Posted 2/10/2019 23:52 (#7312506 - in reply to #7311445) Subject: My Reactions / Extra Thoughts What if Price was...
South Central Iowa
(Price Question at the Bottom, can skip if you like, sometimes I write too much lol)
First, I do want to mention this is not something I am advocating or wanting per se, just something I've seen mentioned here or there over the years. In light of the proposal last week and without getting too political, one of our two parties is moving very hard in a direction that would favor legislation like the above. It appears they would do so regardless of the economic impacts as well. Whether it's air travel, electrical generation, healthcare, tax policy, universal basic income (paying the lazy), climate policy, or cow farts; the drivers of that party want to do it all, right now!.... It's really something when 70 members of their caucus and their 3 leading contenders all signed on to it immediately in spite of it having all the trappings of a Soviet 5 year plan and a similar effect if actually implemented.... Digress.
So I really appreciate all the input from you guys with experience (and others ;). I pulled some numbers from Iowa State and USDA to kind of construct some measure of cost and price difference. I don't want to get too bogged down in them, especially because I am not very knowledgeable about hogs. So ISU says it would cost roughly $1,100 to raise one litter on pasture, including $168 for labor. There would be a little more than 7 market pigs per litter by their estimation, so I will assume 14 per annum. It appears that from most of you, anywhere from 40-150 sows would be doable for a single individual depending on how much he time/effort/frustration he wanted to expend. I will just say that I would want to make at least $100 a pig to screw around with it (remember we assume the banning of confinements so it's this or no pork by decree). So if I took on 100 sows that marketed 1,400 pigs, that would be a profit of $140,000, plus $33,600 for labor that either I could keep if industrious, or could contribute towards hired labor to help. So total cost for that demanded margin for someone like me to want to do it would be $3,600 per sow per year, or $1,800 per litter.
Price: What would it need to be to if $1,800 per litter were demanded and what would the price in the store be?
With an average carcass weight of 210#, the packer would need to pay $85.70 per hwt. Current bids according to USDA are about $55.00. In 2014, we saw an average market year bid of $75.94, an all-time high. The USDA keeps a weighted average for retail prices. In 2014, prices at the retail level reached $4.02/lb. So if we do some simple extrapolation, would need to jump to $4.54, but the farmer share was higher than normal during that spike, so we might assume that retail price would need to jump to $5.00-$5.50 to keep in line with more typical farm to table spreads.
So this would obviously have an effect on demand. The weighted retail price in most of 2018 was around $3.75. When we jumped in 2014 it went from $3.60 to $4.00 and demand dropped 2% according to USDA data. Price is inelastic to demand to some degree, but a jump in price of 40% might test that more. For this example though, I will use the 1% decline for 5% increase, so demand would drop by 8%. We slaughter about 120 million hogs in the US, so this would drop to 110 million. Just making a simple assumption that all are market pigs, no cull sows, we would need nearly 8 million sows for breeding per year. If the hog farmers had 40-150 sows with an average of 100, we would need 80,000 hog farmers at least, and probably as many again for hired help and other labor.
An addendum: I don't support banning CAFO's. Mostly, I think it is more efficient and affordable and in a low margin industry, that little bit of edge clears the field of alternatives. I don't necessarily think that CAFO's are good for farming or rural development or earnings though. I mentioned above and will repeat, I do find the notion of these free-ranging animals somewhat appealing and romanticized; Arcadian really. But I do realize that is because I haven't done it. If I had, I would probably hate every last stinking, wallowing, bastard pig that ever existed and want to beat them just for standing close enough that I could..... lol.... That is why I would want to make pretty good bank, like $150K or so for even messing around with free-ranging hogs. SO:
If you could make $140,000 caring for 100 sows in this hypothetical non-confinement world, would you do it?
Are there 80-200,000 people left in America who would do that task?
Do you think a jump of weighted price from $3.75 in the store to $5.25 would cut much demand or like $3.00 gasoline, do you think people would just become accustomed to it over time? If the average American consumes 50# of pork per year and we presume it drops to 45# for the demand slippage; the annual per capita pork spending would rise from $188 to $236; would $50 per person be that noticeable over time?