Lafayette County
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Pork Supply Chain vs. Pork Production by Ron Plain and Vern Leibbrandt
The U.S. hog/pork industry is changing very rapidly. Traditionally, the industry has consisted of hundreds of thousands of small independent hog farms which sold their hogs to packers in an open market bid system once they reached slaughter weight. By the start of next year, approximately 25% of the nation's hogs will be produced by hog packers and another 50% will be raised under a marketing agreement with a packer. Only 25% of hogs will be sold to packers on the spot market. The decline in the percent of hogs sold on the open market has been so precipitous in recent months that one must question whether a viable open market system for selling hogs will still exist in five years.
A supply chain represents the many components of production, processing,
distribution, and marketing aligned into a single system for the purpose
of meeting consumers' wants and needs. Although, supply chains are
frequently fragmented, they potentially could be under the control of one
entity.
The Pork Supply Chain
Live animal ® Processing ® Distribution ® Retail Sale
The hog/pork industry is rapidly moving toward an integrated supply chain approach because it:
- provides for more rapid response to consumer demand and preferences,
- improves consistency of product,
- provides for greater accountability and traceability
- increases facility and infrastructure utilization through better scheduling
- stabilizes production levels and
- has a single payment site that is less volatile than live animal prices.
A wide spectrum of choices is available to hog farm owner operators as the pork industry moves from a fragmented system to a unified pork supply chain. These options range from a firm which controls the entire chain, such as a producer:
- selling pork directly to consumers as a vertically integrated company
- which contracts for processing and then sells directly to retailers
- that tailors production to meeting the needs of a specific processing center
- group that provides processor specified animals
- organization that owns downstream parts of a supply system.
When sorting through the many choices, producers must be aware of both the opportunities and the great risks of moving downstream in the food supply chain.
Supply chain emphasis is to the future what production technology was to the recent past. Producers who focused on their production facilities and prided themselves in their independence must now consider a new approach.
Show Me The MONEY!!
So you're thinking about doing something "different" or "alternative" or "value-added" on your operation??? Or maybe you're just wondering WHO EXACTLY is making the money in today's pork industry? I'm guessing that if I asked ten producers that question, at least nine would say "the packer". Especially in the last two years! I'd like to share data with you that shows just where the MONEY is…and it's NOT where you might think it is!!! Look at the following graph carefully.
As you can see, while you might have predicted that the farmer's share of the pork dollar has been decreasing, you might not have guessed that the packer's share has been too. So, WHERE IS THE MONEY???? The answer is in processing, distribution and retail. This is an extremely important consideration for anyone thinking of trying something different. If you're thinking of venturing into business on your own (in some fashion), you would be best to work on capturing some of the profit where it's growing rather than shrinking!
Stacey Wilson, Livestock Specialist
14 E. 19th, Box 490, Higginsville, MO 64037
(660) 584-3658
wilsonsj@missouri.edu
Note: Links to commercial websites do not imply endorsement.
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University of Missouri Extension Lafayette County lafayetteco@missouri.edu Site maintainer: Judy Elling Updated 11/23/05 |
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