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Q: Cost of production for pig production ( Answered,   1 Comment )
Question  
Subject: Cost of production for pig production
Category: Business and Money
Asked by: bluegiant-ga
List Price: $50.00
Posted: 31 Oct 2002 05:05 PST
Expires: 30 Nov 2002 05:05 PST
Question ID: 94074
I am interested in finding actual cost of production information
and/or financial statements posted publically from pig production
companys.  Please find cost of production and/or financial statements
from 2 - 3 pig production companys?

Request for Question Clarification by resolutionman-ga on 31 Oct 2002 06:39 PST
By pig production companies do you mean pig processing plants
(slaughter houses) or pig farms (raise pigs)?

Clarification of Question by bluegiant-ga on 01 Nov 2002 04:12 PST
Pig farms.
Answer  
Subject: Re: Cost of production for pig production
Answered By: funkywizard-ga on 02 Nov 2002 05:25 PST
 
First I would like to say thanks for using google answers. Your
question, although straightforward, proved to be quite a challenge,
involving more than 2 hours of research.

Firstly, here is a link to an article entitled "North Carolina's
Capitalists' Pigs" [
http://www.resistinc.org/newsletter/issues/1998/12/nccp.html ], which
although at first glance looks to not be what you want at all, has an
interesting quote: "Production costs for pork are around 42 cents per
pound. In February, when prices first fell, the selling price was 36
cents. With the collapses since February, prices have dropped to
around 29 cents." This article also states that a pig "integrator and
processor" will pay a farmer approximately $8-10 per pig that is
raised.

Although I found numerous mentions of "big pig farming corporations
swallowing up smaller farmers" and similar, throughout my searching, I
found it very difficult to get the names of any of these corporations.
The article above mentioned one company "Murphy Farms, Inc.", which
was acquired by the publicly traded company "Smithfield Foods" (ticker
symbol sfd) [ http://www.advisorinsight.com/pub/indexes/400_mi/sfd_ir.htm
]. A quote from msn money [
http://moneycentral.msn.com/investor/research/profile.asp?Symbol=US%3aSFD
] says

"Having gone whole hog for acquisitions, it is now the world's largest
hog producer (nearly 12 million annually) and pork processor. Its
products include fresh pork and processed meats.....In a steady effort
to diversify, the company has built up its beef and prepared foods
operations through acquisitions. Its Murphy-Brown subsidiary produces
turkeys as well as hogs."

Although it now provides more than simply pork products, they remain a
major portion of their business. A publicly posted financial statement
for this company is located here: [
http://www.smithfieldfoods.com/invest/finsum.html ]. Their cost of pig
farming can be inferred from their complete 2002 financial report [
http://www.smithfieldfoods.com/invest/pdf/SF2002ar_complete.pdf ],
which states on page 40 that they had a total sales in their Hog
production group of $1265.3 million, with operating profits of $266.6
million. These figures are for 2002. The newest data for which they
provide "total pigs slaughtered" was 2001, for which they processed
11.8 million hogs, and had sales and profits of $1225.8 million and
$281.3 million respectively. This translates to a total cost of $944.5
million to process 11.8 million pigs, or a total cost per pig of
$80.04.

Another company that produces pork products is Tysons, with an 18%
market share for pork according to their annual report, which can be
found here: [ http://www.tysonfoodsinc.com/IR/publications/annualreport/pdf/2001%20Annual%20Report.pdf
] on the 25th page of this pdf document, they report that sales for
the pork segment of their business was $619 million for 2001, whereas
operating income was $27 million for this segment. Due to a recent
acquisition, they don't consider this information to fit well with
other data they have, so they prefer to quote the 2000 sales and
earnings figures of $157 million and $23 million respectively.

In the "Invester Factbook" at tyson foods [
http://www.tysonfoodsinc.com/IR/publications/factbook/default.asp ]
they have a section on pork [
http://www.tysonfoodsinc.com/IR/publications/factbook/factbook01/p10.pdf
], which has some useful data:

"In fact, feed usually accounts for more than 65 percent of all
production expenses. The average whole-herd feed conversion ratio
(pounds of feed required per pound of live weight produced) for the
U.S. pork industry is about 3.6 to 3.8 and is improving steadily."

On the second page of this report [
http://www.tysonfoodsinc.com/IR/publications/factbook/factbook01/p11.pdf
], they show that Tyson has an 18% market share of total slaughtered
pigs, whereas the previously mentioned Smithfield has a 19% market
share. Given that smithfield boasts a "nearly 12 million" hog
production for the year, I would estimate Tyson to produce 11 million
hogs. Given Tyson's figures stating their sales being $619 million
while their earnings were $27 million for pork, I can infer a cost of
$592 million to produce 11 million hogs, or approximatly $53.82 cents
per "250 pound average" hog. This includes all post processing that
Tyson performs on the Pork to make it supermarket ready. Given the
earlier estimates of cost I had found, this appears to be a reasonable
estimate of Tysons costs.

ConAgra is the number 3 supplier of pork with an 11% market share. The
investors page on their website is located here: [
ttp://www.conagra.com/investors/index.jsp ]. At this website, they
require you to request a copy of their annual report in order to view
it. If you would like, I can do this, however, in order to quickly
answer your requirements of "2 - 3" pig companies, I leave this up to
you if you are willing to wait for more information.

Some additional, more generalized information about pig production
costs may be useful to you and is provided below.

"Pricing Pigs" by harry tucker, Jan 1997 gas a table for estimated
costs of producing pigs: [
http://www.extension.iastate.edu/agdm/articles/tucker/TuckJan97.htm ],
that puts the total cost from start to finish of producing pork meat
at $100 a head for a 250 pound pig. Including only "farrow" and
"nursery" he estimates then that the cost of actually farming the pig
to be $44 a head.

Iowa state university has a number of publications estimating total
costs of producing pigs [
http://www.econ.iastate.edu/faculty/lawrence/EstRet/Index.html ].
Specifically, their "Farrow to finish" data [
http://www.econ.iastate.edu/faculty/lawrence/EstRet/FarFin00.pdf ] and
"Feeder pig production" data [
http://www.econ.iastate.edu/faculty/lawrence/EstRet/FeedPig00.pdf ]
appear most relevant.

I hope that this answer fully meets your needs. If I have missed
something important or you would like more information, please request
that I clarify my answer, and I will be glad to assist you.

Clarification of Answer by funkywizard-ga on 02 Nov 2002 05:40 PST
I stated that ConAgra foods requires you to request a copy of their
financial data in order to recieve it but I found that they do allow
you to download a copy for free. Apparently their request system is
for if you want a print copy of their data. As such, I would gladly
read over this and attempt to get you their production cost per pig to
go along with the two others i provided if you would like me to do so.

Request for Answer Clarification by bluegiant-ga on 03 Nov 2002 16:11 PST
This is a good start towards what I am looking for.  The Smithfields
data was the most relevant.  All I need to clarify on the Smithfield
cost of production is what is the average live weight of the pig
produced.  (Any cost of production data will require that information,
a point of clarification.)

Regarding the Tyson information, it appears to include the revenues
from slaughtering and processing, as you mention.  The information I
am looking for has to be solely based on the cost for producing the
pig.  As well, I read the Tyson information to say that Tyson has an
18% market share of slaughtering and processing.  Tyson will have to
purchase pigs from other producers to full fill their slaughtering
capacity.

The Con Agra information could provide the information we are looking
for.  Other companys to investigate may be;
Maple Leaf Foods in Canada
Hanor Company
Heartland Pork of Iowa
Heartland Pork of Saskatchewan Canada
Seaboard Corporation

Thanks for taking on this project.  I hope this provides some
assistance.

Clarification of Answer by funkywizard-ga on 04 Nov 2002 13:33 PST
I apologize for the delay, but I am having some (mostly technical)
difficulties in clarifying your answer, but rest assured I will have
what I hope you will find to be an excellent clarification to the
answer within the next day.

Clarification of Answer by funkywizard-ga on 10 Nov 2002 18:07 PST
I cannot apologize enough for the delay in clarifying my answer. After
reinstalling my adobe acrobat reader, I was able to find the following
information for you:

The smithfield foods data does not mention how much their hogs average
(in weight) unfortunatly, but among all the other sites I visited, the
generally accepted average weight for this type of hog is 250 pounds.

As for the conagra data, unfortunatly, in their annual report they did
not make a distinction between hog production and their other meat
production / processing data.

I would like to thank you for providing the names of companies that
would be helpful in my search. Of the companies you listed, seaboard
corp looked the most promising [
http://www.seaboardcorp.com/investors/ ].

From a securities and exchange commission filing [
http://www.sec.gov/Archives/edgar/data/88121/000008812102000003/0000088121-02-000003.txt
]: "Currently, the Company owns and operates production
facilities and owns swine and produces approximately three
million hogs per year with construction in progress for an
additional half million hogs per year."

However, it is implied that they have more hogs than this, and these
hogs are only those that they raise themselves. They get a large share
of their hogs from other suppliers.

Later on in the report, they show the following income data:

"
Pork Segment

(Dollars in millions)                  2001      2000      1999
Net sales                           $ 772.4     724.7     600.1
Operating income                    $  68.7      63.4      37.7
"

However, this information seems to include processing the pork to make
it supermarket ready, and thus does not seem applicable to your
question.

Fortunatly, I was able to find some rudimentary data from the
companies Seaboard Farms website [
http://www.seaboardpork.com/live_prod.asp ], which for their nursery
operations, they state "The twelve-pound piglets are moved to Seaboard
Farms nurseries where they stay for seven weeks until they weigh
approximately 45 pounds. From the nurseries, feeder pigs are
transported to a Seaboard Farms grow/finish site." They go on to
comment that "In the finishing building, the pigs gain 1.5-1.7 pounds
a day for approximately 20 weeks until they reach a finished weight of
260-280 pounds." I would take this as a good estimate of the weight of
hogs at various stages of development.

Most helpful of all however, was the links section of the seaboard
farms website, which led me to this website: [
http://www.porkboard.org/Home/default.asp ] which has a good deal of
the information you are looking for. Specifically, their pork
production factbook [ http://www.porkboard.org/docs/pkfacts2001.pdf ]
seems to have all the data you are looking for.

One quote on pig weight follows: "When pigs reach approximately 250
pounds, producers sell them on either a live-weight basis at terminal
markets or auctions, or on a live-weight or carcassweight basis direct
to packers."

Other interesting data given is their "Typical Market Pig", which is
as follows:

Live weight (pounds) ....250
Carcass weight (pounds) ....184
Backfat, 10th rib (inches) ....0.9
Loin-eye area (square inches)....5.2
Fat-Free Lean Index (pct.)....48.0
Pounds of lean meat ....88.6

I also invite you to look at page 24 of this pdf, specifically its
section entitled "PIG PRICES RECEIVED BY FARMERS", which puts the year
2000 value at $42.50.

You may also find useful on page 25 of the report the table entitled
"PIG PRICES, COSTS AND PROFIT/LOSS MARGINS FOR FINISHING FEEDER PIGS*"
which "*Represents feeding 50 lb. feeder pigs to a 250 lb. market
weight."

The next page details "AVERAGE COSTS OF PRODUCING 50 LB. FEEDER PIGS
(JANUARY 2001)" and "COST OF FINISHING MARKET PIGS FROM 50 LBS. TO 260
LBS., (JANUARY 2001)"

On page 32 of their report [
http://www.porkboard.org/docs/pkfacts2001.pdf ], they have a
comprehensive list of "STATE & NATIONAL PORK ASSOCIATIONS", including
contact information which you may find of use.

I must apologize if anything you need is missing from this
clarification. I feel I did my best to get you the data you requested,
however, if there is anything specific I overlooked, I will try my
best to get you that information.
Comments  
Subject: Re: Cost of production for pig production
From: revbrenda1st-ga on 01 Nov 2002 06:10 PST
 
From Manitoba (Canada, so use a conversion chart to reduce costs to
U.S. $$)Agriculture and Food:
An article by Mike Yacentiuk, P.Ag. Swine Specialist includes a chart
"prepared to serve as a guide for calculating total production costs."

What Does It Cost to Raise a Pig?
http://www.gov.mb.ca/agriculture/livestock/pork/swine/bab02s37.html

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