two Site W to FFEED Purchased Farmer mixed Toll Mill Own Mills Mash Rapidly moving to all PelletsFORMULAT’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 keyBuild 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