All together now: This little piggy went to market, this little piggy stayed home, all of the rest of the little piggies are long gone with the folks tending them.
In fact, there are a third as many pork producers today as there were just 10 year ago, according to Harlan Ritchie, distinguished professor of animal science at Michigan State University.
“Over 40 percent of the hogs today are marketed by operations producing 50,000 head or more per year—about 140 operations. The top 50 hog producers market about half of all of the hogs (fed),” says Ritchie. He was sharing the observation with a rapt crowd of commercial and seedstock producers trying to get a handle on their futures at the recent Beef Improvement Federation meeting in Wichita, Kansas.
Obviously, there are a couple of irrevocable physiological and management differences that mean pork and beef will never be able to travel down the exact same road together, but peek over the hog panels and it's easy to see the paths of both industries are eerily congruent enough to make your knuckle hair tickle. It's not like looking in a mirror as much as it is feeling like you may be staring through a magnified windshield at the same scenery, which is coming up fast and closer than it may appear.
For one thing, according to the last USDA producer census, no surprise to anyone who has been paying attention for the last couple of decades, a few folks control huge numbers of cattle while most producers hold the reins of relatively few. Of the 800,000 beef operations cited in the census, USDA pegs 64,000 with an average herd size of 240 head, while the other 736,000 operations have an average herd size of 28 head.
“In 1993, only 11 percent of all hogs were sold on some sort of pre-arranged contract with a packer. Today 75 percent of them are. This would suggest that the probability is high that the pork industry will become vertically coordinated in this decade,” says Ritchie. Rather than sell six or seven times between cradle and grave like beef, most finished hogs today trade hands one time.
Already the percentage of fed cattle trading away from the cash market has skyrocketed from the teens to about 35 percent in just a few short years. By some estimates, within the next five years or so, that figure could easily double.
“Where do independent hog producers land in all of this? “The key to survival for the independents is to find a way to become more interdependent,” says Ritchie, suggesting, “Facilitate linkages between adjoining industry segments.”
In other words, as fewer players control more of the market, rather than worry about vertical integration—impossible in the beef industry because of capital requirements and return on investment—cattle producers of all sizes have the opportunity to craft an industry that is virtually coordinated through cooperation. Besides offering similar efficiency and product consistency advantages of vertical integration, virtual coordination allows all of the partners to keep on doing what they're best at, rather than try to become something they're not.
Clearly, the beef industry is off to a blazing, stuttering start. From a fledgling idea just a few years ago, the notion of value-added, coordinated production and marketing systems (alliances) is picking up steam. Last year, approximately 15 percent of all the fed cattle flowed through the most visible of these systems, many of them tied to branded beef programs.
The Science of Selection
When it comes to constructing and using genes, Ritchie says selection and distribution has changed dramatically in the swine industry, too. “In 1965 there were 12 swine associations. Today there are three.”
On the beef side of the fence, the most recent independent research from the American Angus Association indicates that over half of all commercial cattle producers currently describe the predominant genetic make-up of their cow herds as Angus. If folks are honest, even with all of the breeds available to producers today, you can count the remaining purebred players without using all of your fingers.
At the same time, only recently and for the first time several beef breed associations have begun working and promoting together publicly. Heavens, at least two of them have gone so far as developing and promoting a brand name composite mixture of their breeds, complete with parentage verification and performance documentation.
In the pork industry, Ritchie explains, “The genetic companies dominate the seedstock market, producing about 70 percent of the commercial genetics; 95 percent in the largest operations.”
As an example, Ritchie explains Pig Improvement Company (PIC), one of the largest genetic companies, offers a dozen standard breeding lines, including purebred, synthetic (composite) and genetically modified options.
One reason so few genetic companies have wrapped up most of the swine business, according to Ritchie, is that they have taken advantage of all of the genetic tools available to them—breed differences, hybrid vigor, selection for economically relevant traits and the like. Plus, they and their customers have embraced some of the most basic technology.
“In swine breeding systems, the commercial use of artificial insemination has grown from 15 percent in 1990 to 70 percent today. Over 90 percent of the sows in the 50 largest operations are bred AI,” says Ritchie. Except for seedstock producers, in the beef industry, the use of artificial insemination has not changed much since the early 1970's.
Of the independent swine seedstock producers who are left, Ritchie explains, “They usually supply more than one breed, sell both boars and semen, and they maintain a sales staff. In other words, they work to become like the large seedstock suppliers, who are full service providers.”
Likewise, in the beef industry some of the most successful seedstock operations today are offering customers everything from marketing services and cattle management consultation, to record-keeping services and tailor-made genetic matings. And, like their swine counterparts, more beef seedstock suppliers are offering customers more breeds, as well as their own custom composites.
In the swine industry today, commercial producers rarely talk in terms of breeds. Instead, they focus on specific lines, something Ritchie expects to occur in the beef industry as well.
So, just what does all of this mean or not mean to the beef producers trying to figure out their near future today? Obviously, anyone with a crystal ball clear enough to describe the exact picture will surely be sipping an umbrella drink on some exotic beach soon enough. The best the rest of us can do is make a few rational assumptions.
First, the changing industry structure and fast-evolving value discovery process at all levels is not some damnable blip on the radar screen. The worm has turned. There's no going back.
Next, it's a safe bet the folks seeking profits rather than lifestyle in the beef business will be toting information, technology and a willingness to change as standard gear.
For instance, the successful producers won't be wondering how their cattle might fit this specification or that one, they'll know. And, they'll demand more tools that allow them to know.
As an example, lots of discussion at the BIF meeting revolved around the next step in genetic evaluation, moving away from indicator traits like birth weight toward the economically relevant traits they're indicators for; in this case, the probability a female will have a live calf and no calving difficulties along the way. Or, how about an EPD for the probability of a bull's progeny surviving to a certain age, or the estimated difference in days on feed it will take a sire's progeny to hit a certain fat endpoint? For that matter, Ritchie ponders the possibility of an EPD that describes the expected differences in nutritional requirements for cow maintenance. He points out 50% of all of the energy costs in the beef industry go toward cow maintenance. Now, that's economically relevant.
With genetics in mind, odds are that breeds won't disappear any time soon, but there will probably be even fewer major players than there are today. And if for no other reason than hybrid vigor, coupled with management convenience, composite genetics should chisel out a growing share in the seedstock marketplace.
Of course, all of this comes before even considering genomics—the study of the structure and functions of genes—that will likely make biotechnology standard operating procedure in the beef business, if public perception will allow it.
Already at least one institution in the United States and another in Australia claim to have uncovered the genetic gateway to guaranteed marbling and tenderness.
And what about transgenics? Again, if the public allows it, how long before the endless debate over the meat quality and quantity of each carcass ends, replaced by discussions of adding genes to the product for everything from natural human antibiotics to those that make cattle disease resistant?
Bottom line, just as one unidentifiable drip finally pushes a bucket of water past its rim, the floodgates of beef industry change have been pried open. What's more, the pump of electronic information and raw innovation promise to keep churning the flow faster and faster with each passing day.