Hog producers are wondering how to compete in the future, and the answer may lie in their willingness to change with the industry.
"Today, only 17% of hogs are sold on the open market," says Gene Tinker, swine business management educator with the University of Minnesota Extension Service. As recently as 1997, 43% of hogs were sold on the open market.
"The family farm producers I work with are wondering how to reposition themselves," Tinker says. "They remember the extremely low prices of 1998 to 1999 and want to do something different."
Many hog marketing contracts base the price on the open market, which has a decreasing percentage of animals determining the price. Tinker says the open market accounts for pricing 71% of market hogs, but only 17% of the 71% represent a negotiated price.
Demand for organic and natural foods continues to increase at roughly 10% a year, Tinker says he lists the pros and cons for producers thinking of producing alternative and organic pork.
--The producer is not in a commodity market, so he usually can get a better price.
--The consuming public may view the product as "better."
--A producer can use facilities that don't fit the mold of today's commodity production.
--These markets often require that specific production practices be followed and specific feeds be fed.
--Production costs are often greater. According to an Iowa State University study, it requires $55 per hundred to break even with organic production.
--Weather often has a greater impact on production, with production tending to be seasonal. "But consumers want the product all the time," Tinker says.
--Treatment for illness may prohibit the animal from meeting the specialty market requirements.
--Organic production requires organic feedstuffs, and the cost of organic protein sources has recently increased due to greater demand.
--Organic feedstuffs may not be readily available in all areas.
--A person is apt to have a certifying agency checking on production practices.
--And all production may not be marketed in the specialty market, so the extra specialty product must be sold in the commodity market for the commodity price.
Producers may contact Tinker, at 507-835-3620.