Years of operating in a hot cash grain market may have helped prepare Strawn, IL, pork producer Art Lehmann to better cope with today's high input costs.
“Because we've had higher-priced corn than in areas like western Iowa all along, I think we've learned to adapt to a little higher feed cost,” he says.
Lehmann trims costs by packing finishing rations with grain alternatives such as distiller's grain, bakery waste, pet food, granola bars, cereal — “whatever we can get our hands on,” he says.
But before a prospective ingredient makes it into a ration, Lehmann's nutritionist (and son-in-law) Matt Steidinger analyzes each item on a cost-and-nutrient basis. “It has to be economical and it has to be nutritionally sound,” he says.
Lehmann has also dropped his target market weight for hogs by about 10 lb. in recent months in an effort to improve feed efficiency. And he is also culling more aggressively. “We are trying to eliminate any poor pigs early so we are not wasting feed,” he says.
Using the futures market to hedge prices is another protective measure. “We are paying more for corn than we'd like to pay, but we aren't paying the cash-quoted market prices because of our hedges,” Lehmann says. “Likewise, we are not taking the price being offered for hogs right now, because we've got hogs forward contracted and sold on the futures market and the futures market has offered some higher prices.”
But Lehmann is also aware that the benefits of hedging could diminish unless pricing forecasts change. “We are 100% hedged for 2008 and 2009, but the (hog) futures market doesn't offer the attractive pricing opportunities today that it offered a couple of years ago,” he says.