By Clint Schwab, Vice President, Science and Technology
The same factors that created concern in 2019 will remain in 2020.
The U.S. pork industry continues to increase supply year over year. The robust supply is coupled with market access challenges. In the largest pork-producing country on the globe, African swine fever continues to expand. Amidst it all, alternative proteins had a banner year with the mainstream launch of several fast-food products.
With a variety of challenges, I doubt anyone is capable of gazing into the 2020 pork industry crystal ball with any certainty. Let’s keep in mind two key themes that can help U.S. pork producers stay on solid footing regardless of what comes our way: a stable and efficient core complimented by a true focus on innovation.
Maintain a stable and efficient core.
The core of our business is producing and selling pork – in a sustainable and cost-effective manner. In order to navigate the inevitable changes, keep the following top of mind:
1. People. People are the first element of a stable core. In this sub-4% unemployment labor market, good people are hard to come by, and retaining good people must be at the top of everyone’s priority list for 2020. Retention starts on day one. Give employees the right tools and training early in their career. Don’t forget to connect the dots for your employees. Pride in production, the nobility of a caregiver – call it what you want – raising pigs is something to be proud of and we must convey this higher purpose more often.
My final point on this subject – people leave managers, not companies. It’s an old adage, but it’s true. Too often, farm managers operate as their title suggests and don’t embrace the fact they likely represent the most critical position in a production system. Farm managers must be leaders. Engaging and inspiring people is one of the manager’s most important and most difficult jobs.
2. Biosecurity. The industry has emphasized biosecurity in recent years. Each of these improvements comes with an increased cost of production, which puts additional pressure to deliver longer stretches of healthy production. Recent results may be a sign these investments are having their desired impact. For our recent run-rates to stick as part of a more stable health status, we must look beyond technological upgrades and ensure biosecurity remains part of the farm culture.
3. Costs. Cost of production is critical to the long-term success of our core business strategy. There is always a need to manage variable costs, but one key lever to manage fixed costs is through efficient production. Producers who are at a throughput disadvantage will find it difficult to compete long-term.
Feed costs will always be important. It’s about the delivered cost of the right diet at the right time and involves careful management of the entire feed supply chain. The baby steps will add up if we remain diligent in the continuous improvement process.
Focus on innovation.
We can’t lose sight of opportunities to innovate our business. If done right, innovation should not only support the core, but enable our ability to grow the global position we’ve become accustomed to as an industry. We need to be careful to not innovate in silos and maintain a system-based approach that leverages perspectives from a variety of disciplines. There are several examples of new products or tools in the marketplace that can and will create incremental value; however, these incremental changes need to be combined in ways that create material change.
At The Maschhoffs, we operate our innovation platform based on the concept of “bullets then cannonballs.” The bullets need to be calibrated, but without the cannonball, we won’t generate the level of change needed to materially evolve our business.
The following are three innovation platforms I believe encompass significant opportunity:
1. Digital transformation. The industry is ripe for a digital transformation, and the ag tech arena is growing. We need to embrace it. It’s safe to say we remain data-rich and information-poor. In comparison to other industries outside of animal agriculture, we’re in the dark ages when it comes to leveraging information technologies. The first step is capturing useful information more timely. Until we can acquire data efficiently, we can’t begin to determine how to make sense of it. Efficient data acquisition using sensors will lead us into the realm of more real-time business intelligence tools. This is where the rubber meets the road in creating value. It requires a new level of predictive analytics – and for many of us, a new way of thinking. Not only will these tools allow us to respond more efficiently to production challenges but they will help us unlock areas of opportunity we don’t currently realize.
2. Health and nutrition intersection. The interaction of health and nutrition in the gut of the pig is a big opportunity we need to better understand. Pharmaceutical and nutrition companies have started to think differently and offer opportunities to improve pig performance through the intersection of health and nutrition in the gut of the pig. As we move forward, it’s less about bugs and drugs and more about creating the right gut maturity, health and population of microbes. It’s the combination of tools in the realm of gut health that may comprise the cannonball and lead to better overall performance.
3. Harvesting genetic potential. There are many competitive genetic populations out there. However, the population average only tells us so much, particularly if evaluated on macro factors only. Opportunity exists in more efficient leverage of these resources. On the sire side, we need to implement innovative approaches to allow the best boars to have a broader impact. Advancements in reproductive technologies will accelerate this impact – but it’s just as important we fully understand the differences among them at the commercial level.
The good and the bad of genetic change is that it’s permanent. To ensure genetic change in the right direction, we need to advance our measurement capacity and explore novel phenotypes that help us better describe the basic biological elements that need to evolve (and manage risk associated with that change). As an industry, we allow too much waste to exist in our genetic supply chain. It generally revolves around genetic lag – and if we took a close look at the losses we live with on a daily basis, we would find a better way to manage gilt utilization and reproductive longevity.
Planning for today and tomorrow.
A stable and efficient core is paramount to a sustainable business structure for each of us that make up what is known as the most efficient pork supply in the world. However, to maintain that position in the long-term, it’s just as important we keep innovation front-and-center to our daily operations. Without it, I’m nervous we’ll look up and find too many instances where other areas of the globe are on a faster trajectory.
Today we are focused on the massive opportunity represented by China’s pork demand. At this point, they’ve demonstrated they’ll contribute to our demand picture, and margins in the short run will benefit. This creates the real risk of the U.S. pork industry becoming over-built on the back end. We need to hold on to the global cost-competitive position we have today by focusing on innovation alongside a stable core.
Want to learn more about information technology in the barn? Read porkbusiness.com/tech-revolution.
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