Detailed plan of action helps keep hundreds of contract growers throughout the Midwest competitive.

About three years ago, when the streak of hog profits in the United States began its long run, South Central Management Services (SCMS) didn't sit on its laurels.

Instead, in service to its expanding list of wean-to-finish contract growers, the Wells, MN-based company, affiliated with South Central Veterinary Associates, started a string of initiatives to help secure the future of its clientele.

“We formed a partnership with the Provimi Group, North American Nutrition, known as SCA in America, which has its U.S. corporate offices in Lewisburg, OH. Provimi, which controls 8% of the global market for feed ingredients, manufactures a lot of blend packs for our starter pig programs,” explains Steve Hargis, CEO of SCMS, which also supervises production of 25,000 sows in Iowa and Minnesota. “One of the biggest things they do for us is input analysis every week.”

The reports provide a detailed breakdown of all feed ingredients, vitamins and trace minerals that may be used in wean-to-finish diets, as well as their availability and corresponding price trends.

For example, when lactose prices skyrocketed about three months ago, SCMS was on top of it and quickly switched to a by-product to get around that $64/ton cost of the raw product, Hargis observes.

An analysis for Jan. 9 indicated corn prices had stabilized on the futures board, for example. “So we feel $3.40 to $3.80/bu. is going to be pretty good for the next three months,” Hargis says. Of course, the weather could throw a wrench into corn prices. Wet, mild conditions through winter could delay spring planting.

The lesson here is to keep close track of feed costs, not just corn. At the end of the day, about 70% of what makes that pig “go” relates to feed usage, he points out.

“I think the take-home message, when you look at pricing competitive feedgrains, is you need to be doing economic modeling (cost projections) on every group of pigs. You want to make sure that you understand not just the corn, but the impact of the cost of all of those ingredients, and what it's going to take to meet breakeven costs,” he says.

That's part of the services SCMS provides to producer clients.

Producers should also forge closer ties with swine nutritionists, veterinarians and other consultants to advise them on tracking variable feed costs, he urges.

Strategic Planning Accelerated

About 1-½ years ago, Hargis says SCMS' efforts got a lot more aggressive in focusing on survival by providing single-source pigs to the 352 contract growers they serve. Those growers market about two million hogs/year, mainly from Illinois, Indiana, Iowa, Kentucky and Minnesota.

Growers commonly run 2,400 to 5,000-head, wean-to-finish sites; to fill a 2,400-head building in one week requires a sow farm of at least 5,600 sows, Hargis explains.

“The math on this flow is simple: 5,600 sows running 22.5 pigs/sows/year will produce 126,000 pigs annually, which comes out to 2,423 pigs in a week,” he says.

For optimum nutrition and health, it is important to cut fill times to a week to reduce age spreads.

“A lot of guys will take pigs from 2-3 smaller farms and commingle those flows. With the current challenges with circovirus, porcine reproductive and respiratory syndrome and Actinobacillus pleuropneumonia in finishing pigs, we don't want to take the risk that one of those source farms is going to get sick and end up hurting one of our contract farms down the road,” he says. “Death loss costs about $1.05/pig for every 1% of loss, so it is an expensive cost that gets applied to the whole group. It shows how important it is to buy healthy pigs.”

To single-source pigs, SCMS has intensified efforts to align itself with large sow farm systems that can consistently provide clean sources of weaned pig flows. They've identified isolated sow farms in southern Illinois, northern Missouri and central Nebraska.

“We try to fill those barns in about five days from the last pigs out to the first pigs in,” Hargis says. “That grower has about a week to get completely down, washed up, disinfected, dried and ready again for pigs.” Hargis figures those 5-7 days of downtime add an average of $0.50/head in cost for that next turn of pigs.

Story continued on next page >