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Pork Production in Nebraska: The Ability to make a living

by 5m Editor
28 August 2006, at 12:00am

By Allen L Prosch, Extension Educator for Swine Marketing and Production - The size of pork production units in the United States has changed dramatically in the past 20 years.

University of Nebraska Agricultural Research Division

Introduction

In Nebraska that change is demonstrated by the fact that in 1989,61 percent of Nebraska's inventory of hogs was owned by producers who marketed less than 1,000 hogs per year, and by 2002, only 23 percent of the inventory was held by producers in that category. While many reasons for this change have been offered, one is that producers were not able to generate an acceptable family living. They either expanded their operations to compensate or they left the business. This hypothesis is examined in this publication.

Methods

Family Living
To determine an acceptable family living, the household expense data in the Nebraska Farm Business Association (NFBA) annual report are used. The data are derived from the reports of diversified farmers across Nebraska. The data are compared to nonfarm household income in Grand Island, Neb. to determine if reported farm family living differs from that of nonfarm households.

Family living, as reported by NFBA, is then compared to the cash that is available to the operator, after expenses, from a 125-sow farrow-to-finish operation. The data for the swine operations are from the Swine Enterprise Records and Analysis Program. This comparison allows examination of whether the produces could generate an average family living.

If providing a family living is a significant driving factor in the growth of swine operations, the size categories that are large enough to provide family living should be the ones that grow significantly. The number of swine units in each size category reported by US DA in the December Hogs and Pigs Report is used examine the size of operations that are growing in the United States.

Data Sets
To examine this hypothesis, data from the Nebraska Swine Enterprise Records and Analysis Program (NSER&A), the Nebraska Farm Business Association (NFBA), and Positioning Your Pork Operation for the 21" Century (PYPO) published by Purdue University were used to analyze a producer's ability to generate a living. Living cost comparisons were also made between the NFBA and United States Census data for nonfarm income levels in Grand Island, Neb., to ensure that NFBA farm incomes adequately represented family living needs. Also, because the data have differing origins, adjustments were made to allow comparison.

Since the Purdue data (PYPO) were estimated in a different region, actual Nebraska feed prices and market hog prices for the compared years were used. Labor costs were adjusted from 1994 to 2002 by using Nebraska wage data for this period. The percentage of increase in labor costs for each year was added to the 1994 Purdue budget.

NSER&A data ended in 1997. Data for 1998 through 2002 were calculated using actual feed cost changes and a weighted annual increase in nonfeed costs. After 1997, productivity was increased at the average rate (3.5 percent) of improvement reported by all producers from 1988 to 1997. NSER&A data included information on three categories of producers: high profit 1/3, low profit 1/3, and average of all producers. Data for the average of all producers are used in comparison.

Hog market prices are cyclical. The cycles that run between an extreme high and an extreme low last from three to four years. Comparisons were made between entire cycles rather than specific years. The data sets have certain labor costs, which include funds that could be earnings to the owner / operator in a family business situation. The unpaid labor costs in NSER&A data were added back when comparing earning potential to living needs. In the Purdue data, a $1.39/cwt management fee was added back.

Further Information

To read the full report, including tables, click here (PDF)

Reproduced courtesy

July 2006