EVOLUTION OF THE US PIG PRODUCTION INDUSTRY

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• EVOLUTION OF THE US PIG PRODUCTION INDUSTRY
• - FINANCIAL CHANGES SHAPED THE US PORK INDUSTRY
  TODAY
• Randy Stoecker November, 2008

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PERSONAL HISTORY

• 1947 BORN WESTERN,KS
• RAISED BY DEPRESSION PARENTS
• 1958 SOLD 1ST SL PIGS FOR 0.11/LB Live
• 1970 GRAD KANSAS STATE UNIV.

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BUSINESS CAREER

• 1970 - BANKER - FINANCED 600 SOW UNIT OWNED BY 5
  FARMERS
• RALSTON PURINA - GREAT TRAINING
• 1974 - YEAGER FED 60,000 COMINGLED PIGS
• 1975 - TRAVELED TO EUROPE / ENGLAND

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BUSINESS CAREER

• 1979 - JOINED PIC - TALENTED PEOPLE AND HIGH
  PERFORMANCE PIGS
• 1987 JOINED WENDELL MURPHY TWO DIFF PEOPLE
  WITH ONE PLAN
• 2000 MURPHY FARMS BOUGHT BY SMITHFIELD A GOOD
  FIT
• 2000-2007 GROWTH BY ACQUISITION- NEW CULTURES
  SYSTEMS

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• FINANCIAL PRESSURES CAUSE REAL CHANGE
• CHANGES IN PRODUCTION PRACTICES ARE THE REACTION!!

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U.S. Average Corn Price, 1908-2007
1942-1972 30 years Avg 1.26
1908-1942 35 years Avg 0.78
1973-2006 34 years Avg 2.37
Source USDA/NASS
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Pigs Per Litter, 1930-2007USDA Hogs Pigs
Reports
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Average U.S. Hog Carcass Weight, 1930-2007 Note
Some Systems Target 100 kg Carcass
90 kg Carcass
75 kg Carcass
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Annual U.S. Pork Production Per Sow, 1930-2007
Note Top Systems 2,600 to 2800 kg
1930-80 growth rate 2.027 1980-07 growth rate
2.793
2000 kg Carcass Wt
1400 kg Carcass Wt AUS Today?
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Exchange Rate Can Per US
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2007 was the 16th consecutive record year for
U.S. pork exports
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U.S. Daily Slaughter Capacity

• Packer Fall 06 Fall 07
  change
• Smithfield 117,600 118,700
  1,100
• Tyson 72,800 74,000 1,200
• Swift 46,000 47,000 1,000
• Excel 36,000 36,000 0
• Hormel 35,800 36,800 1,000
• Triumph 16,000 17,500
  1,500
• Seaboard 16,000 16,800 800
• Indiana Pack 14,000 15,000 1,000
• Hatfield 10,200 10,600 400
• Others 56,475 52,435 -
  4,040
• Total 420,875 424,835 3,960
• Owns some pig production

Source Steve Meyer, Paragon Economics
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Iowa Farrow to Finish Profits, 1997-2008
Quarterly
Source John Lawrence, Iowa State University
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PRODUCTION CHANGES IN RESPONSE TO PRESSURE

• 1970s STD was 40 Sows Farrow to Finish
• OR
• 100- 300 Purchased Co-mingled Feeder Pigs
• ALMOST ALL WERE CORN FARMERS FIRST

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STRUCTURE

• OWNER- Family to Entrepreneur to SHIP
  Business/Corp. Contracting
• GRAIN Produce gt fed, Nowlt 30,
  Produce enough to matter
• LABOR Family to Local to National
  International Mix
• GENETICS Pure Bred Boars, own gilts,
• Buy hybrid Boars F1 gilts,
• Now 50 own Multiplier w/ 4 owning G
  Nucleus herds

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• SOW 50-100 ? 300-500 ? 2400-7500 FARM
  Probably 20 Sow Farms 10,000 or gt
• MATING Natural ? to All AI since 1995
• Auto semen pkg. boar studs 100-600
• BUILDINGS One Site Farrow to Finish
• ?Farrow to Feeder
  w/off-site Finisher
• ?Three Site ? Now Two Site ? W
  to F
• FEED Purchased ? Farmer mixed ?
  ? Toll Mill ? Own Mills ?
• ? Mash ? Rapidly moving to all
  Pellets
• FORMULATN No Involvement ?
• ? Own Nutritionist and RD Farms
• ? Statisticians Quality Trial Mgt.

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• PACKER- Adversarial (Live)
  CARCASS Contracts (prem, window, cut out)
  QUALITY Alignmt/Ownership ( lean quality,
  antibiotic free, etc)
• FACILITIES Each one difft low Fixed Asset
  invest.
• Bought turn key
• Build their own (lacks innovation)
• BENCHMARK Lie to neighbor -gt listen to Feed Rep
  -gtUniversity systems -gt Agri-Stat (Last
  12 mths 11.50/hd Profit Av to T25)
• FINANCING Dad -gt Local Banker/Low Debt -gt
• Regional gt Natl/Intl/Public Mkts

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Pork Powerhouses Successful Farming Magazine
468,000
Christensen 170,000 Hanor 75,000 New Fashion
48,000 TriOak 28,100 Eichelberger
20,000 Allied Prod 58,700
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BENCHMARKING

• AGRI STAT RESULTS
• JULY 2008
• 12 Months Consolidated

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Feed Conversion (6.98,j)
AVG vs. Top 25 0.07 0.07
0.09 0.01 0.01 -0.05
0.08 0.11 0.09 0.14
0.10 0.12 0.01
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Comb. - Nsy/Fin. Mort. (ps1.1,d)
AVG vs. Top 25 1.49 1.66
3.03 2.85 1.32 1.66
3.14 4.96 4.47 3.98
2.21 2.16 2.03
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AGRISTAT PRODN COST SUMMARYUSA CANADAJULY 08
12 MONTHS

• USA(43) AVG Top 25 CANADA
• WEANED PIG Month / Year Month / Year Variance
  Yr Avg Yr
• Cost/head 33.78 / 31.67 29.24 /
  29.05 2.62 32.54
• P / S / Y 23.77 / 22.69 23.94 /
  22.79 0.10 24.02
• Weaned / Lit 9.84 / 9.65 9.81 /
  9.53 (0.12) 10.18
• Feed 13.04 11.39 2.43 13.81
• Cal/Gest/Day 6882 6416 466 7378
• Cal/Lact/Day 19,983 18,068 1,915 20,432
• Total Facility Costs 12.32 10.51 1.81 13.58
• Labor 5.92 5.25 0.67 6.21
• MILLING ON COSTS per Ton
• Mills (80-100 Pel) 8.09 9.48

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AGRISTAT PRODN COST SUMMARYUSA CANADAJULY 08
12 MONTHS

• USA(43) AVG Top 25 CANADA
• Month / Year Month / Year Variance Yr Avg Yr
• Nurs Cost/hd Out 50.74 48.90 1.86 58.65
• TOTAL COSTS
• Total Fin /100 58.66 / 49.33 52.19 /
  46.49 2.94 52.13
• Total Fin /100kg 129.05/ 108.53 114.82/
  102.28 6.47 114.69
• FINISHING PIG
• Feed Cost/100 28.39 / 22.76 26.36 /
  21.37 1.39 19.35
• Fin FCR 2.80 2.67 0.13 2.98
• FC Cal/ Gain 4248 4081 167 4328
• ADG gm/day 795 860 65 795
• Fin Mort 6.32 4.62 1.70 3.77
• Profit/head (.8.20) / (11.20) 11.27 /
  0.30 11.50 29.76
• w/o Corp Int and GA

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• THANK YOU