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Characteristics and Production Costs
of U.S. Hog Farms, 2004
William McBride and Nigel Key
Economic Information Bulletin No. (EIB-32) 41 pp, December 2007
The U.S. swine industry has undergone significant changes in the size and ownership structure of
operations during the past two decades. Farm survey data on hog operations (locations with hogs) for
2004 reveal an industry characterized by wide variation in the types, sizes, and economic performance
of operations. Once dominated by small, owner-operated crop-hog farms, hog ownership has
become increasingly concentrated. The traditional approach of farrow-to-finish production, where
all phases of production are performed on one operation, is being replaced by operations that specialize
in a single production phase.
What Is the Issue?
Changes in the structure and performance of hog operations have important implications for those
associated with the industry. Hog producers continually face decisions about adjusting the size, organizational
structure, and technological base of their operations to improve economic performance
and farm viability. The restructuring in the hog industry has given rise to many concerns: environmental
risks and nuisance effects from large hog operations, social implications of a declining rural
population, and food safety, nutrition, and animal welfare concerns. Consequently, information
about structural characteristics and economic relationships in hog production and what they suggest
for the future of hog farming is needed.
What Are the Major Findings?
A wide variation in the types, sizes, and economic performances of hog operations characterized
the industry in 2004. Specialized farrowing, weanling, and hog finishing operations averaged
nearly $1 million or more of production value. By contrast, farrow-to-finish operations averaged
about $322,000 in production value per year.
Large specialized hog operations had been in business an average of no more than 13 years in
2004, compared with 20 years for the farrow-to-finish operations. The specialized operations
also showed more recent investment in production facilities and equipment, and greater technical
innovation, using such innovations as artificial insemination, terminal crossbreeding, and all-in/all-out management, than did farrow-to-finish operations.
Hog farms with the lowest costs of production in 2004 tended to be large, located in the
Heartland, and operated by farmers whose primary occupation was farming. Performance indicators--such as pigs per litter, death loss, and feed and labor efficiency--were also better on lowcost
operations. The better performance may be due to their greater use of improved technologies
in such areas as breeding, feeding, and facilities management.
Small and medium hog operations far outnumbered large and very large operations during 2004, but large and very
large operations accounted for most of the production. The use of contracts for finishing hogs increased with size of
the operation. Contracts were used by 75 percent or more of large and very large hog finishing operations compared
with less than 50 percent of smaller operations. Operators of small and medium operations were generally older and
more often reported plans to exit the hog industry in the next 5 years, suggesting that the trend toward fewer and
larger operations will likely continue.
Most indicators of physical and economic performance improved as the size of operation increased. These differences may be partly due to less-than-full capacity utilization by small operations as well as to the superior technologies
used on larger operations. Average production costs declined as the size of the hog operation increased, a result
of spreading capital ownership costs over more units of production as well as more efficient input use.
Variation in production costs was most pronounced among the more diverse small operations, and fewer of these
operations could cover their costs at a live market hog price of $40 per hundredweight. Despite the higher average
costs of small operations, several had costs competitive with those of larger operations.
Hog production was highly concentrated in the Heartland in 2004, but the largest operations were in the Southern
Seaboard, where hog finishing operations averaged more than 12,000 head sold or removed per year. The larger hog
finishing operations in the Southern Seaboard were more feed and labor efficient than those in other regions, but
their production costs were higher than in the Heartland, where lower corn prices offset the better feed efficiency.
How Was the Study Conducted?
This report uses data from an in-depth survey of U.S. hog producers in 2004 as part of USDA’s annual Agricultural
Resource Management Survey (ARMS). The survey collected information from a cross section of U.S. hog operations,
including measures of size, production costs, business arrangements, production facilities and practices, and farm operator
and financial characteristics. Surveyed farms were first divided into the types of producers common to the U.S. hog
industry, and differences among the producer types were evaluated. Differences among farrow-to-finish and feeder pigto-finish operations were explored in-depth. Data on structural and farm characteristics and on hog production practices
and costs were summarized for these producers in order to explore variations in production cost, economies of size, and
regional diversity in U.S. hog production.
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