Michigan State University Extension
Ag Experiment Station Special Reports - SR459201
07/28/98
Gerald Schwab and Maynard Hogberg Departments of Agricultural Economics and Animal Science Michigan State University
July 1992
TABLE OF CONTENTS
I.Introduction
II.Structure of the Swine Production Industry A.The U.S. and Michigan Situations B.The Michigan Situation 1. Number and Sizes of Farms 2. Ownership and Control 3. Location within Michigan 4. Types of Swine Operations 5. Hog Sales and Slaughter
III.Reasons for Structural Changes in the Swine Production Industry
IV.Seven Assumptions for the 1990s into the 21st Century
V.Projections to the Year 2000 A.Swine Production Projection B.Number and Sizes of Farms C.Impediments to Expansion of Swine Farm Size D.Improvement in Competitiveness of Michigan's Swine Industry E.Improvement of Quality and Consistency of the Product F.Improving Animal Well-being and Food Safety G.Coordination of the Swine Production System H.Shifts in Location within the State
VI.Emerging Issues and Need for Industry Action A.Programs that Could Strengthen the Swine Industry 1. Labor and Personnel Management 2. Manure Management 3. Cooperative Extension Programs 4. Venture Capital Formation Assistance 5. Creation and Access to New Knowledge
B.Relationship to MSU Support Programs
TABLES
1.Number of U.S. Hogs and Hog Farms--Some Changes, 1980- 1991
2.State Ranking by Number of Hogs in December Inventory-- A Comparison of 1991 with 1980
3.Number of U.S. Hogs and Hog Farms With More Than 500 Head in December Inventory--Changes, 1980-1991
4.Distribution of U.S. Swine Farms, Classified by Size
5.Michigan Hog Production -- Trends & Changes, 1978-1991
6.The Ten Leading States in Large-Scale Hogs and Pigs Marketings, 1987
7.Distribution of Michigan, Iowa and North Carolina Swine Farms, Classified by Size
8.Percentage of Farms by Ownership Arrangement Within Farm Size
9.Types of Michigan Swine Operations--Percentage Distribution of Farm Units (Percentage Distribution of Hogs Produced)
10.Michigan Hog Sales as Percent of Total Michigan Agricultural Sales
11.Commercial Hog Slaughter
12.Swine Projection to Year 2000
13.Michigan Swine Production Units, Projected to Year 2000
FIGURES
1.Michigan County Swine Inventory, December 1990.
2.Receipts Less Cash and Capital Replacement Costs for Farrow-to-Finish Hog Production
3.Livestock Manure Phosphorus Produced Relative to Field Crop Removal in Lower Peninsula of Michigan
Michigan's Swine Industry: A View of Yesterday and Today -- A Vision for Tomorrow by Gerald Schwab and Maynard Hogberg Departments of Agricultural Economics and Animal Science
I. Introduction
Change and more change. In the 20th century, change
is ubiquitous. No industry can escape the impact of new
developments and changes in mechanization, biotechnology,
consumer preferences, environmental awareness and
political structures, to name only a few. The
agricultural and food system industrial complex,
including the swine sector, is no exception.
Participants in the swine sector -- producers, packers
and processors -- must continuously interact with this
changing world.
It is our purpose here to describe the structure of
the swine production industry from both historical and
futuristic perspectives. The initial focus will be on
changes in the number and sizes of hog farms in the
United States and in Michigan. The distribution of hog
numbers by farm size will be highlighted. Possible
causation of structural change from both on-farm and off-
farm institutional and technological sectors will be
discussed. The main question to be addressed relates to
the importance and future of the swine industry in
Michigan. What are the critical factors that will
determine our future?
II. Structure of the Swine Production Industry
A. The U.S. and Michigan Situations
For the past 50 years, starting in the 1930s, U.S.
farm numbers as defined by the Bureau of the Census have
trended downward from a high of approximately 7 million
farms to about 2.5 million farms in the early 1990s. The
structure of the swine production industry at the farm
level appears to be rapidly changing. Since 1980, the
number of U.S. farm operations with hogs has declined by
approximately 60 percent. As presented in Table 1, the
number of U.S. hog farms in 1980 was 670,350. By
December 1991, this number had declined by over 413,000
farms to 256,390.
TABLE 1.Number of U.S. Hogs and Hog Farms --
Some Changes, 1980-1991
Total U.S. Total U.S. Average number
hogs & pigs farm operations hogs per
December with hogs farm
(1,000 head)
1991 56,974 256,390 222 1990 54,477 275,440 198 1989 53,821 306,210 176 1988 55,469 326,600 170 1987 54,620 331,620 165 1986 50,960 346,890 147 1985 52,312 391,000 134 1984 54,073 429,580 126 1983 56,694 462,110 123 1982 53,933 482,190 112 1981 58,688 580,060 101 1980 64,512 670,350 96
1"Hogs and Pigs," Statistical Reporting Service, USDA, Washington, D.C., December issue, 1981-1991.
For Michigan, the number of swine farms declined
relatively less during this same 12- year period. In
1980, Michigan was reported to have 9,600 farm operations
with hogs. In December 1991, this number had decreased
by approximately 4,600 farms to a reported 5,000 farms
with hogs. The absolute magnitude of the decline --
approximately 48 percent -- may be arguable, but the
trend is not: the number of hog operations in the nation
and in Michigan is declining.
Geographically, the Corn Belt States in the Midwest
have continued to be the largest hog-producing states.
The three "I" states, Iowa, Illinois, Indiana plus
Minnesota have been the four largest hog-producing
states. As indicated in Table 2, Michigan has gained
relative importance as a hog-producing state. During
1980-91, Michigan moved from 17th to 11th in number of
hogs in inventory on farm during the December count. To
achieve this ranking, Michigan surpassed Georgia,
Wisconsin, Kentucky, Tennessee, Pennsylvania and Texas.
TABLE 2. State Ranking by Number of Hogs in December Inventory -- A Comparison of 1991 and 19802
1991 1980
1991 No. swine # Hogs in 1980 No. swine # Hogs in
farms Dec. rank farms Dec.
inventory inventory
1.Iowa 34,000 14,300 1 64,000 16,100
2.Ill. 14,300 5,800 2 30,000 6,600
3.Min. 14,000 4,900 3 35,000 5,100
4.Ind. 12,000 4,550 4 24,000 4,600
5.Neb. 12,500 4,400 6 23,000 3,900
6.N.Ca. 8,800 3,550 7 41,000 2,460
7.Mo. 15,000 2,650 5 40,000 3,980
8.S.Dak.7,500 1,950 11 13,000 1,860
9.Ohio 13,000 1,875 9 23,000 2,150
10.Kan. 5,600 1,400 10 14,000 1,900
11.Mi. 5,000 1,270 17 9,600 830
12.Wi. 8,600 1,180 12 21,000 1,680
2"Hogs and Pigs", Statistical Reporting Service, USDA, Washington, D.C., December issue, 1981-1991.
Though the total number of farms with hogs has been
rapidly declining, the number of larger farms with hogs
has not declined. The importance of the larger hog farms
has increased with the absolute growth of their farm
numbers and their share of production. As illustrated in
Table 3, the number of farm operations with more than 500
head in their December inventory trended upward and the
average size of these farms increased during 1980-1991.
TABLE 3.Number of U.S. Hogs and Hog Farms With More Than 500 Head in December Inventory --Changes, 1980-19913
Number hogs & pigs Number farms Average number
on farms with 500+ with 500 + hogs per
head in December head hogs farm
(1,000 head)
1991 38,742 30,767 1,259 1990 35,682 28,370 1,258 1989 33,638 29,396 1,144 1988 33,060 29,721 1,112 1987 31,133 25,203 1,235 1986 28,741 24,629 1,167 1985 29,741 26,979 1,000 1984 28,064 25,775 1,089 1983 28,971 28,651 1,011 1982 26,158 24,592 1,064 1981 26,820 27,263 984 1980 27,095 28,155 962
3"Hogs and Pigs", Statistical Reporting Service, USDA, Washington, D.C., December issue, 1981-1991.
Hog production is becoming increasingly concentrated
into fewer farm operations. As of December 1991, 12
percent of the swine farm operations (somewhat more than
30,000 farms) with more than 500 head in inventory have
68 percent of the hogs in inventory. In 1980, only 4.2
percent of the farms had more than 500 in inventory and
accounted for 42 percent of all hogs. Table 4 presents
the data that illustrate the ever-increasing importance
of the larger swine farms and the continuing decline in
share of the market represented by the 1-99 head
category.
TABLE 4.Distribution of U.S. Swine Farms Classified by Size4
Size of Operation
(Number of hogs & pigs on Dec. inventory)
YEAR 1-99 100-499 500-999 1000 + TOTAL
1991: % of U.S. operations
62.0 26.0 7.7 4.3 100%
% of U.S. hogs & pigs
5.5 26.5 24.0 44.0 100%
1990:
% of U.S. operations
64.7 25.0 6.5 3.8 100%
% of U.S. hogs & pigs
6.5 28.0 23.5 42.0 100%
1989:
% of U.S. operations
66.2 24.2 6.1 3.5 100%
% of U.S. hogs & pigs
7.1 30.4 23.2 39.3 100%
1988:
% of U.S. operations
67.8 23.1 6.0 3.1 100%
% of U.S. hogs & pigs
8.4 32.0 23.5 36.1 100%
1987:
% of U.S. operations
70.1 22.3 5.0 2.6 100%
% of U.S. hogs & pigs
8.8 34.2 22.1 34.9 100%
(500+ category)
1986:
% of U.S. operations
72.6 20.3 7.1 100%
% of U.S.hogs & pigs
9.5 34.1 56.4 100%
1985:
% of U.S. operations
73.5 19.6 6.9 100%
% of U.S. hogs & pigs
10.3 34.0 55.7 100%
1984:
% of U.S. operations
74.5 19.5 6.0 100%
% of U.S. hogs & pigs
11.3 36.8 51.9 100%
1983:
% of U.S. operations
73.4 20.4 6.2 100%
% of U.S. hogs & pigs
11.3 37.6 51.1 100%
1982:
% of U.S. operations
76.1 18.8 5.1 100%
% of U.S. hogs & pigs
12.6 38.9 48.5 100%
1981:
% of U.S. operations
76.8 18.5 4.7 100%
% of U.S. hogs & pigs
14.4 39.9 45.7 100%
1980:
% of U.S. operations
77.3 18.5 4.2 100%
% of U.S. hogs & pigs
15.8 42.2 42.0 100%
4"Hogs and Pigs", Statistical Reporting Service, USDA, Washington, D.C., December issue, 1981-1991.
B.The Michigan Situation
1.Number and Sizes of Farms
Though the current number of swine farms in Michigan
is slightly more than half the number that existed in
1980, swine production numbers have trended upward over
this time. Concurrent with this increase over time,
Michigan's share of U.S. hog production has also tended
to increase.
Data in Table 5 indicate that Michigan production of
hogs has trended upward since 1980. The trend has been
upward not only for the absolute amount of production,
but also for Michigan's relative amount in the United
States as indicated by Michigan's share of production.
Since 1980, Michigan's share of U.S. hog production has
increased from approximately 1.41 to 2.26 percent.
TABLE 5.Michigan Hog Production -- Trends and Changes, 1978-19915
MICHIGAN
Year Farrowings Mich. U.S. Mich.
Dec (t-1)-Nov (t) Pig crop prod. prod. Share
(t) 1,000 litters) (1,000 hd) (Million pounds (%)
liveweight)
1991 255 1998 1990 262 2062 481 21275 2.26 1989 268 2086 472 21942 2.15 1988 255 1982 454 21670 2.10 1987 255 2001 434 20446 2.12 1986 235 1878 417 19461 2.14 1985 214 1694 387 20167 1.92 1984 260 1980 445 20200 2.20 1983 248 1875 386 21206 1.82 1982 185 1378 288 19658 1.47 1981 161 1225 288 21813 1.32 1980 207 1419 331 23402 1.41 1979 219 1522 310 22617 1.37 1978 162 1168 236 19466 1.21
5"Hogs and Pigs", Statistical Reporting Service, USDA, Washington, D.C., December issue, 1979-1991.
Consistent with movement in the United States
towards larger, more specialized hog farms, Michigan is
the ninth-ranked state in hogs marketed from large farms.
According to data in Table 6, approximately 23% percent
of all Michigan hogs marketed came from farms marketing
more than 5,000 head per year.
TABLE 6.The 10 Leading States In Large-Scale Hogs and Pigs Marketings, 1987.6
Hogs and pigs marketed Large- National
(1000 head) From all scale rank
State Large- From farms farms marketing in growth
scale marketing as % of of
rank more than all marketing,
5,000 head marketings 1982-87
N. Caro. 1 2,992 5,181 58 1 Iowa 2 2,324 23,484 10 (49) Nebraska 3 1,781 7,443 24 5 Illinois 4 1,375 9,880 14 6 Indiana 5 1,216 8,025 15 2 Arkansas 6 798 1,211 66 4 Minnesota7 744 8,073 9 11 Kansas 8 619 2,760 22 (48) Michigan 9 500 2,216 23 3 S. Dak. 10 440 3,181 14 19
6"The Structure of the U.S. Pork Industry", Pork Industry Handbook, 19.48.08 Extension Bulletin E-1676, October 1990.
Michigan swine producers are in competition with
producers in other states. Iowa is the No. 1 state in
hog numbers, but the state that has generated excitement
and garnered nationwide attention because of its growth
in the swine production industry has been North Carolina.
As seen in Table 6, North Carolina markets more hogs from
large-scale farms (defined as a farm marketing more than
5,000 head annually) than any other state. Iowa is the
No. 2 state in number of hogs marketed from large-scale
farms, but its in-state marketing percentage from large-
scale farms of 10 percent is much lower. Michigan has
shown some growth in large-scale swine farms, as
evidenced by its third place ranking in growth of
marketings from large-scale farms during 1982-87. Data
in Table 7 suggest that the increased concentration of
hogs produced on the larger farms is increasing in all
three states but is much more pronounced in North
Carolina. It can be hypothesized that the more
financially successful farms are those that are growing
in number. If these changes are suggestive of future
swine farm size, Michigan swine producers will have to
compete with these large-scale farms. The next question
is, what are the critical factors required to be
financially competitive?
TABLE 7.Distribution of Michigan, Iowa and North Carolina Swine Farms, Classified by Size7
Size of operation
(No. hogs and pigs on Dec. inventory)
1-99 100-499 500-999 1000+
MICHIGAN
1991
% of operations
67.0 24.5 4.0 4.5
% of hog inventory
5.5 22.0 12.5 60.0
1990
% of operations
67.0 24.5 4.0 4.5
% of hog inventory
6.0 22.0 13.0 59.0
1989
% of operations
69.0 23.0 3.7 4.3
% of hog inventory
6.5 26.0 11.5 56.0
1988
% of operations
71.4 21.4 3.3 3.9
% of hog inventory
6.7 25.9 12.6 54.8
IOWA
1991
% of operations
24.0 48.0 19.0 9.0
% of hog inventory
2.5 29.5 31.0 37.0
1990
% of operations
26.0 47.0 18.5 8.5
% of hog inventory
2.5 31.0 32.5 34.0
1989
% of operations
27.0 49.0 16.0 8.0
% of hog inventory
3.0 34.0 29.0 34.0
1988
% of operations
28.8 48.8 15.8 6.6
% of hog inventory
3.5 35.0 31.4 30.1
NORTH CAROLINA
1991
% of operations
81.0 8.0 3.0 8.0
% of hog inventory
3.0 4.4 5.6 87.0
1990
% of operations
83.0 8.0 3.0 6.0
% of hog inventory
4.2 5.3 6.5 84.0
1989
% of operations
86.0 7.0 2.5 4.5
% of hog inventory
6.3 6.7 7.0 80.0
1988
% of operations
86.7 7.0 2.4 3.9
% of hog inventory
7.1 7.8 7.8 77.3
7"Hogs and Pigs", Statistical Reporting Service, USDA, Washington, D.C., December issue, 1988-1991.
2.Ownership and Control
Michigan swine farms are primarily a family owned
and controlled farm activity. A 1989 survey of Michigan
swine producers indicated that approximately 90 percent
of the farms are organized as individual propietorships,
family partnerships or family corporations. As
illustrated in Table 8, the largest farms tended to be
other than individual proprietorships. A possible reason
for this ownership-control pattern would be the increased
need for capital and managerial skills on the larger
sized farms.
TABLE 8. Percentage of Farms by Ownership Arrangement Within Farm Size8
Total Hogs Produced in 1988
Less 500 1,000 2,000 More than Total
than 500 to 999 to 1,999 to 2,999 2,999
Ownership Arrangement Individual 73.1% 77.8% 66.7% 75.0% 29.4% 51.0% owner
Family 22.8% 18.5% 26.7% 25.0% 38.2% 30.9% Partnership
Outside .0% 1.9% 2.2% .0% 14.7% 7.9% partnership
Limited 2.1% 1.9% .0% .0% .0% .4% family
Corporation .0% .0% 4.4% .0% 13.2% 7.4% family
Corporation .7% .0% .0% .0% .0% .1% other
Other 1.4% .0% .0% .0% 4.4% 2.3%
Total 100.0% 100.0% 100.0% 100.0% 100.0%100.0%
8 1989 MSU Swine Survey. Unpublished data. Michigan Agricultural Experiment Station and Michigan Agricultural Statistics Service.
3.Location within Michigan
Swine farms can be found throughout Michigan, but
they are concentrated in the southwestern part of the
state. As illustrated in Figure 1, the top four counties
for hog numbers in rank order are Cass, Allegan, Ottawa
and Van Buren. These four counties are clustered in
southwestern Michigan. Together these four counties
account for approximately 37 percent of the swine numbers
in Michigan.
4.Types of Swine Operations
Farrow-to-finish is the predominant type of Michigan
swine farm enterprise, with those farms having no
farrowing enterprise accounting for more than 25 percent
of the swine farms. Data in Table 9 support the
importance of the larger farms to the swine production
industry. These data indicate that farms producing more
than 1000 head per year account for less than 30 percent
of the farms but almost 80 percent of the hogs produced
on Michigan farms.
TABLE 9.Types of Michigan Swine Operations -- Percentage Distribution of Farm Units (Percentage Distribution of Hogs Produced)9
Total Hogs Produced in 1988 Total
Less 500 to 1,000 to 2,000 to More than
than 500 999 1,999 2,999 2,999
Description of farm enterprise
Farrow-to-finish
20.8% 11.1 9.0 2.9 4.7 48.4
(4.2%) (6.7) (10.9) (5.8) (30.5) (58.1)
Farrow, sell feeders
4.3 2.5 2.2 0.4 0.7 10.0
(0.9) (1.5) (2.6) (0.7) (5.5) (11.2)
Farrow, sell both
11.8 1.4 1.1 0 0.7 14.7
(2.4) (0.9) (1.3) (0) (2.2) (6.7)
Buy feeders, sell finish
14.7 3.9 3.9 1.1 2.2 25.8
(3.0) (2.4) (4.8) (2.2) (11.2) (23.5)
Other
0.7 0.4 0 0 0 1.4
(0.1) (0.2) (0) (0) (0) (0.4)
% of total farm units
52.3 19.2 16.2 4.3 8.0 100%
% of total hogs
produced
(10.6) (11.8) (19.6) (8.7) (49.3) (100.)
91989 MSU Swine Survey. Unpublished data. Michigan Agricultural Experiment Station and Michigan Agricultural Statistics Service.
5.Hog Sales and Slaughter
In size of Michigan agricultural enterprises as
measured by cash receipts from marketings, the Michigan
hog sector ranks fourth to sixth each year. One
characteristic of the swine sector is the variability of
hog prices as a function of supply and demand forces. As
hog numbers and prices vary, the importance of the hog
sector relative to other sectors changes. Nevertheless,
as illustrated in Table 10, the importance of hogs to the
Michigan agricultural economy has been steady to
increasing accounting for 4.5 to as much as 8 percent of
total agricultural sales.
TABLE 10.Michigan Hog Sales as Percent of Total Michigan Agricultural Sales10
Year Hog sales Total ag sales $ Hogs/$ total ag
($1,000) ($1,000) (%)
1989 $197,907 $2,940,387 6.73 1988 193,744 2,739,381 7.07 1987 212,560 2,631,438 8.08 1986 195,293 2,590,864 7.54 1985 178,243 2,915,425 6.11 1984 203,601 2,944,667 6.91 1983 163,245 3,045,426 5.36 1982 132,554 2,790,947 4.75 1981 129,020 2,773,946 4.65 1980 135,678 2,730,869 4.97 1979 124,490 2,337,059 5.33 1978 97,554 2,172,301 4.49 1977 95,545 1,900,844 5.03 1976 102,205 1,728,377 5.91 1975 101,511 1,660,980 6.11 1974 86,762 1,662,277 5.22
10Michigan Agriculture Statistics, 1991-1975, Michigan Department of Agriculture, Michigan Agricultural Statistics Service, Lansing, Mich.
For Michigan swine producers to be financially
competitive with producers in other states, Michigan hog
prices must be comparable. Michigan hogs are sold not
only in Michigan, but to packers in Ohio, Pennsylvania,
Virginia, Iowa, Indiana and Illinois. Conversely, hog in
shipments to Michigan also occur. Michigan has
traditionally been a hog-deficit state, in that more hogs
are slaughtered in Michigan than are produced here.
Table 11 data indicate that hog slaughter in Michigan has
trended downward since 1984. Some packing plants have
exited from the industry and others have reduced their
slaughter numbers to concentrate on more value-added
products by processing the carcasses. Still, the hog
slaughter capacity in Michigan exceeds the amount
currently produced in state. The bottom-line current and
future concern for the Michigan hog production industry
is for proximate hog slaughtering capacity that can be
financially viable and pay prices competitive with other
geographic locations.
TABLE 11.Commercial Hog Slaughter11
Michigan
Year U.S. Hogs As % of Pounds/head, Total
(1,000 head) (1,000 U.S. liveweight pounds
head) (1,000)
liveweight
1991 83,660 1990 80,505 3,836 4.8 241 925,225 1989 83,653 4,875 5.8 240 1,168,141 1988 82,917 4,918 5.9 238 1,168,088 1987 76,859 4,527 5.8 236 1,069,718 1986 75,084 4,625 6.2 237 1,095,979 1985 79,602 5,061 6.4 239 1,209,987 1984 77,096 5,323 6.9 241 1,280,809 1983 81,864 5,285 6.5 241 1,274,962 1982 77,096 5,219 6.8 242 1,260,560 1981 85,691 5,521 6.4 239 1,321,221 1980 89,561 4,678 5.2 241 1,125,724
11Michigan Agriculture Statistics, 1991-1981, Michigan Department of Agriculture, Michigan Agricultural Statistics Service, Lansing, Mich.
III.Reasons for Structural Changes in the Swine Production Industry
The previous data and discussion have presented
strong evidence of a rapid decline in numbers of swine
producers and an increase in the size of the individual
producers, while ownership and control continue to reside
primarily in the family farm unit. Michigan not only
increased in swine production during the 1980s, but also
increased its share of national production. This section
will briefly explore some possible reasons for these
changes.
A. Farm financial crises of early 1980s -- The
financial crisis generally applied to much of the land-
based agriculture, including swine producers. At the end
of the 1970s, inflation expectations were high as land
prices soared. The real cost of money was low as
inflation continued. Financial leverage was practiced as
farms expanded in size. This time period followed
relatively high hog prices in 1978 followed by low prices
in 1979 and 1980. As we entered the 1980s, nominal
interest rates increased and land prices peaked in 1981
and then fell. These forces drastically affected young
and highly leveraged farms. The end result was farm
exits and consolidation into existing, subsequently
larger, farms.
B. Investment in non-size-neutral technology -- The
1980s continued the development of confinement housing
systems. These facilities are capital intensive and
substitute for or reduce labor. As suggested in Figure
2, economies of scale provided economic pressures for
facilities to increase in size because the cost per unit
of capacity tends to decline with larger facilities. As
swine producers invested in capital-intensive facilities,
financial pressure existed to fully employ these
facilities with an optimal number of hogs. The end
result is that total swine production capacity increased.
This increase in production took place primarily on those
farms that were specializing in swine production and
viewing hogs as a business profit center.
C. Federal income tax regulations -- During the
1980s, tax-related incentives to stimulate investment in
depreciable capital assets included investment tax
credits, capital gains at reduced taxation and rapid
depreciation in the form of the accelerated cost recovery
system. The combination of the highly progressive
federal income tax structure that existed until the Tax
Reform Act of 1986, the accelerated cost recovery system
and a median monthly market hog price of $45/cwt during
the 1980s provided excellent incentives for profitable
producers to expand. Those swine producers whose higher
costs and low profits did not enable them to participate
in the tax-reducing advantages of this structure had a
financial incentive to leave the swine sector.
The capital gains provision provided expansion
incentive for Michigan swine producers that had a high
turnover of their breeding stock, primarily the pasture
farrowing segment that utilizes the female for only one
or two litters. Sale of breeding stock qualified for
capital gains at reduced taxation. This provision
provided excellent financial incentive to expand this
type of enterprise.
D. Excess hog slaughtering capacity -- As noted
earlier in Table 11, Michigan slaughtered more hogs
during the 1980s than it produced. Proprietors of these
businesses often expressed their desire for additional
hog production within the state to assure them of a more
constant hog supply for their slaughter plants.
Increasing production by 1 million head per year
would help assure a strong supply of hogs for the packing
industry in Michigan. Since 1976, the number of major
hog packers in Michigan has declined from four to one.
Modernization of the remaining plant and/or the building
of a new slaughter facility is a must if the Michigan
slaughter/processing industry is to remain competitive.
E. Excess corn supply -- Michigan produces more
corn than is required to feed its livestock industry.
Having an excellent local feed supply is an advantage to
the livestock industry that could be exploited with an
expansion in livestock numbers.
Michigan currently feeds approximately 40 percent of
the corn grown in the state. Increasing hog production
by 1 million head per year would add value to an
additional 14 million bushels of corn currently being
shipped out of the state as a cash crop.
F. Animal breeding technology -- Emergence of
commercial seedstock firms that can provide large numbers
of more uniform breeding replacement animals has enabled
commercial hog producers to expand and still produce a
uniform, quality product.
G. Animal production and management technology -- A
complex of managerial activities involving animal
feeding, housing and preventive health strategies has
facilitated the intensive use of larger sized confinement
facilities. Production scheduling utilizing all-in, all-
out with sanitary cleanup between groups has increased
the hog throughput in confinement facilities. Phase
feeding, split-sex feeding, and attention to ventilation
and space requirements have enabled producers to increase
the number of hogs produced from a confinement facility.
Feeding of boars rather than barrows to improve
efficiency of gain and carcass quality will become a
reality in the swine industry.
H. Managerial skills of Michigan swine producers --
The strength and growth of the Michigan swine industry
can largely be attributed to the abilities of its
producers. They have been most willing and eager to
expand their knowledge base, as demonstrated by their
support of Michigan State University programs and the
formation of a strong Michigan Pork Producers
Association. The family-farm orientation of most
Michigan swine-producing units remains traditional, while
their attitude is progressive and positive for the need
to adapt to change.
IV.Seven Assumptions for the 1990s into the 21st Century
1. The federal deficit will continue to grow in
nominal terms and executive pressure will be to reduce
budgetary exposure in the U.S. Department of Agriculture.
This would translate into a lowering of the safety net
programs for agriculture. One direct impact upon the
swine industry would be upon grain prices, which would be
more variable. Prices would rise if grain acreage is
reduced.
2. The food industry will be consumer driven.
Consumers' increasing concern over human health and
nutrition will affect the quantity and quality of meat
consumed. Demand for lean retail cuts will increase.
Producers who cannot meet ever-increasing leanness
requirements from the packers/processors who are selling
branded products will receive lower prices. The
continuing increase in quality of pork retail cuts should
enable the pork sector to maintain its market share.
3. Vertical coordination in the food system from
the consumer down to the input supplier will increase.
Gaining predominant influence will be packers/processors
producing branded products for the consumer. Because of
the brand identification, packers/processors will be
increasingly concerned with the percent lean cuts
provided in a hog carcass. This heightened awareness of
consumer demands will encourage packers/processors to
control the quality of the live animal being received at
their plants. This concern will be translated into
packers/processors placing a severe price discount on
animals not meeting their specifications. This need will
lead to packers/processors offering contracts to
producers who can meet their specifications. An
alternative route for packers/processors to guarantee
themselves an adequate quantity of quality hogs is to
integrate backwards and actually own the breeding stock
and/or commercial stock that is to be slaughtered.
4. Consumer concern about use of animal growth
hormones may lead to a price premium for "natural" pork
for a small segment of firms that do not adopt this
technology. If the majority of consumers accept pork
grown with this technology, commercial swine producers
will adopt the technology to remain cost competitive.
Although growth hormone usage may lead to expansion by
the lower cost firms, it should be size neutral if the
technology can be purchased and administered in divisible
units.
5. The lowering of international trade barriers
will offer the opportunity to expand pork markets and
present the need to be cost and quality competitive with
foreign producers. An example would be the
liberalization of trade agreements as in a North American
Free Trade Agreement. Michigan swine producers would
need to be competitive with Canadian hog producers to
benefit from this agreement.
6. Special interest groups such as animal welfare and animal rights groups will continue to make their presence known. Continued efforts to husband animals in a humane fashion may lead to some size and design changes for space requirements in swine confinement housing. Confinement housing using liquid manure is expected to continue and grow as the primary swine housing system for growing and finishing animals. Some comfort stalls and bedding requirements may emerge for sows nursing baby pigs. Changes in this direction would increase the labor requirement and costs associated with producing hogs.
An alliance of animal rightists with vegetarians
to oppose use of animals for human food will present a
formidable educational task for animal producers. The
efforts of this group are one reason that the meat
industry is not likely to expand in total per capita
consumption of meat products.
7. The environmental agenda will become
increasingly important in determining the "rules of the
game". Though the most frequently expressed concern is
odor control, the more important problem that relates to
human health will be water quality as it is affected by
nitrates and phosphates in ground-water. This problem
relates to manure management and possible feeding
strategies for individual swine producers.
V.Projections to the Year 2000
A.Swine Production Projection
Table 12 contains a projection of swine production
to the year 2000 for both the United States and Michigan.
The projection for the United States is basically for
pork to maintain its market share with approximate seven-
year cyclic variations about this stable trend.
Michigan is expected to maintain and slightly
increase its share of U.S. swine production. The
political/economic climate for and neighborly acceptance
of swine production need to be improved to encourage
rapid growth in the swine sector. The economic
performance of the swine enterprise has been excellent
compared with the performance of most other animal
enterprises in Michigan. Swine can continue to be a
profitable enterprise for those producers who are
currently competitive and strive continuously to improve
the efficiency and performance of the swine enterprise.
TABLE 12.Swine Projection to the Year 2000
United States Michigan
Year Projected pork Estimated Share Est. Est.
production12 liveweight livewgt #
(million lbs) (million (mil. litters
carcass weight lbs.) (%) lbs.) @ 9 pigs
sold/
litter
@ 240
lbs.
(1,000
litters)
1992 17,205 23,896 2.30 550 254.6
1993 16,852 23,406 2.34 548 253.7
1994 16,136 22,411 2.38 533 246.8
1995 15,885 22,063 2.42 534 247.2
1996 16,622 23,086 2.46 543 251.4
1997 17,307 24,038 2.50 601 278.2
1998 17,337 24,079 2.54 612 283.3
1999 16,827 23,371 2.58 603 279.2
2000 16,013 22,240 2.6213 583 269.9
12"Summary of the FAPRI Baseline", Food and Agricultural Policy Research Institute, Iowa State University, and the University of Missouri-Columbia, Novmber 1991.
13Ferris, J., Michigan Agricultural Model Projection, Michigan State University, September 1991.
B.Number and Sizes of Farms
The number of swine farms is declining and the size
of remaining swine production units is increasing. The
direction is clear, the question is how rapidly the
change will occur. The growth and increased size of
swine production units will occur primarily on those
farms already in business. It has been encouraging to
the authors of this paper to observe the next and new
generation entering the swine production business. We
believe that a healthy group of willing and able swine
producers exists in Michigan. We believe that the
Michigan swine production industry can grow in hog
numbers, if not in people participants.
The swine production projections presented in Table
12 suggest that Michigan could produce approximately 600
million pounds of liveweight hogs in the year 2000. The
numbers of sows and farms that would be involved are
obviously a function of size and efficiency assumptions.
We believe that the need for cost efficiencies, an
adequate genetic program to produce a quality hog and
increased marketing savvy will continue to pressure out
those producers who have viewed the hog enterprise as a
sideline or part-time business. Access to a stable and
competitive market system is a must if smaller operations
are to remain viable and provide a starting point for
young producers. If these efficiency pressures continue,
economically viable hog production businesses will become
larger.
How many hogs and hog-producing units can be
expected in Michigan in the year 2000? Using a projected
600 million pounds of liveweight and an average weight of
250 pounds per market hog sold, the total number of hogs
sold by Michigan producers would be 2.4 million. The
number of farm units producing hogs is expected to
continue to decline during the current decade. Farm-of-
origin identification of individual hogs and the
production of quality hogs demanded by the
packer/processor will encourage smaller producers to
improve the quality of their hogs if they are to remain
in business. The rate of exodus by this type of producer
and those who are not financially viable will increase in
the '90s. With an average rate of exodus of 8.5 percent
per year, approximately 2000 swine producers would remain
in Michigan as we enter the 21st century. Table 13
presents an estimate of the size distribution of Michigan
swine producers in the year 2000.
TABLE 13.Michigan Swine Production Units, Projected to Year 2000
Size Category
Number hogs sold per year
Less than 1000- 2000- More than
1000 1999 9999 10,000
Number farm
units
(Percentile distribution) 2000 (100%)
1250 200 530 20
(62.5) (10) (26.5) (1.0)
Number
hogs produced
(Percentile distribution) 2,400,000 (100%)
360,000 240,000 1,560,000 240,000
(15) (10) (65) (10)
Average number hogs sold per farm
290 1,200 2,945 12,000
C.Impediments to Expansion of Swine Farm Size
For those farms desiring to expand, the five
obstacles or impediments most frequently identified in
the 1989 MSU Swine Survey as hindering growth of farm
size were:
1.Limited financial resources. 2.Unstable hog prices. 3.Availability of skilled hired labor. 4.Uncertainty about environmental laws. 5.Odor problems and proximity to neighbors.
In response to a question on perceived needs for
research-Extension efforts needed to improve performance,
the five highest priorities identified were:
1.Disease control. 2.Financial management. 3.Feeding -- balance rations. 4.Marketing. 5.Farm records -- financial and production.
Other areas that were less frequently identified by
these farm respondents that the authors considered
critical to improvement and growth of the Michigan swine
sector are manure management and odor control as related
to design of swine facilities. Additionally, the
capability of current swine breeding systems to produce a
quality, uniform hog is a concern. Many producers use a
rotational cross whereby replacement gilts are raised and
purebred boars are purchased. Another alternative is to
employ a terminal cross to improve uniformity and quality
of the market hogs produced and meet the quality concerns
of our consumer-driven market. Additional alternatives
need to be identified and their feasibility determined.
D.Improvement in Competitiveness of Michigan's Swine Industry
Improving the competitiveness of Michigan's swine
industry is important if the industry is to continue to
grow in the future. For operations to improve their
competitiveness, they need to employ a systems analysis
approach to the production system. A viable record and
monitoring system is necessary to evaluate performance
standards of individual units and diagnose where changes
can best be made to improve profitability. This record
system also provides the data base to further evaluate
each unit for strengths and weaknesses. The development
and use of an integrated decision support system will
enhance this area.
E.Improvement of Quality and Consistency of the Product
Current trends toward the leaner pork demanded by
health-conscious consumers will continue. Improving the
lean composition of pork and maintaining a high quality
product will be a challenge to the industry. Recent
studies indicate that 16 percent of all U.S. pork
carcasses have a quality problem that reduces yield and
shelf life. Increased emphasis is needed to detect
PSS/PSE (Porcine Stress Syndrome/pale, soft, and
exudative) susceptible hogs quickly and accurately, as
well as study methods of handling hogs prior to slaughter
to improve pork quality. Matching nutrient needs to
genetic potential can greatly improve efficiency of
production and lead to a high quality product. An
aggressive program is needed to improve the quality and
uniformity of swine produced in the state to meet
consumer demand. Since boars grow more efficiently and
produce a leaner carcass than barrows, boar feeding
studies are needed to discover a method to reduce the
boar taint in the meat.
F.Improving Animal Well-being and Food Safety
Producers consistently rank swine diseases as a
major problem in swine production units. New
technologies are needed for animal management systems,
genetics and nutrition to reduce animal health problems.
This can be partially accomplished by reducing stress on
animals and by enhancing the immune system through
genetic selection, nutrition and management. A future
goal would be to develop a system of production that
would minimize or eliminate the need for antibiotics. In
addition to reducing costs and improving animal well-
being, eliminating antibiotics use would reduce potential
residues and so improve food safety.
G.Coordination of the Swine Production System
Coordinating the number of hogs to be produced,
price discovery and delivery of the hogs to a
packer/processor will continue to be an intriguing
problem. On the production side, family farm ownership
and control is expected to continue its predominant but
declining role in swine production units, with an
increasing share captured via vertical integration by
packers/processors and possibly by feed manufacturers.
Production contract arrangements will also increase to
coordinate the number of hogs produced and reduce the
risk exposure -- and upside profit opportunities -- of
the individual producer.
Larger producers are expected to deal directly with
the packer/processor in establishing price and arranging
for delivery of a given quantity of hogs of a certain
quality at an established time and place. For the
remaining producers, livestock marketing cooperatives or
commercial hog buying operatives will need to play a
market coordinating role. Heinold and The Michigan
Livestock Exchange currently play that role. It is
predicted that individual farm units will have to devote
more time to price discovery and/or hire a private
marketing consultant.
H.Shifts in Location within the State
Given the projection of a moderate to slow increase
in swine production during the 1990s and the projection
that much of this increase will occur on currently
existing farms, and barring any environmental regulatory
mandate, no dramatic shifts are likely to change where
hogs are produced in Michigan. If significant swine
growth in Michigan is to occur, it most likely will occur
in an area other than the current four largest swine-
producing counties in southwestern Michigan. Figure 3
illustrates phosphorus balance -- the relationship
between phophorus in manure and that needed by row crops
and small grains. Any county with a number greater than
1 is depositing more phosphorus from manure than these
crops are using. Counties appearing to have growth
potential for swine production based on this measure,
corn availability and marketing outlets would appear to
be in The Saginaw Valley, mid-Michigan and the Thumb
area.
VI.Emerging Issues
A.Programs that could Strengthen the Swine Industry
1.Labor and Personnel Management
As farm firms become larger, they will need to
employ hired management and labor beyond the immediate
farm family. The demand for skilled workers and managers
will exceed the supply of graduates from vocational-
technical schools or the Institute of Agricultural
Technology at MSU.
2.Manure Management
Alternative ways to handle manure or to alter its
composition need to be explored. Reducing odor and
tailoring manure application to cropping requirements,
composting or other processing alternatives need to be
identified and evaluated. Altering the composition of
manure through such techniques as feeding microbial
phytase needs to be researched. Current research
indicates that feeding phytase can reduce manure
phosphorus levels by up to 50 percent. Other
nutritional strategies need to be explored to reduce
other nutrients in the manure.
3.Cooperative Extension Programs
Large commercial producers need quick resolution to
these problems. Ready access to information sources can
be an important part of the solution system. Extension
currently has an excellent network to provide problem
awareness and problem-solving assistance or
entrepreneurial access to information to assist
producers. There is a continuous need to have highly
trained and capable Extension people in the field who can
help producers adopt new technologies and improve the
business management of swine farms.
4.Venture Capital Formation Assistance
As farms become larger, the capital requirements
increase and the possibility of private family funding of
these businesses declines. Assistance could be provided
in putting together financial packages to assist smaller
and newer swine producers to grow into the business.
5.Creation of and Access to New Knowledge
Research programs to increase the knowledge bases
need to be responsive to the needs of the industry but
not captured by private industry needs. Examples of
problem areas needing attention are:
1. Manure and odor management.
2.By-products as a source of feed.
3.Mycotoxins in feedstuffs -- prevention and
detection; e.g. enzyme-linked immunosorbent assays
(ELISA) tests.
4.Improving production practices to provide a more
uniform, higher quality hog.
5.Alternative facility systems that are cost
competitive.
6.Herd health -- impact of nutrition and environment
on health and well-being.
7.Risk management as related to integration of
marketing, financial and production activities.
8.Low-cost production systems that can keep Michigan
competitive with other hog- producing states. More
opportunities exist to lower production costs than to
increase the market price received.
B.Relationship to MSU Support Programs
The Michigan swine production industry has been very
supportive of swine research and Extension efforts. The
1989 MSU swine survey provided the following evaluations
for three major MSU activity areas:
MSU Animal Health Diagnostic Lab -- 61.5 percent of
respondents rated it good to
excellent.
MSU Cooperative Extension Service -- 68.7 percent of
respondents rated it good to excellent.
MSU Agricultural Experiment Station -- 57.4 percent
of respondents rated it good to excellent.
Two Extension positions -- MSU swine specialist and
CES southwestern area livestock agent are currently
vacant and retirements are pending from the nutrition
research faculty in the Animal Science Department. It
would be difficult to envision not filling these
positions and having fewer resources in the swine area.