The industry in the nation’s second-largest pork producing state, North Carolina, can be described in many ways, but stagnant it is not. All pork producers tackle a confluence of challenges — constant environmental management and animal welfare pressures, higher and higher feed prices. Corn prices in the Tar Heel state generally run a buck a bushel higher than in the nation’s Corn Belt.
North Carolina’s sow herd has been slimmed and trimmed in recent years through stringent culling and, in a few cases, by financial bankruptcies.
With the belt tightening and a smaller sow herd, vacant and worn-out sow farms are being remodeled or replaced with finishing facilities to match a site’s environmental footprint. Having always been a pig-exporting state, the current trend is to finish more pigs in the state to ensure the shackle space of the region’s pork slaughter and processing giant, Smithfield Foods, remains full.
More Pig-Friendly State Legislature
For more than a decade, a ban on the building of any new lagoon sprayfield systems has stymied all hopes of growth within the state’s borders. The ban, commonly referred to as “the moratorium,” is more accurately deemed a “session law,” first passed in 1997 and renewed in the biennial gathering of the state’s general assembly for 10 years.
In 2007, the state legislature passed Senate Bill 1465, which made the moratorium on “the construction of new lagoon sprayfields for swine production systems” permanent. In doing so, the general assembly also directed the state’s Department of Environment & Natural Resources (DENR) to establish the criteria under which old lagoons can be replaced, and challenged the Division of Water Quality (DWQ) to establish performance standards for swine facility waste handling replacements.
The bill also established a rulemaking procedure and created a cost-sharing lagoon conversion program that would allow new technologies to replace the popular lagoon sprayfield waste handling methods, explains DWQ engineer Christine Lawson.
“The way the law is written, to qualify for the money for the lagoon conversion program, a new technology must meet the performance criteria outlined in the ‘Swine Waste Management System Performance Standards’ guidelines,” she explains. Briefly, the five primary standards include:
Additional details and guidelines for the rule, the means of evaluation and approval of new or modified swine farms for compliance with the performance standards, and the lagoon conversion requirements are available at: www.ncwaterquality.org, under the “Aquifer Protection” tab. The performance standards became effective on Jan. 1, 2009.
Although the general statute prevents expansion or new construction of a swine lagoon sprayfield system, a new or expanded facility may be built, providing the five criteria are met, Lawson notes.
“North Carolina is looking for ways to maximize the resources that are available throughout the agricultural community. If there is a way to look at manure as being more than just waste and maximize its value, there are opportunities for innovation in North Carolina,” she adds.
North Carolina currently has 2,150 permitted hog sites plus about 20 sites that carry federal permits under the Environmental Protection Agency’s National Pollutant Discharge Elimination System (NPEDS) permit program.
Poised for Growth
With skyrocketing feed costs, one might imagine that producers in the state are not clamoring to invest in new waste handling technologies. While no applications for new swine construction have been filed, B&B Tyndall Farm in Sampson County was the first to apply for a permit for a two-phased expansion to nearly double the finishing capacity of a 5,145-head site.
Expansion in North Carolina is defined as an increase in the steady state live weight (SSLW), which essentially defines the maximum average weight of the pigs on a site. For example, the SSLW of pigs in a wean-to-feeder facility is 30 lb.; for a feeder-to-finish facility it is 135 lb. SSLW is calculated by multiplying the site’s one-time capacity times the respective SSLW.
Tim and Wendy Craig have their eyes on the first new construction permit, but first they have some work to do. In 1999, they purchased a 624-sow, farrow-to-feeder pig farm with a lagoon-sprayfield permit near Fuquay-Varina, NC. They operated the two-barn site for nine years, but high corn prices forced them to shut down production in 2009. Although the barns and equipment are in good shape, pig flow from that size of sow herd doesn’t fit well with most contract finishing sites, so the Craigs began exploring other options.
Unable to expand the sow herd due to the SSLW limits, they began exploring a switch to finishing. That’s when they met John Classen, associate professor of manure management in the Biological and Agricultural Engineering Department at North Carolina State University (NCSU).
Classen had run a trial on a pilot scale design to separate the manure solid and liquid waste streams of finishing pigs. Manure and urine pass through the slotted floor onto a belt that runs the full width and length of the pen. The convex-shaped belt allows the liquids to flow off the belt edges and into gutters on each side. At full scale, the liquids would flow to an enclosed collection tank for further processing. Solids are carried to a hopper and conveyed to outside storage for composting.
“The belt system provides a platform for alternative waste utilization strategies, since the primary nutrients partition differently between the solids and liquid fractions of the waste streams,” Classen explains. “Since most of the phosphorus is contained in the solids stream, it can be easily captured for off-farm utilization. Most of the nitrogen is retained in the liquid waste fraction and can be managed for alternative utilization and processing, or land-applied as a nitrogen source for crop production.”
The liquid is concentrated — about 5,000 parts per million (ppm) of TKN (Total Kjeldahl Nitrogen) — the sum of organic nitrogen, ammonia (NH3), and ammonium (NH4+). “Organic nitrogen can be easily converted in the soil, so it is a measure of available nitrogen,” he explains. “After 24-30 hours, almost all of that is converted to ammonia.”
There are several options for further processing the solids. “We can gasify the solids, but exactly how to do it will depend on what end products you want,” Classen continues. “You can put all of the energy into heat, hot water or electricity. The most versatile is electricity, but there’s difficulty in getting it into the (electrical) grid and distributed because it can’t be stored. You can put as much as possible into synthesis gas, which can be converted into liquid fuel. Or, you can use a different set of conditions to get oil, which can be refined into various petroleum products that are indistinguishable from crude oil,” he explains.
The belt system appeals to Tim Craig’s innovative spirit, so he has been working with Classen and Lawson on a barn and waste handling design that will meet the five performance standards. Current plans include four, 10-ft. wide belts running the length of a barn. Craig has proposed a concave shape for the belt, which would drain liquids from the center of the belt on a 6-in. slope to the end of the barn. The space below the slats will be recessed 2 ft. below ground level, helping keep the barn cooler in summer and warmer in winter, and providing ample space to work on the belt if necessary.
Craig sold the gestation stalls, farrowing crates and nursery gating in the barns. He plans to salvage the trusses and steel to build a composting facility on his Meadow Creek Farm site where four barns are currently dedicated to raising replacement gilts for Murphy-Brown.
The plan is to build three gilt-rearing barns on the Fuquay-Varina site, sized to meet the SSLW level permitted for the lagoon, although a modified lagoon permit would be required. If the belt system fails, he can simply remove it and resume use of the lagoon.
“If you change the phase of production or the way the manure is managed, a modified permit is required because he is changing the nature of the manure,” Lawson says.
Eventually, Craig’s goal is to have ample space to handle all of the gilts from a 2,400-sow multiplier unit. If the belt system pans out, he will file for a permit to build five more new barns on the Meadow Creek farm site, which would bring the gilt development barn count to 12. This final step would require new proven manure management technology — in this case, data collected on the belt system — to meet the five performance standards. That construction would mark the first new construction permit requested since the moratorium was activated in 1997.
NCSU staff will monitor the belt system to demonstrate that the belt technology meets standards. If 12 months of monitoring and test data demonstrates that the system meets the state’s criteria, anyone else could build a new unit using the belt technology, too.
“If he wishes to build a whole new farm at another location using this exact, proven technology, he could do that, providing it meets the siting requirements,” Lawson states. “Tim is committed to making it work, and I believe he is every bit as imaginative and innovative as the engineers are,” Classen adds.
The Craigs’ interest in new technologies is driven by a desire to ensure their three children have a future in the hog business. “I’m not looking at next year, I’m looking 10 years down the road,” Tim says. “I want to make sure they have a farm to come back to. If we can produce energy out of manure, the industry in North Carolina will become an energy-making and a food-driven industry. If we can change the operation and make something out of what we generate here, it will help people in other states, too.”
Mastering Volatility
Much of the effort and activity in the state’s largely integrated systems is currently focused on striking a balance between the sows needed to ensure ample supplies of market hogs and the region’s packing capacity. Tight corn supplies and building restrictions forced expansion-minded producers to build in states blessed with ample corn and packing facilities, such as Pennsylvania, Indiana, Iowa and other Midwestern states. However, poor hog prices coupled with record corn prices took a toll there, too.
“We are learning to live with volatility,” declares North Carolina Pork Council CEO Deborah Johnson. “When the Cohairie Farms’ bankruptcy hit, which was the latest and the largest (30,000 sows), there was an awakening by the people in our state. It took a major production system bankruptcy for the public to realize the severity of the crisis and respond.”
Recent state elections have provided a more “business-minded” general assembly. And the state has formed a regulatory review commission to study how regulations impact businesses, jobs, peoples’ lives and livelihoods. A two-year moratorium on issuing any new rules is in place.
A few of the sow farms in the bankrupt systems have been purchased and repopulated. Some sites have been converted to finishing. Some are still sitting empty.
“Most everybody is focused on trying to grow finishing in the state,” Johnson continues. “Producers are examining their production, whether to keep sows here or move them somewhere else where they would be more efficient.”
Integrators and independents alike are taking a hard look at pig flows through nursery and finishing facilities, where the pigs are located relative to the packing plants, and making every effort to avoid crisscrossing pig transport and feed trucks across the state.
“The question is: can we continue to reduce sow numbers here and still meet packing capacity? We are stable in our packing space, so we need to work toward bringing finishing and packing capacity into balance,” Johnson says.
Smithfield Foods’ Tar Heel plant is maxed-out at 34,000 pigs/day. The company’s plants in Clinton, NC, and Gwaltney, VA, can handle another 21,000 hogs daily. The packer has increased their slaughter weights about 10 lb., now hovering around 270-275 lb.
“Producers are trying to gain some efficiencies,” explains Todd See, NCSU animal science department head. “They are at a competitive disadvantage until prices stabilize or they find an alternative to corn.
“We’ve designed a system based on cheap energy and cheap feed — a different scenario than exists today. The question is whether we can raise hogs under a new model; $7-8 corn will pressure us into leading the search to find solutions, alternatives and new systems that will allow all producers to survive under this new model. I think there will be a sea change in what we are doing,” he adds.
Declaration of Independence
Forty-eight-year-old Whitley Stephenson, Smithfield, NC, has approached the hog business from several different angles during his hog-producing career. He began as a 450-sow purebred and commercial seedstock supplier, which grew to 800 sows, farrow-to-feeder with off-site finishing. When the 1998-99 hog market crashed, he had 4,600 sows, which he retained, but he turned over the nursery and finishing facilities to Dogwood (formerly Lundy Packing), and signed an agreement to supply them with weaned pigs.
Since, Stephenson has partnered on another 1,200-sow farm, built a 1,600-sow farm and a 3,650-sow farm, all farrow-to-wean, and bought another 1,600-sow Coharie farrow-to-feeder farm and converted it to 2,200 sows, farrow-to-wean. His total sow count now stands at 13,250.
Except for a weaned pig agreement with Smithfield Foods/Murphy-Brown that expires in November, Stephenson’s production is split three ways between producers in Iowa, Indiana and North Carolina.
“There are a lot of ways to approach the hog business — especially in this state,” Stephenson says. He and his wife, Janet, have chosen to focus on weaned pig production.
“Once we converted over to weaned pigs only, it enabled us to concentrate on doing that one thing the best we could do it. I feel it has enabled us to grow and specialize. If I were to go back to retaining ownership, I would have to worry about marketing, purchasing feed, hedging, and all of those things. Quite honestly, I’m not good at those things, so we’re focusing on what we are good at,” he explains.
The measures of success are affected by whether the sow farm is currently operating “with” or “without” porcine reproductive and respiratory syndrome (PRRS), he says. With four of the eight farms dealing with mild or severe strains of PRRS, production averages around 22-23 pigs/sow/year (p/s/y), with two farms consistently cranking out 26-27 p/s/y.
“I think our genetics can consistently get 26-27 p/s/y, but we need to figure out how to capture it. The sows are doing a good job of putting live pigs in the crate, but we have got to raise the bar of our stockmanship in the farrowing department. People and husbandry skills are important; 99% of the people we hire are task-oriented, not husbandry oriented. This is not a factory where all of the machines stop when people take a break,” he comments.
Lactation feeders installed in two farrowing barns have been particularly helpful during the summer. “If managed properly, sows breed back quicker, even in the worst summer months, and our weaning weights are absolutely heavier,” he says.
On the largest farms, Stephenson is designating a person to attend farrowings, split-suckle pigs, use hot boxes and make sure every pig gets colostrum. “These are things we used to do and have gotten away from. With 13-14 pigs born alive, it’s a whole different ballgame,” he notes.
“Our biggest challenge is feed price,” he assures. “I blame that directly on our (country’s) ethanol policy. As long as we continue to burn up our food, I don’t see that changing a whole lot. The silver lining in that cloud is $103 (per cwt., carcass) hogs on the board over summer. Our weaned pigs are priced accordingly, so we’ve sold weaned pigs for the highest ever. But, we also sold some for $6.50 two summers ago, and I had to pay to deliver them to Iowa,” he reflects.
Stephenson is working with finishers on a pricing arrangement that will prove beneficial to both parties — “so there’s not a winner and a loser every time the truck leaves a farm, so we can both stay in business.”
Currently, pigs are priced on an 11-lb. base, with premiums and penalties above and below that weight. “Iowa producers are willing to pay for the extra weight, if they can get a 15-lb. average. I can hit that in the cooler months, but not in July and August,” he says. Weaning age averages 20-21 days of age.
Stephenson sees the North Carolina pork industry changing as new alliances are formed. “I think there is plenty of opportunity going forward it’s just a matter of who you want to work with. Sow numbers have retracted, so that means there is more opportunity for those of us who have sows. For those of us who are willing to put wheels under the pigs to place them somewhere else, I think there is more opportunity today than there was 3-4 years ago. Smithfield Foods will continue to be the biggest gorilla around. Someone said to me the other day, ‘When you dance with a gorilla, the gorilla usually leads.’ My intent is to quit dancing with the gorilla,” he says.
Recalculating
Caught up in the financial stresses of Coastal Plains Pork a few years back, Henry Moore III elected to sell his stock in the firm. “It turned out to be one of the best business decisions I’ve made,” he says.
After Coastal Plains filed bankruptcy, the Iowa producers who had been receiving pigs still wanted them, so Moore bought back the Bobcat Farms’ sow herd near Rose Hill, NC, and reduced it to 2,800 sows. In spring 2010, he added another 2,400 sows.
He and his father also contract 10 finishing barns with Murphy-Brown, so they have experience on both sides of the integration-independent line.
Moore feels fortunate to have had the start-up lessons associated with launching Coastal Plains Pork. “We were owners of the company, but we were also the contract growers, so we knew all of the costs involved. Some advantages to being small are we can move smaller groups of cull sows to market without having to coordinate cull trucks that collect sows from several farms. We are more efficient with vaccines and antibiotic treatments. Bigger operations may beat me a little bit on their supply costs and their ability to hedge their feed costs, but we have the edge on a per-pig-cost basis and labor.
“The 5,200-sow unit cash flows much better than the 2,400-sow unit because we have the same farm manager, basically the same equipment, but twice the animals to spread the costs over,” he explains.
In the future, Moore expects more joint-ownership contracts between the pig supplier and the finisher. “They have a stake in pig production and I have a stake in the finishers. If I get hit with PRRS, they would suffer with me at the pig end and I would suffer with them on the finishing end,” he notes.
A trend Moore thinks might take hold is some means of contracting corn acres. “That’s the next best way to hedge your input costs, such as a cost-plus agreement where they agree to deliver corn to your mill for 10 to 20 cents/bushel over market price. It would be similar to a set weaned-pig contract. You may not make a lot of money, but you will live to see another day. The volatility of the corn market is the key criteria that will tell us what this market will look like in the next two years,” he predicts.
Grabbing Hold of Opportunity
In his youth, James Lamb worked alongside his father in a meager 10-sow, pasture-farrowing operation, selling the feeder pigs to area farmers for finishing. Today, he works for a top 10 pork production system, Prestage Farms, and owns two, 1,520-head wean-to-feeder barns.
Lamb studied agricultural and environmental technology at NCSU as producers in the state geared up construction ahead of an anticipated moratorium. During the mid-’90s, Prestage Farms was changing to off-site nurseries, and Lamb saw an opportunity to get into the production side of the industry. In 1997, he put together a pro forma balance sheet for a $250,000 investment in the nurseries. The first pigs were placed in early 1998.
In the 13 years since, the pair of nurseries is mostly paid for. Lamb has updated the floors and added a security system that monitors room temperatures, feed delivery, water pressure and power — all easily checked via his cell phone. He averages 6.5 turns/year, bringing pigs in at 12-14 lb. and sending them out seven weeks later weighing 45-55 lb.
A self-proclaimed “stickler” for organization, Lamb color-codes the pens to correspond to the three sow farms the pigs come from and loads the barns in the same sequence every time. “I can go in there blindfolded and know which pigs came from which farms,” he says. “We size them (within farm groups) and put the smallest pigs in the center of the barn because I feel that’s where the temperature and ventilation are optimum. We spend most of our time with those middle pens — trying to get them to catch up with the bigger pigs.”
His agile and dedicated 80-year-old mother, Thelma Lamb, makes the morning and afternoon rounds, checking the high/low overnight temperatures and making sure all pigs have feed and water, and sweeps the aisles. Being diabetic, she says the exercise helps keep her blood sugar level in check.
“When the pigs are still small — small enough that I can pick them up — I move the smallest ones to the middle pens,” she says. Any problems or irregularities are noted on a whiteboard in the office for Lamb to check every afternoon.
Obviously a good team, their nurseries were the top-ranking Prestage Farms’ barns for the first two years, and they have always ranked in the top five.
Since joining the Prestage organization, Lamb has worked in all phases of production — farrowing, nursery, finishing — and land development. As the environmental regulations in the state got tougher, he helped install gauges on lagoons and took on other environmental management tasks.
Now, as an environmental specialist, Lamb inspects each of Prestage Farms’ 356 lagoons in North Carolina annually, a requirement of the Division of Soil and Water Conservation and the DWQ. Field operators handle the pumping, but he documents nitrogen application and the amount remaining in the lagoons, and makes sure irrigation systems are properly calibrated.
Lamb also helped develop a remote-controlled boat that is used to measure the sludge depth in lagoons, also required by the state. The boat carrying a sonar device similar to a depth-finder for fishing is propelled by a leaf blower. A transducer sends a sonar signal toward the bottom of the lagoon, and when it hits the top of the sludge it bounces back. Using a lagoon depth measurement initially taken with a pole and the current water level, he can easily calculate the depth of the sludge.
“There is a minimum liquid level that must be maintained in the lagoon at all times, and the sludge level should not exceed 50%,” he explains.
In the last 6-7 years, Lamb has become more involved in the state and national pork producer organizations and participated in the Pork Checkoff’s Pork Leadership Academy. “Growing up, I had no idea that there were people out there, half a country away, who were willing to help. I didn’t know about the checkoff, the resources available, or the positive message about the industry. With the Internet and all of the new technology we have, it’s interesting to learn how things are done in other states and countries. It’s made the world smaller for me,” he adds.
Largest Integrator Makes Adjustments
Perhaps nowhere in the predominantly integrated North Carolina pork industry have the changes been felt more acutely than the state’s largest producer of pigs — Murphy-Brown, Inc. At the directive of their parent company, Smithfield Foods, 100,000 sows were culled from the system as record high feed costs curbed any hopes of profits in recent years.
“Over the last five years, capital spending essentially ground to a halt,” explains Terry Coffey, chief science and technology officer of Murphy-Brown. With the company’s pledge to eliminate gestation stalls echoing in the background, a sow relocation project was launched. Existing farrow-to-finish farms are being converted to larger farrow-to-wean facilities in the more outlying areas, but the environmental footprint permitted under the SSLW guidelines was held constant. Small sow farms in pig-dense areas were converted to modern wean-to-finish or finishing facilities.
“This is not expansion. Lagoons, waste treatment and land application levels remained untouched,” reassures Don Butler, director of government relations and public affairs at Murphy-Brown, LLC. “As the conversions are made, the sows being relocated are placed in group housing systems when they are confirmed pregnant,” he explains.
The company has identified several different designs for housing sows in groups. The European Union’s 24 sq. ft./sow standard was adopted in anticipation of export market requirements. “We believe the important part of the system is to minimize competition during feeding events. Exactly how we do that depends on whether we are building a new facility or renovating an existing one, and whether the floors are solid or slotted,” he says.
“There is no clear objective data that identified superior sow welfare — one system over another — but each requires different training for the workforce,” Coffey explains. “As people become more familiar with loose-housing systems for managing sows in gestation, husbandry becomes more important. Once they have gained confidence through experience, productivity is comparable,” he says.
“We started this year with 6-7% of sows in loose housing, and we will end the year with about 30%. That will give us a subset of data large enough to answer questions about the impact on sow productivity, feed consumption and other metrics.”
“Most of the aggression — the fighting and scuffling — among sows takes place in the first 36 hours (after mixing),” Butler says.” “We thought it might last longer. Generally, the pecking order is established within that timeframe and, usually, the cuts and scrapes are superficial and heal within a week to 10 days.”
The Murphy-Brown system has shifted to heavier market weights, so finishing space has become scarce. “Murphy-Brown had been a very significant feeder pig exporter (from the state), but we’re out of that business now,” Butler explains. “Quite a few of our sows went away because, long-term, there is no money to be made by exporting feeder pigs. Frankly, we can increase weight and sell about the same pounds with fewer head. The underlying efficiency is pretty impressive.”
“We can go to heavier weights, but there will be pressure on numbers as weights go up. It will put pressure on the whole industry complex, including the packing side, because as weights go up, numbers go down, and the ability to keep the shackle space full will be increasingly competitive,” Coffey agrees.
“Feed costs are high everywhere, but the spread in feed costs has grown over time. Freight rates have gone up. Fundamentally, there’s now a corn complex that includes DDGS. Putting that all together, the spread (between North Carolina and the Corn Belt) has grown more than most people realize. What you think you can do to save a little bit of feed when it was $2.25 vs. $7.25 is a totally different world, and I’m not sure that anyone in the industry has considered all of that,” Coffey says.
“Whatever the cost of corn is in the Corn Belt, add about $1/bu. to our cost,” Butler says. “If we are to remain competitive, we have to operate world- class facilities. We will continue to focus more on the integrated opportunity, and understand more about the value chain from conception to consumption. I think technologies will come into the system, and we will have to continue to be early assessors and adopters of new technologies — maybe faster than we’ve ever been in the past.”
“This is an industry that still has a very innovative spirit and a willingness to take on those challenges,” Coffey stresses. “I think there will continue to be some trend-leader events that will develop because we face economic difficulties sooner and larger than some other parts of the country. Increasingly, survival and success in the industry is going to depend on all of the technologies and efficiencies, but it’s also going to depend on the ability to manage the tremendous volatility and economic risk that’s there. North Carolina is in a very strong position in that regard — probably one of the advantages we have today. That spirit still resides very much in the people who work in the industry here,” he concludes.