Mason City Glove Gazette, IA
01-13-07
The Smell of Money? Profitability drives Iowa's pork boom
By DEB NICKLAY, Of The Globe Gazette
MASON CITY — Rapid growth of Iowa’s pork industry and the resulting “smell of
money” for those downwind is fanned by 34 consecutive months of better-thanaverage profits.
The quick increase has raised concerns about health and environmental effects,
and has prompted arguments about regulation of the industry.
Last year’s increase in corn prices could temper the growth, but concerns about
impacts of hog farming in the nation’s leading pork-producing state will remain
strong.
State lawmakers, having heard much about the issue in recent campaigns, may
consider regulatory changes during the legislative session that began last week.
From 2002 to 2004, an average of 78 permits a year for animal feeding
operations were issued in Iowa. The largest percentage was hog confinements.
In 2005, the total was 203; and last year, 318, more than eight times the number
in 2000 — 38.
The reason for the increase in pork production is profitability.
John D. Lawrence, agriculture economist for Iowa State University, said a
10-year profit average per hog is $3.52, and the last 34 to 35 months have been
above that.
While some farmers choose to raise hogs in open lots, the vast majority use
confinement operations.
There are more than 1,000 large confinements in North Iowa. The classification
of “large” is based on a threshold of 2,500 or more hogs. Those with 2,500 or
more must meet stricter requirements for construction, required by the Iowa
Legislature and enforced by the Iowa Department of Natural Resources.
Hogs are owned by independent operators and by corporations, such as
Christensen Farms Midwest LLC, or Hormel. Just under 40 percent of all pork
operations in Iowa contract with corporations to raise hogs for them. The
percentage does not include corporate-owned confinements in Iowa.
Contract hog farmers enter into agreements with companies such as Iowa
Select or Hormel. Companies own the pigs and provide feed, medicine,
veterinary and other services. Private operators have to shoulder those costs
themselves.
Both independent and contract pork producers are now feeling the effects of
higher prices. That and the record number of hogs — 17.2 million as of Dec. 1 in
Iowa, the most since 1955 — will combine to strain the bottom line, say industry
analysts.
Those factors could result in lighter hogs and lower production.
“And usually, that means a few (producers) will drop from the business as well,”
said Lawrence.
Corn prices, pumped by the demands of ethanol production, went over the $3 per
bushel mark last year. Feed is the largest cost in production, Lawrence said, and
could push costs 10 percent higher this year. About half of the total production
cost is feed, and 80 percent of feed is corn, according to ISU’s Iowa Farm
Outlook, published in November.
Manly area farmer Craig Benjegerdes agreed. The Worth County family farmer
has a 3,000-head wean-to-finish operation.
“It could get tough and ugly this summer and fall,” he said.
Benjegerdes is a non-contract hog farmer who likes the opportunity for better
profits — but knows there are greater risks, too.
“But if you’re younger and want to get in the industry, contract farming is
sometimes the way to go,” he said.
Higher prices may mean a slowdown in construction of pork operations that
include larger confinements, Lawrence said.
Benjegerdes said non-contract hogs in North Iowa are largely purchased by four
major processors: Tyson, located in Waterloo but with a buyer in Osage; Hormel,
in Austin, Minn.; Excel, in Ottumwa; and Swift, in Marshalltown. Corporate
owners have their own agreements with processors or have their own packing
operations.
The fourth largest owner of pigs in the nation is Iowa Select, based in Iowa Falls,
with 150,000 sows, according to the latest Pork Powerhouse report in Successful
Farming..
In December, Powerhouse ranked Triumph Foods number two nationally.
Triumph grew by 48,450 sows during the past year. The largest Triumph owner,
Minnesota-based Christensen Family Farms, is a major presence in Iowa.
There is another valuable by-product sought in today’s pork operations: manure.
Nutrient rich, manure collected from pits at confinements is “far better than what
you can buy commercially,” said Lawrence. Manure is spread on or injected into
fields for crop fertilization. The resulting odor and potential for runoff pollution —
predominantly from topical vs. injected spreading — has fueled much of the
debate about the growing industry.
Despite the recent bump in corn prices, long-term prospects for the pork industry
look good.
Demand for pork worldwide has pushed the market, with Iowa having 17.2
million hogs as of Dec. 1, 2006, according to the USDA’s quarterly Hog and Pig
Survey.
Pork exports over the past decade grew 400 percent, according to ISU’s
November paper, “A Vision For Iowa Animal Agriculture.”
It said the long-term outlook for pork remains good.
Reach Deb Nicklay at 421-0531 or deb.nicklay@globegazette.com.