SIC 0213

Companies in this industry

Industry report:

This category covers establishments primarily engaged in the production or feeding of hogs on their own account or on a contract or fee basis. A general trend toward vertical integration in the industry has resulted in larger, more integrated hog operations that often play diverse roles--including breeding, raising, feeding, feed production, butchering and processing, distribution and marketing--in the process of getting hogs from the weaning pen to the market place.

Industry Snapshot

In the early 2010s, the United States was the third largest pork producer and consumer in the world. The U.S. Department of Agriculture estimated that American producers maintained about 63.9 million hogs on farms and feedlots in 2010, 90 percent of which were market hogs; 10 percent was breeding stock. Iowa accounted for about 30 percent of total hog population, followed by North Carolina (14 percent) and Minnesota (11 percent). Illinois and Indiana rounded out the top five states in terms of number of hogs.

Organization and Structure

Besides meat, pork products provide a broad range of needs, serving as a source for over 40 drug and pharmaceutical products as well as varied industrial and consumer products, from chemicals to leather goods. Such widespread demand fueled increasingly fierce competition, with a general trend toward larger farms and vertically integrated operations that controlled every step of the production process, from birth to grocery store sales. With escalating competition, industry leaders in the 1990s and the first decade of the 2000s strove to increase pork's market share by appealing to consumers. Lower prices resulting from supply surfeits of the early 1990s were a start. But the pork industry was faced with the task of reversing years of market decline largely brought on by consumers' growing health concerns, which had resulted in a general shift in consumption from pork, beef, and red meats to less fatty fish and poultry. In 1986 the National Pork Producers Council (NPPC) launched its "Pork--the Other White Meat" promotional campaign to emphasize a new health awareness in the industry and to lend fresh pork a brand-name type identity. In 1996, NPPC began a new phase of its campaign, emphasizing the versatility of pork, epitomized by its "Taste What's Next" slogan. According to the National Pork Board, per capita consumption of pork hovered around the 50 pounds per year mark throughout the 1990s and the first decade of the 2000s.

In December 1991, the University of Wisconsin, working with the U.S. Department of Agriculture and the hog-raising industry, published findings that indicated that pork examined in 1990 contained 31 percent less fat, 17 percent fewer calories, and 10 percent less cholesterol than its equivalent in the 1983 USDA Nutrient Handbook. The NPPC estimated that in contrast to the hog of the 1950s, the hog of the 1990s contained 50 percent less fat. Whereas before the average hog had 2.86 inches of backfat, the average hog now had only 1.1 inches.

In the early years of the first decade of the 2000s, roughly 80 percent of the nation's hogs came from farms that produced more than 5,000 hogs a year. A survey by Brock Associates of Milwaukee and Elanco Animal Health division of Eli Lilly & Co. suggested that the country could have as few as 100 producers by the year 2050. The majority of survey participants--250 leading hog producers, veterinarians, meatpackers, and scientists--believed that the pork industry would move along the same lines that the poultry industry had in previous years, with a massive shakedown in the number of small or independent producers. Industry observers noted that hog production was rapidly becoming less labor-intensive and more capital-intensive, a condition that had not been problematic for corporate outfits able to bring significant resources to bear. Independent farmers, however, had to compensate for their lack of capital through extra work and by securing the latest technology through public universities, cooperative deals, and other sources.

Competition for such resources to acquire the necessary funding for the buildings, equipment, and technology needed to produce the most competitive hogs has grown increasingly fierce. Producers must seek increasingly tight financing through combinations of credit institutions, investor groups, insurance companies, and allied industries such as feed producers and packers. Financing is contingent on overall efficiency, management ability, complete and accurate records, and a sound business plan. In order to best meet such demands, producers have to rely increasingly on genetics, nutrition, and advanced record-keeping systems.

The Typical Hog Farm.
Whether corporate or independent, typical hog farms have operated along roughly similar lines, consisting of designated buildings or areas for breeding, farrowing, nursing, growing, and finishing the animals. Depending on various factors--available capital, amount and type of labor, future plans, existing facilities, and management style--a producer could provide a comfortable and efficient environment in many ways. To conserve land for harvesting purposes and to better control animal environments, producers increasingly turned to enclosed buildings for the different stages of production. In the past, fully controlled environments were almost exclusively reserved for nurseries, where baby pigs had to be carefully protected against weather, insects, and disease.

From Gestation to Market.
The gestation period for a sow or gilt (young female that has not yet had its first litter) lasts 114 days, during which a careful diet is provided to ensure a healthy litter. In 1995 farrowings averaged 8.8 pigs per litter in feeder pig production and 8.52 pigs saved in farrow-to-finish operations, with average pigs weaned increasing to 8.4 up from 7.1 in 1980. Facilities for farrowing (giving birth to baby pigs) ranged from pasture systems with A-frames or other types of shelter to confined quarters that could be totally or partially confined. Though significantly more expensive, total confinement facilitated handling of hogs, disease control, feeding control, and reduced labor expenditure for the farmer.

After three to five weeks, pigs are weaned (removed from their mother) and moved to a nursery--a dry, warm, and draft-free facility that generally features slotted floors to keep the young animals free of their own waste. After reaching an age of eight or nine weeks, by which time the pigs weigh an average of 50 pounds, the pigs are moved to another area for growing until they reach roughly 120 pounds; finally, they are finished (fattened or fed in preparation for slaughter) until they've reached the marketable weight of 220 to 250 pounds.

Feed and Supplements.
From farrow to finish, food intake is carefully monitored to assure proper growth and development and, above all, marketable fat-to-muscle ratio. Hogs are usually fed a ration of 20 percent protein in the nursing stage, changed in an incremental fashion to 13 to 15 percent for finishing. U.S. producers tend to prefer corn as the staple diet, supplemented by high-protein soybean meal and other feeder concentrates usually acquired from specialized feed producers.

Generally, eight major breeds remained prominent in the United States throughout the first decade of the 2000s: Yorkshire, Landrace, Chester White, Berkshire, Hampshire, Duroc, Poland China, and Spot. Purebred hogs are generally raised to be sold to commercial producers as seed stock for crossbreeding purposes. The objective of crossbreeding programs is to combine the most desirable traits of select breeds in order to arrive at the desired characteristics of leanness, meatiness, feed efficiency, growth rate, and durability. In the first decade of the 2000s, farmers increasingly depended on the research and expertise of independent breeders to provide them with stock designed to yield a more competitive hog herd. In addition, a growing proportion of breeding stock consisted of hybrid (crossbred) hogs. Hybrid hogs have become a significant part of breeding stock replaced annually in the U.S. herd.

Whether a producer secures breeding stock from a breeder or from the resident herd, choice of breeders can make or break a herd. Considerations in boar selection include such traits as temperament, birth rate, feed efficiency, carcass merit, feet and leg soundness, and past performance records with littermates. Sow herd replacements are often gilts from large litters that exhibited fast growth and leanness.

Three basic breeding systems have been commonly employed: the simplest lets one boar run with a group of sows and gilts. Although such a method requires little labor, it complicates the detailed record keeping of breeding dates. Another option is a hand-breeding system that puts one boar with one female at a time; this puts less stress on the boar and is easier for record keeping. A third breeding method involves artificial insemination. This route requires the greatest level of management for the producer but minimizes the spread of disease organisms or uncontrolled genetic material.

The Market.
Once a hog has reached an average of 230 pounds and 4.5 to 6.5 months of age, it is considered ready to market. The producer has several options at this juncture, including livestock exchanges, cooperative marketing agreements, terminal markets, auctions, and direct sales to packers. Terminal markets are typically located near major metropolitan areas, where commission firms represent the producer before the product is brought to nearby slaughtering plants. Auctions, on the other hand, were developed to provide a point of sale for small lots of livestock in rural communities. Direct sales to packers became increasingly popular with advances in animal transportation vehicles, which facilitated both delivery of livestock to packers and shipment of dressed carcasses to consumption centers.

Playing off the ever-shifting forces of supply and demand, producers can also sell their product at livestock exchanges, hedging their hogs on futures markets such as the Chicago Mercantile Exchange (CME). Market prices for hogs and pork products can be extremely volatile, influenced by a wide range of factors, including seasonal and cyclical supply fluctuations; shifting consumer demand patterns due to seasonal influences like holidays and temperature patterns; the impact of the fortunes of competing products such as beef and poultry; and the price of grains, such as corn and soybeans, that serve as hog feed.

Industry Cooperation.
In order to best address changes in production, marketing, technology, and consumer preferences, pork producers have organized at local, state, and national levels. In addition to countless cooperatives and local clubs and councils, the pork industry was represented by four main organizations in the first decade of the 2000s: the National Pork Board (NPB), the National Pork Producers Council (NPPC), the National Live Stock & Meat Board, and the U.S. Meat Export Federation (MEF).

The National Pork Bureau was established by Congress under provisions of the Pork Promotion Research and Consumer Information Act of 1985. Its purpose was to organize and manage funds raised by a legislative check-off on all hogs and pork products sold domestically and imported, at the rate of 35 cents per $100 of value. The NPB contracted different organizations to coordinate specific check-off-funded programs. The NPPC, for example, coordinated national product promotion and marketing efforts. That group was also responsible for a wide range of programs in producer research and education. The MEF assisted the NPPC in cultivating foreign markets of U.S. pork. The National Live Stock & Meat Board coordinated informational programs aimed at health care professionals and schools, including nutrition and product research related to pork.

Meat Inspection Policy.
In 1996 President Clinton announced a new meat inspection program that would require the participation of the private sector as well as the U.S. Department of Agriculture (USDA). The USDA implemented the Hazard Analysis and Critical Control Points (HACCP) system to replace the look-touch-smell system that began in 1907. The new system required companies to use new technology, antimicrobial chemical sprays, and irradiation to combat meat contamination hazards and determine where in the production process contamination takes place and prevent it from occurring. Farmers were required to submit samples to the USDA. In addition, the NPPC took other steps to ensure pork does not become contaminated. Calling for participation at the producer level as well as at the processing level, the NPPC strove to reassure consumers of pork's safety.

Background and Development

Dating back 40 million years, according to fossil records, hogs were domesticated in China by 4900 B.C. and in Europe by 1500 B.C.. The animal was reputedly brought to the New World from Europe by Columbus and then, more notably, by Hernando de Soto, who was dubbed "the Father of the American Pork Industry" for landing hogs at Tampa Bay, Florida, in 1539. By the time of de Soto's death in 1542, his herd of 13 had grown to 700 strong. Pork colonization continued with other explorers: Hernando Cortez introduced hogs to New Mexico in 1600, and Sir Walter Raleigh brought them to the Jamestown Colony in 1607.

The hog population grew alongside and sometimes in conflict with, humans. A long solid wall was constructed on the northern edge of Manhattan Island to control roaming hogs, eventually becoming the Wall Street area of the country's largest city. By the end of the seventeenth century, the typical farmer owned four or five hogs, which were raised largely on Indian corn. Pioneers carried a growing hog population westward in the nineteenth century.

By the mid-1800s, pork was being commercially slaughtered in Cincinnati, which acquired the moniker Porkopolis as a result. During this period, 40,000 to 70,000 hogs per year were driven along trails to eastern markets. The development of railroad lines and eventually the refrigerated railroad car ushered in the modern era of the hog industry. The Midwestern states led the nation in hog production after 1920.

About 97 million hogs were slaughtered in 2003, generating 19 billion pounds of processed pork and retail pork sales of roughly $38 billion. Compared to 3 million in the 1950s, the number of U.S. pork producers in 2003 totaled only 85,760. Consolidation contributed significantly to this decline as farms producing 5,000 or more hogs per year accounted for 80 percent of total U.S. hog production in 2003. This situation for the small farmer continued a trend that saw the industry concentrating itself into corporate-based finishing and marketing operations. In the early years of the first decade of the 2000s, more than 50 percent of the inventory share of U.S. hog marketings came from the large contract hog operations. In this contractual situation, the contractor agrees to provide the hogs, feed, medication, and supplies. The contractee supplies the housing, utilities, and labor.

Animal Rights.
The pork industry's efforts to produce an efficient, lean pig, as well as the consumption of its product, aroused animal-rights groups beginning as early as the 1800s. Common ground between these two groups seemed impossible to achieve, since the industry's livelihood is predicated on continued consumption of pork and other hog byproducts. But numerous, if not effective, measures were taken over the years. As early as 1873, legislation--the Humane Treatment of Livestock Act--was enacted to prevent cruelty to livestock while in transit on railroads. It was repealed and replaced in 1906 by the 28-hour law controlling feed and water availability and handling procedures of livestock. The Humane Slaughter Act of 1958 also contained humanitarian guidelines, though no noncompliance penalties were enforced. These and numerous other rules continued to spark controversy over such issues as animal confinement, feed supplements, and slaughtering methods. Groups such as the People for the Ethical Treatment of Animals (PETA), a Washington, D.C.-based nonprofit animal protection organization, continued their opposition to the pork and beef industries as the twenty-first century began.

Drugs and Pork.
Concerns were also voiced by consumers, veterinarians, hog buyers, and the NPPC over the use of drugs by hog farmers. Efforts were mounted in the late years of the first decade of the 2000s to develop better methods of detecting drug residues in table-ready pork in an effort to alert producers and curtail the practice. Industry interest also revolved around the possible uses and abuses of porcine somatotropin (PST), a growth hormone that greatly reduced fat while increasing lean meat and diminishing the amount of feed needed for a pound of weight.

Current Conditions

U.S. hog farmers were struggling as the second decade of the twenty-first century began. In addition to feeling the effects of the global economic recession, they were dealing with higher feed and energy costs and the negative effects of trade bans related to the H1NI virus. The H1NI virus was referred to as the "swine flu" because initial testing showed that many genes in the virus were similar to those present in pigs and hogs with influenza and the disease could be passed from humans to pigs and vice versa. The outbreak of the virus in United States in 2009 caused the World Health Organization to proclaim the situation a public health emergency, and as the disease spread, it became classified as a pandemic. People in the pork industry called for a different name for the disease, as they feared the misconception that one could catch swine flu from eating pork would bring pork sales down. The main negative effect, however, came from important export markets, including China and Russia, banning the import of U.S. pork. U.S. exports of the commodity dropped, as did prices. After development of a H1N1 vaccine, public fear of pork seemed to diminish, and by mid-2010 some countries had begun lifting trade restrictions.

Other factors influencing the industry included ongoing environmental concerns. In 2010, in response to pressure from environmental groups, the Environmental Protection Agency (EPA) approved new regulations related to the Clean Water Act that placed further restrictions on concentrated animal feeding operations (CAFOs), which included hog farms. According to the NPPC, the agreement "sets the stage for new Clean Water Act permitting measures that will add to producers' costs, drive more farmers out of business, increase concentration in livestock production to comply and hurt rural economies" while doing nothing to improve water quality.

Another trend that continued into the 2010s other than increasing pressure from environmental groups was the domination of the industry by large operations. According to the USDA, farms with more than 5,000 head accounted for 88 percent of the pig crop in 2008, as compared to 82 percent in 2005. As the farms grew larger, however, the size of the herds grew smaller, due to a rise in efficiency. For example, the average number of pigs produced per breeding animal per year was 18.7 in 2008, up from 17.4 in 2005. The USDA attributed this rise to an increase in the number of litters per sow per year and the increase in litter rates. According to the USDA, "Producers have been able to increase pig crop while decreasing breeding herd as a percent of the total inventory."

Industry Leaders

In 2010, the world's largest pork producer and hog processor was Smithfield Foods, of Smithfield, Virginia, with $12.4 billion in annual sales and 52,400 employees. Smithfield's brands included Armour, Cook's, John Morrell, Lykes, Patrick Cudahy, and Smithfield Premium. Other industry leaders were Seaboard Corporation, of Shawnee Mission, Kansas, with $3.6 billion in 2009 sales; Prestage Farms, of Clinton, North Carolina; and Cargill, Incorporated, of Wayzata, Minnesota. Sixty-two percent of hogs and pigs were raised in the Corn Belt states, according to the USDA, with Iowa the number-one producing state, and 15 percent were raised in North Carolina.

America and the World

The United States was the world's largest exporter of pork in 2010. That year, the United States exported an estimated 4.4 billion pounds of pork. The top customers for U.S. pork exports were Japan, Mexico, and Canada, with Japan accounting for about 30 percent of the export market and Mexico, 20 percent. In 1996 U.S. exports of pork reached the $1 billion mark, a milestone that the NPPC attributed in part to the implementation of the General Tariffs and Trade Agreement (GATT) and the North American Free Trade Agreement (NAFTA). By the late years of the first decade of the 2000s, U.S. exports of pork were valued at $3.1 billion, according to the National Pork Producers Council. The pork industry was also expected to be positively affected by China's agreement in 2010 to reinstate U.S. pork imports, which had been way down due to H1NI trade restrictions.

U.S. imports of hogs, especially from Canada, were also a factor in the industry. In 2008, imports of hogs from that country totaled 9.3 million head.

Research and Technology

Check-off funded programs organized by the pork industry forged ahead in research and development toward efficient and safe pork production that would better attract domestic consumers and compete in world markets. Of the many advances sure to affect the hog industry of the future, several could be especially notable, including the use of repartitioning agents as feed additives to encourage less fat, leaner meat, and faster growth and biotechnology that would advance gene mapping to a point where growth, fat-to-lean ratio, and prolificacy could be better controlled from the laboratory.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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