What does the future hold for the pork industry? A group of Purdue University professors answer this question in a report they just prepared.
"The industry is becoming more industrialized, more specialized, more managerially intense," the report states. "Pork production is changing from an industry dominated by family-based, small-scale, relatively independent firms to one of larger firms that are more tightly aligned across the production and distribution chain."
How will these changes impact the future for producers? One of the authors, agricultural economist Mike Boehlje, recently presented their conclusions:
1 Site-Specific, Micro-Production Management - Micro management could reach new levels as production management goes beyond specific site and room to specific animal. For example, medication may be administered to an individual rather than to the group. Diets may be geared to the individual hog based on its genetic makeup, sex, age, health and consumer market.
An influx of information obtained from new monitoring and control systems will drive this shift. These devices will reveal even more detailed information about the hog and its interaction with the environment.
"The increased development of monitoring and control systems is just the tip of the iceberg," Boehlje says. "I believe we will have the same controls and monitors of diseases and other illnesses in pork production in five years as there are now in for air quality and temperature."
The micro management must be economical, however. This may create the need for "best technologies systems," which apply the knowledge of genetics, health, nutrition, environment and market to a system for a large number of animals.
2 Supply Chain Optimized - Pork will increasingly be produced, processed and sold through supply chains in the future. The links in the chain are not necessarily through ownership, like the poultry industry, Boehlje suggests.
"Poultry went to tight ownership in contrast with what we seem to have in the pork industry, which will be aligned systems, but not necessarily ownership of them," he explains.
In fact, Boehlje expects 40 or so pork chains to develop in the next 10 years. These pork chains will link major hog producers with a processor and retailer.
3 Environmental Control - There's no end in sight for environmental regulations. "We do expect to see more, closer monitoring and a key determinant of site selection," Boehlje says. He adds that larger hog farms will be the first and most able to adopt technology to protect the environment. Smaller farms will not be as able to cost effectively adopt the technology.
Until a "technological fix" arrives to solve environmental problems, these challenges will continue to affect the size, location and structure of the hog industry.
"If we can get a technological fix in the next 2-3 years, then we think the industry won't have to move (from the Midwest)," he adds. If a technological fix doesn't appear, Boehlje expects new growth to take place in the Great Plains of the U.S., Mexico and the Canadian plains.
4 Production Associations - Producers not already involved in a production association or alliance of some type might want to look for one. The Purdue professors say associations give an edge to their members when it comes to sharing information, nutrition, genetics, pharmaceuticals and marketing.
5 Traceback - With food safety one of the most important issues today and in the future, the ability to trace back ownership become acutely important. Traceback from a pork chop to the producer who raised it (along with feed, genetics, etc.) already is possible in places like Great Britain. As food companies feel the pressure to be accountable for safe food, traceback in pork will be a reality in the U.S., too.
6 Heightened Risk from New Sources - Changes in the hog industry bring new risks. The Purdue professors say to beware of these risks:
* Variation in feed grains and protein prices likely under the 1996 Farm Bill.
* A potential shutdown of large production or processing centers.
* The risk of contract termination for those under production contracts.
* A global financial crisis, weather catastrophe or political dispute in the world, which will affect our greater dependence upon export markets.
* Less diversification that leaves producers more vulnerable to drops in feed and hog prices.
7 Production/Processing Centers - The decisions to invest in either production or processing facilities now depend on each other. Due to the high capital cost of both, new processing facilities will not be built unless sufficient hogs are available; and production facilities will not be built unless sufficient processing is available in the area.
The Purdue professors note this will intensify the interdependence between the two segments. It is unlikely new processing will be added unless a large part of that capacity is assured from either a hog production firm or organization of producers.
8 Enhance Market Share - More than any other animal protein source, pork has more opportunity to improve efficiency and therefore market share through advances in production efficiency and chain coordination.
The Purdue professors say the sow's ability to produce multiple births is a key to quickly improving production efficiencies, particularly compared to cattle and sheep. And looking at past history, continued improvements in feed efficiency are very likely.
The pork industry's current structural change of displacing inefficient operations with more efficient ones will also help it stay cost competitive with other animal proteins.
9 Product Attributes, Diversity - Look out poultry. The Purdue professors believe many new pork products will be developed to build its consumer base. Today's attention to pork quality will pay off with these new products. Positioning pork so it has products available to be eaten at all meals and as a snack food is critical.
10 Global Ownership - Expect 5-10 global pork firms to be major players in world hog production and pork processing in the future. This global trend has already started. Japanese pork companies have invested in farms and processing in Oklahoma, Indiana, Wyoming and Texas. European companies may be next to seek expansion in the U.S.
Meanwhile, U.S. pork companies have built in Canada and Mexico, and look for opportunities in Asia, Eastern Europe and South America. The pork industry is clearly becoming global in scope.