Vita Plus Corporation
P.O. Box 259126
2514 Fish Hatchery Road
Madison, WI 53725-9126
1.800.362.8334
608.256.1988
 Vita Plus Swine Summit 2011
Gunderson: Embracing 'The New Normal' in Our Industry
Today’s news headlines are filled with crisis stories – from natural disasters and political uprisings across seas to higher food prices and escalating fuel costs here in the U.S. During his opening presentation at Vita Plus Swine Summit 2011, Vice President Al Gunderson explained how these events could be labeled as the “new normal” for American citizens. But this kind of new normal might not be all that different from what attendees’ parents and grandparents experienced in their generations. Gunderson shared a video highlighting the changes brought about by the Great Depression and World War II and pointed out that people of that era adapted to the new normal and created a new kind of success. “We’ve always had events that have changed our perceptions of what’s normal,” he said. Gunderson said three major drivers of change bring about a new normal in a society. First, people cause change and, the more people, the faster that change occurs. Second, technology causes the rate of change to feed on itself. Third, we’ve gained more new information between 2000 and 2010 than in the previous 5,000 years. So how do swine producers adapt to the new normal? On a personal level, it’s important to set goals, appreciate successes, take time to relax and focus on good health. On an industry level, it’s important to understand all of the factors that influence change in the industry. The U.S. is no longer the only “player” in the markets. As the standard of living increases in other countries – particularly China – demand for higher quality food will increase exponentially. The Chinese government recognizes that it must take care of its citizens and keep them happy in order to remain a world power. Gunderson said China will focus on building a harmonious society and scientific development between 2011 and 2015. This means addressing the rising inequalities between Chinese citizens. To do so, the government will place priority on more equitable wealth distribution, increase domestic consumption and improve social infrastructure and social safety nets. It will also shift emphasis from urban and coastal growth to rural and inland development. Gunderson reminded swine producers that adapting to the new normal will take a change in thinking. It’s human nature to fight change or run from it. Gunderson challenged producers to instead “flow with it” and use the new normal to their advantage. He said this will require everyone in the industry to “give up, toughen up and wise up” in certain situations. Gunderson concluded his presentation with a final challenge to attendees: embrace change and use new demand, technologies and information to build your business. “Carpe mañana,” Gunderson said. “Seize tomorrow.”
Swanson: Economics & Commodity Volatility
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It’s a growing world and people need to eat. That’s great news for today’s livestock producers. During his presentation at Vita Plus Swine Summit 2011, Michael Swanson, an economist with Wells Fargo, said hog producers should be optimistic and described demand for agricultural products as “absolutely excellent” as the United States becomes the “go-to supplier” for food. However, capitalizing on this demand will take some work and risk management should be at the forefront of each producer’s mind. Swanson challenged producers to carefully consider their cost of production and then look at how they can get strong margins for their products. It’s not about guessing the highest price; it’s about securing the best margin. “Planning can’t be about predicting,” Swanson said. The economist highlighted several factors that drive volatility:
Swanson said the current ethanol policy will cause everyone to hold their breath through this season. If it’s a great year with a great harvest, the livestock sector should be okay. However, if the crop is affected by drought, flooding, etc., it could be a completely different story with low supply, high demand and skyrocketing grain prices. The only thing that will bring down the cost of corn is demand doubts. “We have deliberately combined weather and energy volatility,” Swanson said. “We will live to regret that choice.” With weather and ethanol prices largely outside of producers’ control, Swanson said producers should focus on the areas they can affect. Increase margins first by making good decisions for owning and renting land. Also, use risk management to “work the trade.” Swanson said risk management takes the guess work out of producing and selling hogs. The key is making informed decisions and “keeping fear and greed on short leashes.” Practically speaking, Swanson provided these guidelines for management:
To conclude, Swanson related risk management to his golf game. “A hole-in-one is always luck” and usually doesn’t result in a win at the end of the game. In contrast, the “scratch golfers” combine skill and practice to recognize changes in the course, adapt their strategy and hit par every time. Swanson said, “When the environment changes, it’s the adaptable that thrive, not the well adapted.”
Stieve and Bloom: Putting Social Media to Work for You
Today’s society is global and without the opportunity to meet face-to-face, people are looking for ways to maintain connections and relationships over long distances. That’s where social media becomes a valuable tool for today’s pork producers to use in communicating with consumers. During their presentation at the Vita Plus Swine Summit 2011, Marjorie Stieve and Andrea Bloom, Vita Plus marketing, reminded attendees that social media is intended to be a two-way conversation. Not only do companies or farms share information about pork production, but consumers have the opportunity to provide feedback, share opinions and ask questions. When working with consumers, a top goal for any hog producer should be to build a lasting relationship that is based on trust. Producers must prove that they care about consumers’ interests and needs and that they also value their opinions. In short, building this relationship requires two-way communication. That’s where social media becomes an effective tool. Stieve and Bloom provided a summary of today’s most popular social media sites:
To make the most of these sites, Stieve and Bloom reiterated some of the basic guidelines for communicating with consumers. First, producers must lead with their values, not with science. The average consumer is three or more generations removed from the farm and thus cannot relate to a lot of the challenges or practices on a farm. However, values such as hard work, commitment, providing for a family, concern for the environment, care for animals, etc. are universal. Producers can connect with consumers through their shared values and use that to provide more details about pork production. Secondly, producers should show they care about consumers and want to engage with them. To do so, they must carefully consider their language, address ALL questions that arise, ask consumers what they want to know and listen to any concerns consumers may have. Lastly, Stieve and Bloom reminded attendees that “even the winner of a boxing match gets a black eye” and they should never return the mudslinging from activist groups or agenda journalists. They shouldn’t try to go point-for-point on every argument. Rather, they must always maintain positive attitudes as they share information from their farms. “Talk about what you do best and why you do it,” Bloom said. “That’s what a consumer will remember most.”
Kubesh: Harnessing, Purchasing and Maintaining Technology
Today’s technology provides invaluable tools for hog producers to manage their business and communicate with peers, employees and consumers. However, as Vita Plus Information Technology Manager Phil Kubesh pointed out, understanding computer security and protecting your information is a key to embracing that technology. Kubesh provided the following checklist to attendees at Vita Plus Swine Summit 2011:
Dierks: One-on-One with NPPC's Chief Executive Officer
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The National Pork Producers Council (NPPC) is taking part in and leading many important projects related to the issues facing today’s pork producers. Neil Dierks, NPPC chief executive officer, shared updates on a few of those issues with Vita Plus Swine Summit 2011 attendees. World demand for pork China continues to grow and develop. As it does, demand for high quality meat products increases. China has limited land mass to increase domestic hog production and will not be able to meet demand on its own. It will look toward the U.S. for meat products. 2012 Farm Bill Oversight hearings will take place this year and Farm Bill markups may begin in 2012. With a focus on reducing the deficit, the federal government will be looking at all major spending and revenues. This includes an evaluation of farm programs, conservation efforts, crop insurance and nutrition programs. Dierks said, “Agriculture will not likely be cut disproportionately.” Animal health: Surveillance and trade consequences Right now, the world counts on the U.S. for high quality meat exports. An animal health “Armageddon” (such as an incidence of foot and mouth disease) could change that. The pork industry needs to consider animal health initiatives for surveillance, trade management and state-level responses to any “black swan” events. Activist opposition Activist groups like People for the Ethical Treatment of Animals (PETA) and the Humane Society of the United States (HSUS) are not going anywhere. Producers must continually work together to promote a positive image of modern pork production. NPPC has joined forces with other commodity groups to form the U.S. Farmers and Ranchers Alliance. This group will spearhead national agriculture image campaigns in contrast of the negative media created by activist groups. Environmental issues Concern for nitrogen, phosphorus and other sediments will also continue to be on the radar at the state and national level. As of now, producers face no immediate new rules for concentrated animal feeding operations (CAFO), but they will likely see increased pressure on several levels. NPPC will continue conversations with the Environmental Protection Agency (EPA) in hopes that nutrient management laws will not negatively affect producers.
Dr. Tim Loula with the Swine Vet Center has extensive experience in the hog industry and shared some of his insights with producers at Vita Plus Swine Summit 2011. Exports and cost of disease Currently, the U.S. exports 21 percent of its pork products. That’s great news right now, but “really puts us in a bad place” if the industry sees disease outbreaks such as foot and mouth disease. Many countries may close their borders to U.S. pork products if that would happen. Loula said producers must really work to maintain biosecurity on their operations to prevent a disaster like this from occurring. Grain prices With $10 corn on the horizon, “the cost of stocking the shelves is double.” That means that producers are investing twice as much into each pig and the cost of a dead hog is double too. Animal health needs to be a top priority. Alternative feedstuffs With high grain costs, producers are looking to more feasible alternative feedstuffs. Although these feedstuffs can work, pigs must be transitioned to new diets – they don’t like sudden changes in what they’re eating. Work closely with your nutritionist to develop these transitions and maintain animal health and performance. Also keep in mind that alternative feedstuffs, such as DDGS, can change the fat profile of an animal and packers are becoming increasingly concerned with this issue. They may impose limits on DDGS use. Calcium, phosphorus and vitamin D issues For the first time in a long time, Loula is seeing an increase in the incidence of calcium, phosphorus and vitamin D deficiencies. These deficiencies can result in a 1- to 3-percent mortality rate per day, further emphasizing the need for an increased focus on great nutrition. Activist organizations Loula reminded producers that they must always farm like they’re being videotaped at every moment. That’s because they never know when an activist may decide to target their operations. It’s also vital that producers share positive information about modern pork production. For example, recent University of Missouri research shows that moving pigs indoors and on slats has indeed led to healthier animals. Producing food efficiently This world is an increasingly hungry world. Loula said producers need to recognize their social responsibility to produce food efficiently – with fewer inputs and better performance – to meet growing demand for food. It also means they must better manage their feeds and cannot waste any of the grain they feed. He predicted, “People are going to start criticizing us for wasting corn.”
Brumm: Improving Production Efficiencies to Manage
Raising hogs has become far too expensive to not take full advantage of production efficiencies. Dr. Mike Brumm with Brumm Swine Consultancy, Inc. shared a few suggestions for improvement with attendees at Vita Plus Swine Summit 2011. Feeder design Many feeders aren’t adequate for today’s pigs. Brumm said producers need to carefully evaluate whether feeders are big enough to keep pigs at the feeders or whether the small space is discouraging intake. For example, a “six-hole” feeder has a six-inch-by-six-inch hole for each pig. That’s okay for a 35-pound pig, but is it still adequate for a 55-pound pig? Wet/dry feeders versus dry feeders Wet/dry feeders have a few advantages over dry feeders. First, they allow for more pigs per feeder space and pigs eat faster. They also show higher feed intake in hot weather. However, they have a few disadvantages too, including fatter carcasses, same to slightly poorer feed conversion and salt damage to concrete. They also can’t be used to start weaned pigs. Carefully consider what feeder type best fits your operation and production goals. Feeder adjustments With today’s escalating grain prices, producers absolutely cannot waste feed. Based on research from Kansas State University, Brumm recommends “feeds be adjusted to allow feed to cover slightly more than half of the feed pan without feed accumulating in the corners.” To better train employees, Brumm recommends producers work with their team and take pictures of proper feeder adjustments in their own facilities. That way, staff can compare the photos with the feeders and better judge when they need to make adjustments. Pen usage Brumm said a common error he’s seen is improper pen usage. For example, producers may designate a pen as a “sick pen” and it will often house just one pig – if any – or serve as a storage area instead. This may also force an overstocking in the other pens. Brumm said the goal should be to have the same pig numbers in all pens. He reminded producers that each 3-percent change in space equals a 1-percent change in gain. Summer heat management The key to summer heat management is an understanding of latent heat, which is the heat involved in converting liquid water to water vapor through evaporation. This evaporation is what keeps pigs comfortable during the summer months. Brumm told producers that they need to make sure fans in the barn are pointed toward the pigs to promote cooling at their level. Fans pointed straight across the barn do nothing but keep the ceiling air cool. Next, have an adequate sprinkler system installed in your barns. Once the pigs are wet, stop the sprinkling and allow for the water to evaporate. The goal should be a maximum of two minutes of “on time” with 60-percent pen coverage. If you continually wet the pigs, you’ll increase the relative humidity and evaporation will actually decrease. It could also lead to hoof health and respiratory issues. Brumm said research has shown that sprinklers (large droplets of water) are more effective in cooling hog barns than foggers (small droplets of water). That’s because the small droplets may be carried away by the fans without ever reaching the animals. In contrast, a sprinkler’s large droplets do reach the animals and allow for evaporation from the pig’s skin. Be sure your sprinkler system is the right system for your barn. Curtain barns should have cone-nozzle sprinklers while tunnel barns should use a flat fan nozzle parallel to the air flow.
Vita Plus Consultants: Adapting Nutrition Programs to
When Vita Plus swine nutritionists work with their customers, the ultimate goal is to construct nutrition programs that optimize profitability. The consultants shared the thought process behind this strategy with Vita Plus Swine Summit 2011 attendees. According to Dr. Dean Koehler, the “old normal” of nutritional programs was like a puzzle with a two-dimensional view of cost and performance. The “new normal” is much more complex – a Rubik’s cube of factors. That’s due to high costs of major nutrients and more sophisticated data systems. This has led to a multi-dimensional approach to formulation decisions. Today’s factors include: nutrient requirements, ingredient nutrient profiles, diet costs, feed costs per pig, and animal performance (ADG and carcass) as well as system structure, which includes health, stocking density, days on feed and the packer matrix. In the new normal of diet formulation, revenue (market hog sales) is just as important as diet costs and formulation strategies can have an impact on market hog revenue. Using their opportunity costs per pig calculations, nutritionists can assign value to increasing market weights across populations of pigs. Often times, increasing the weight of light pigs can have a substantial positive impact on revenue – more than a straight line calculation would suggest. The Vita Plus swine team reminded producers that every farm is different and one strategy will not fit all operations. Rather, strategies and decisions must be customized to fit individual needs and goals and optimize profits. Consultants have the resources to help in making these decisions.
Meyer: Pork Industry Economic Review and Outlook
Dr. Steve Meyer with Paragon Economics, Inc. has extensive experience with the markets and hog production. According to Meyer at the Vita Plus Swine Summit 2011, the biggest player in this year’s game will be ethanol. "Ethanol will compete successfully for corn in 2011, regardless of policy issues,” he said. Meyer said the primary reason is high oil prices driven heavily by a stronger world economy. Ethanol plants are marginally profitable, but they too are paying a huge bill with today’s grain prices. They most likely could not operate without subsidies. This year, ethanol will use more than one-third of the total corn crop. That means agriculture will see a battle for acreage between corn, soybeans, cotton and wheat, with likely a 4-percent growth in total corn acres planted. U.S. demand for pork will not likely show a lot of growth in the upcoming year. Although income growth is improving, it’s not yet back to the pre-recession average. Unemployment remains high, which is negatively related to consumer confidence. In addition, people have learned to save their money and aren’t spending as much at the store. Exports will have a bigger impact on demand. The U.S. dollar remains weak, which is good news for exporters as other countries are able to buy more products and keep demand high. As an example, 2010 U.S. pork exports were up 3 percent and Canadian exports gained 2.1 percent. Meyer said that although the Japanese earthquake and subsequent destruction is indeed a tragedy, it likely won’t have significant impacts on the hog markets. He said that Japan was not expected to significantly contribute to world economic growth in 2011. Japan, the top market for U.S. pork muscle cut exports, will continue to import food with even less of an ability to feed its population. Packers report consistent – and even larger – Japanese orders in the past two weeks. For the first time in several years, Meyer was optimistic about the hog markets for 2011. In fact, he said projected May profits are the eighth largest ever. “If you don’t sell some $100 hogs, it will be your own fault,” Meyer said. However, Meyer also reminded producers that it’s important to be cautiously optimistic. Risks to better profits could include a serious financial crisis in Japan, a drought in the U.S., a “double-dip” recession, “trade games” with China and/or Russia, and unforeseen “black swan” events.
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