Relative Profitability of Hog Production in Western Canada and the US Midwest Executive Summary
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1 Relative Profitability of Hog Production in Western Canada and the US Midwest Executive Summary Prepared By Larry Martin, Kevin Grier, Al Mussell, and Kate Stiefelmeyer October, 2001
2 George Morris Centre Canada s Independent Agri-Food Think Tank # Research Lane Guelph, ON N1G 4T2 Tel: (519) Fax: (519) info@georgemorris.org Website:
3 Relative Profitability of Hog Production in Western Canada and the US Midwest by Larry Martin, Kevin Grier, Al Mussell, and Kate Stiefelmeyer EXECUTIVE SUMMARY Studies of international competitiveness in hog production completed by the George Morris Centre in 1994 and 1999 found that Western Canada had the lowest overall cost of the regions evaluated. To determine whether this remains the case, the model used in the previous studies was updated with monthly data from 1999-May 2001 representing the Western Canadian Prairies (Eastern Alberta), the Eastern Canadian Prairies (Southwestern Manitoba), and. The model was used to evaluate competitiveness in hog production on the basis of variable production costs, gross margins, and net profit for a 1200 sow farrow to finish operation and for a 1200 sow farrowing unit. Based on changes that have occurred in Western Canada and in US farm policy, the conclusions of this study differ from its predecessors. The significant competitiveness criteria are the relative variable costs, gross margins, and net profit. The results showed that, among the 3 regions: * had the lowest feed costs given the assumed rations * had the lowest variable costs for farrow to finish, farrowing, and finishing * had the highest hog prices, although Eastern Prairie hog prices are converging toward prices * The Western Prairies had the lowest fixed costs * had the highest net profit in the farrow-to-finish enterprise * The had the largest net profit in farrowing * Finishing weanlings from the in is more profitable than farrow-to-finish in, or farrow-to-finish in the The most significant fact influencing relative competitiveness are feed costs and hog prices. US farm policy has fostered a decrease in corn prices, and barley prices in Western Canada have simultaneously increased due to drought and problems associated with vomitoxin. Western Canadian processors are closing the gap with Southern Minnesota hog prices, but still appear lower than their Midwest US counterparts.
4 Herd Assumptions HERD ASSUMPTIONS Per Litter Per Year Per Month Number of Sows 1200 Litters / Sow / yr 2.35 Total Litters Weaner Operation Pigs born 10.9 Mortality Rate (pre-weaning) 12% Pigs Died (pre-weaning) Pigs Weaned Mortality Rate (post weaning) 3% Pigs Died (post weaning) per litter Weaner Pigs Transferred per litter Average Weaning Age 18 days Post-Weaning Days (nursery) 50 days Grower-Finisher Operation Mortality Rate 3% Pigs Marketed per sow Market Dressed Weight 88 kg Days on Feed Total Days to Market 122 days 194 days Farrow to Finish Ration Starter Grower Finisher Lactation Gestation Per Litter Ration % Corn Soymeal Tallow Premix Total/Pig (kg) Western Canadian Farrow to Finish Ration Starter Grower Finisher Lactation Gestation Total Per Litter Ration % Wheat Barley Soymeal Tallow Premix Total/Pig (kg)
5 Monthly prices of the feed ingredients for the period 1999-May 2001 at locations in each region are used to calculate and update the monthly cost of the ration. For the Eastern Prairies, feed costs are based on: * Winnipeg barley price (Agriculture and Agrifood Canada) * Winnipeg feed wheat price (Agriculture and Agrifood Canada) * Winnipeg 48% soymeal price (Agriculture and Agrifood Canada) * Vomitoxin adjustment of $13.50/tonne (additional freight) on barley and wheat For the Western Prairies, feed costs are based on: * Calgary barley price (Agriculture and Agrifood Canada) * Calgary feed wheat price (Agriculture and Agrifood Canada) * Calgary 48% soymeal price (Agriculture and Agrifood Canada) For, feed costs are based on: * Minnesota corn price (USDA National Agricultural Statistics Service) * Decatur 48% soymeal price (USDA Agricultural Marketing Service) In all cases, other feeds and tallow priced at $700/tonne. Manitoba ($Can/ year/employee) Labour Costs Alberta ($Can /year/employee) ($US/ year/employee) Manager (1) 53,820 65,122 50,800 Assistant Manager (1) 32,292 39,043 30,400 Production Assistant I (3) 27,986 33,864 26,416 Production Assistant II (4) 21,528 23,681 20,320 Total Annual Cost 256, , ,80
6 Other Operating Costs Veterinary, Medicine & Supplies $/sow/year $ Maintenance & Repairs $/sow/year $ Hydro $/sow/year $ Insurance $/sow/year $ Manure Haulage $/sow/year $ Office Supplies $/sow/year $ 5.00 Marketing & Transportation $/sow/year $ Property Tax $/sow/year $ Subtotal Operating Costs $/sow/year $ Feed Prices, 1999-May 2001 Mean Price ($Can/tonne) Western Prairies Mean Price ($Can/tonne) Mean Price ($Can/tonne) Corn Barley Wheat Soymeal Average Total Feed Cost ($/Head) Total Variable Costs of Production Total Variable Cost Western Prairies Total Variable Cost Total Variable Cost Jan-May Average Standard Deviation Total feed cost/hog includes the vomitoxin adjustment for the, feed prices do not
7 Hog Prices Manitoba Hog Price ($Can/ckg) Alberta Hog Price ($Can/ckg) Iowa-Southern Minnesota Hog Price ($Can/ckg) 2 Minnesota Hog Price ($Can/ckg) Jan-May Average Standard Deviation Farrow to Finish s Western Prairies, Based on IA/Southern MN Price, Based on MN Price Jan-May Average Standard Deviation Members of the George Morris Centre will receive a copy of the full report. To learn more about how to become a member of the George Morris Centre contact Lynn Punnett at (519) EXT 204 or visit our website: 2 The Iowa- price series was changed in 2001 to a basis that is not directly comparable with the other prices
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