Meristem: Meeting Report: 2011 Banff Pork Seminar

It might be called the benchmarking bonus. Records from two large benchmarking and recordkeeping databases of North American pork producers show that the best of those producers significantly outperformed the worst over the past year. That resulted in substantially greater returns.

Greg Bilbrey of Agri Stats and Tom Stein of MetaFarms showed producers at the 2011 Banff Pork Seminar that better records mean better financial performance. Dave Kraut of Maple Leaf Agri-Farms in Manitoba, a leading production unit in Canada that uses both services, says results from its business units confirmed that benefit.

"You can have cost of production fluctuate $10 or $20 a hog," says Kraut. "On any given day we could have one finishing barn producing a hog for $120 and another for $140. So internal benchmarking becomes valuable. You have to figure out why that is going on.

"We are now able to identify those differences. We have 6,000 sow pyramids and 2,000 head finishing barns. We have a monitor report that identifies the top 10 percent and the top 50 percent. We show four or five different categories which can pinpoint where units are dong well and where they aren't. These reports get our unit teams talking to one another and finding solutions."

Comparisons with other pork producing areas is also important, says Kraut. "Like all producers we hear stories about productivity differences across North America and we wanted to know where we stood."

The Agri Stats benchmarking process requires producers to supply all of their production records and all financial records so that benchmarking results can be tied back to general ledger cost data, says Greg Bilbrey.

"This past 12 months top producers had about a $20 difference in profit, $11 a head lower cost and about $9 a head advantage in sales, the price they got for their pigs."

It does not usually take producers long to see a difference, says Bilbrey. It takes about a month to get set up and a month after that they'll get their first report. They can start to see some comparisons on performance and cost.

"There aren't a lot of decisions that first couple of months but once they have a quarter under their belt they can start to develop action plans and strategies. They see it as an opportunity and decide what they are going to do about it."

The system works for producers of all sizes, but the smallest producer currently is 10,000 sows. One reason, Bilbrey says, is that smaller farms are typically more family oriented and more hesitant to share data. They may not have the corporate comptroller or do the level of accounting required.

"That doesn't mean you can't benchmark," he says. "Ideally you want to relate production to financial records, but if you can't do that you can still benchmark production."

Tom Stein of MetaFarms says there about a million sows on that system and about 12.5 million nursery and finishing pigs, roughly 17 percent of all pigs in the U.S. The smallest one is a 100 sow producer and the largest is the largest pig producer in the world.

"Ten years ago what everyone was doing was day-to-day operations and reports for that and doing the analysis looking back," says Stein. "Today they continue to do that of course but it is really about looking ahead and do what you can to manage risks and communicate that to your lenders.

"In the U.S. the big focus among producers on our software has been looking at carcass weights, doing what they can to have a very narrow weight range. They are making $3 to $5 a pig just by doing that. They do that just by managing the way the barn managers load the trucks and feeding that information back to them. They get information from packer and within 48 hours feed that back. That has worked really well."

The data is all stored in top line database. Reports come out in easy-to-use Excel spreadsheets.

Stein says producers are going to have to rely on these information systems to provide them all of this data seamlessly without even thinking about it so they can concentrate on all the higher level activities like hedging, managing forward.

There are big opportunities to use social media to influence public opinion, but like any other opportunity it works best if it is managed properly.

That's the core message Lilian Schaer, of Agri-Food Projects Services had for a breakout session at the 2011 Banff Pork Seminar.

It may surprise people to know that time spent on social networking increased from three hours to 5.5 hours a month in the past year, she says. The majority of Twitter users are over 35 years of age. Approximately 60 percent of Facebook users are over 26 years old. And people 45 to 65 are the fastest growing demographic of Facebook users.

"It's important not to forget that many anti-agriculture groups are using social media as well. So it may not be ideally suited to everyone, depending on your audience, who you are trying to reach and what your comfort level is with interacting with people in a public forum."

He's equal parts Alberta boy, top chef, entrepreneur and pork evangelist, with a little 'rockstar' charisma thrown in for good measure.

Brad Smoliak gave BPS a taste of his energetic, fun and passionate outlook, and what the industry can borrow from that to capture the consumer mindset, in a presentation on Getting Pork on the Consumer's Plate.

Born and raised in Alberta, Smoliak has been a chef for the past 20 years, including as co-founder of the internationally recognized Hardware Grill, and served as the executive chef for the Alberta government at the Alberta House at the 2010 Winter Olympics in Vancouver. He also works as a research and product development chef specializing in developing formulations and recipes for the food manufacturing sector.

Perhaps most important for the BPS audience, he's clearly a guy who's pumped about pork. Here's a sampling of thoughts he had on capturing the consumer mindset:

1. Create comfort food to grab the gold. "People are constantly searching out great tasting food, for themselves and their families," says Smoliak. The most talked about and highest reviewed dish as the Olympics was beer-brined (with Big Rock Traditional Ale) double pork chop with butter cabbage, chive mashed potatoes, and natural reduction. "Pure comfort food," he says.

2. Focus on the consumer. "Getting them to enjoy and use pork is the secret," says Smoliak. "We need to give pork some chachet." Some keys to doing that, he says, are to make it easier for the consumer to cook pork, to exploit specific products, celebrate the pig and develop value chains. Pulled pork is one example of success. "Pulled pork is a trendy dish that is now seen everywhere. What about pork burgers? Why not? A restaurant in the Crowsnest Pass featured it on their menu and it sold out."

3. Commitment and passion wins the race. Making progress is a process and it's not going to happen overnight, says Smoliak. "People really have to work together and stay committed to the process."

Industry needs to take care of it's own business. "The demand for pork needs to be created by us." What's step one? "Stop treating pork as a commodity and start treating and celebrating it as food."

Value added strategies of leading retail, food service and meat industry entities will dominate the animal protein market for years to come. With a shift from a commodity driven market to a consumer driven one, it will become more important to understand consumer preference, attitude and acceptance of meat as driving factors, Andrzej Sosnicki of PIC North America told the 2011 Banff Pork Seminar.

One sign of that is the emergence of food technology development centers focused on driving consumer-friendly meal solutions. Here are some key food trends in North America.

Natural / organic = healthy. This category has attracted all sorts of "trendlets" including environmental consciousness and sustainability, fair trade, local production, energy conservation, natural, minimally processed or stripped down formulations.

Health and wellness. This has bigger implications than "organic." While any product can be formulated to be branded organic, not all are healthy, says Sosnicki. Health and wellness covers components such as diabetes and obesity, children's health, food safety, women's health, allergies and immunity. The animal industry is just starting to develop this segment.

Age awareness. The doubling of the over 65 population by 2030 means increased need for everything from easy-to-open containers to food safety concerns based on conflicting issues of tamper-resistant containers that don't require sophisticated kitchen tools.

Portion control. Essentially a health tool, this trend started in earnest in 2006 and is merged with the ongoing demand for convenience. It offers opportunity to meet consumer needs and ensure consistent package weights, and therefore price, within a category.

Globalization. Asian, Hispanic, African American and other ethnic groups will make up more than 35 percent of U.S. population in 2012. Cultural traffic and instant global information enables rapid diffusion of once regional preferences. Ethic influences as part of the specialty food category reached approximately $35 billion in 2007.

Kosher and halal certification. Religious oversight of food encompasses food safety, health and wellness, taste and quality, and ethnicity and spiritualism.

This is by no means a complete list of value added opportunities, says Sosnicki. It does not include large scale and niche opportunities such as those associated with breed specific products or intangible, such as organic or welfare friendly farming type criteria.

The first winner of the newly named R. O .Ball Graduate Student Competition at the Banff Pork Seminar is University of Saskatchewan student Alvin Alvarado. Presenting the award in Banff is Dr. Ron Ball, (right). The winning paper topic was "reducing gas emissions from swine barns using zinc oxide nanopartticles."

University of Missouri-Columbia agricultural economist Dr. Ron Plain riffled through a number of graphs and charts during an insightful and thorough presentation on global prices and production.

One of interest to anyone following the dramatic impact of U.S. ethanol policy on feed prices, was a line chart showing corn price moving in lock step with energy prices. It was a conclusive visual demonstration that as long as that policy continues to push ahead, the fortunes of pork production are fused tightly to it.

Equally concerning to higher feed prices are numbers indicating a rising trend in feed supply shortages, says Plain. "Bottom line is, if the livestock industry is going to start growing again we need find new sources of feed."

The USDA says 39 percent of the 2010-2011 U.S. corn copy will run through an ethanol plant, reports Plain. The livestock industry used to buy its share of that crop for $10 billion per year. It's now buying it for $30 billion. "Not only that, when you get down to how much feed is actually out there, it needs to go up but it's going down."

At the same time, there's reason for optimism over the long-term. A key bright spot for the future, from an export perspective, is the rise of China as a meat consumer, he says. "Despite all the challenges producers are facing, pork consumption worldwide is actually rising at a pretty good clip and China is the big reason. We're not seeing any slowdown in demand globally. In fact, it should keep going up."

Does labeling some pork devalue the pork next to it? What are the big drivers in pork purchase? How segmented are the meat markets? These were a few among many questions tackled by panelists at the end of a BPS breakout section on marketing to the future consumer.

Speakers included Karen Hamman, the Institute for Food Studies, Denmark; Ellen Goddard of the University of Alberta; and Jill Hobbs of the University of Saskatchewan. Here's a snapshot of four take-home messages they offered.

1. No simple strategies to capturing the consumer mindset. "There are a lot of different drivers in the purchasing decision," says Goddard. "Opinions are as different as people are different and as we try to interpret and generalize based on research it often just gets messy. It doesn't become clearer that this group belongs in this category so we can just market to them. That's a big challenge we face."

2. Regional preferences are a mixed bag. "We did a survey among consumers in Europe asking, 'What would you like to have on your label?' for meat products in general," says Hamman. The results showed a very big difference among the countries. French consumers said we are very interested in the quality label, 'Label Rouge,' and we're very interested in food safety information. If you asked consumers in Denmark, they would like to see attributes such as organic but there's not as concerned about having food safety information because they take that for granted."

3. Be careful not to shoot your industry in the foot. Niche opportunities based on label differentiation are getting more attention but from an industry perspective there are concerns to consider. "There's a lot of people doing research on 'the stigma effect' is what they would call it," says Goddard. "Some of the most interesting work in the U.S. was done on rBST-free milk. In some states they've actually outlawed claiming rBST-free on the product because of the stigma effect potentially on the other milk. It doesn't always happen and it's a complex area, but you have to be aware of it."

4. Distinguish strategies between safety and quality messages. "On the safety basis, I think there is a greater risk of the stigma effect," says Hobbs. "Whereas, if we accept that consumers are very differentiated – there is no average consumer – you might well have a label about the quality of a production system that appeals to one consumer but that other consumers are indifferent about."

With the challenges in pork production the past number of years, there no shortage of financial stress among producers but sometimes overlooked are the challenges from a lender's perspective as well.

Particularly for lenders who focus on the hog portfolio, like Mark Greenwood of U.S.-based AgStar Financial Services, the increasing demands to manage effectively in volatile times are something he shares with producers he works with. Here's a few tidbits of wisdom he offered from that unique viewpoint at BPS 2011:

'Get over it' and be realistic. Volatility is likely here to stay and current markets aren't going to shift dramatically overnight, so there's no sense betting otherwise in how you run your business, says Greenwood. "I hear people say, both on the producer side and lender side, they'd like to see hogs sell at $100 and corn at $2. Well, so would I. But what's the reality? I run half marathons. I would like to run a 1:10 half marathon but it's not possible, so get over it."

Tough economics don't have to mean poor results. They just mean managers, whether lenders or producers, need to be equally tough in how they operate and direct their business. For Greenwood, arguably the most important factor in success for pork operations today is how they manage liquidity. "Liquidity in my opinion is the most important thing - it's what managing well is all about in agriculture today. Without it, you can't operate. In my role working with pork producers, we focus heavily on working capital. If you have good liquidity, you can run your business and keep your lender off your back."

Don't underestimate value of passion. Pork producers finding ways to keep their business moving are a testament to the power of having passion for your business, and that trait goes a long way in keeping viable, says Greenwood. Lenders in the sector, too, need a tough constitution and a 'thrive on challenges' mentality to do a good job. "At times you feel like an ER doctor trying to keep the patient alive. It's challenging but you believe in what you're doing and you wouldn't trade it." He suspects many of the pork producers operating today share that attitude. "I've seen lots of producers who have faced long odds and put all their chips in to get through. And that's what they've done."

A surprisingly strong walk-in crowd helped boost registrations at this year's BPS to 627 people. And that has Seminar organizers, Ruth and Ron Ball smiling.

While producers are a mainstay of attendance, the Seminar continues to draw many from industry, academia and government. It's a networking and business opportunity that continues to find appeal.

The response was especially gratifying this year with the Seminar celebrating its 40th anniversary.

One interesting fact from the celebration of the 2011 F X Aherne award winners was that this year's contest drew a record 11 entries.

That amazes committee chair Ruurd Zijlstra of the University of Alberta. He says the range and quality of the entries over the past several years has been very strong and winners say they have benefited from the profile the contest has brought.

"Those entries from 2011 who were not selected this year are eligible to re-enter another year," he says. "And we hope to draw even more new ones as well."

Anyone interested in learning more about this year's winners can check out PDF format overviews of the three entries posted on this report.

University of Alberta scientist Dr. Ron Ball has served as program director of BPS for 13 years. During that time commercial sponsorship has quadrupled and registration has doubled for an event recognized as one of the best of its kind in the world.

With Ball retiring from the university he is stepping down from his program director role after this year's conference, and the BPS organizing committee took time to commend his service with a special recognition. The annual BPS award for graduate student research has been renamed the "R.O. Ball Graduate Student Research Award." Ball was also presented with a painting of the Banff area mountain setting that has been so much a part of the BPS image.

The recognition was fitting for a man with a long list of accomplishments in a stand-out scientific career who has mentored over 50 graduate students, some of whom were in attendance.

"Training graduate students has been the highlight of my scientific career," says Ball. "The thing I most cherish is their accomplishments when they leave and go somewhere else. I'm so proud of them. So to have this award named after me is very moving."

In looking back on 40 years of history for BPS as it celebrates that milestone anniversary, BPS chairman Jim Haggins drew some interesting parallels from the early days to the present.

As Haggins pointed out, in 1971 the Canadian dollar was $1.0098 US. "Does that sound familiar to anyone?" he says. "I like Yogi Berra's sayings. One was, 'It's déjà vu all over again.'"

The industry has been through many cycles of fruitful and trying times over 40 years, with the last number of them particularly challenging. "Once again we find ourselves under siege on many fronts," says Haggins. "But the knowledge and innovations presented here are opportunities to improve our situation and right the ship."

BPS has established a remarkable track record of consistency, throughout industry ups and downs, as an event that has unfailingly brought producers and their industry colleagues together to hear about and discuss the latest progress and solutions.

Another constant has been the resiliency of many pork producers who have, through many sacrifices and management adjustments "found a way" to make it through three years of losses and turn the corner into another year, says Haggins. "I'm in total admiration of the core producers and industry partners who have survived these severe challenges to our industry – to our way of life – and have upheld our production of some of the highest quality pork in the world."

These people are leading examples of "Facing Forward to the Future" – the theme of this year's seminar and what BPS has been about in all of its 40 years (and counting).

If you've had a chance to watch Dr. Ron Ball at farm meetings over the years, one of things he has always looked for is practical solutions that can be applied by producers. And he thinks the 2011 Banff Pork Seminar is one of the best yet for that type of information.

Here are 18 reasons he thinks pork producers and those who work with producers should be at this year's 40th anniversary event.

Save $7 / pig or more. Since 2008 the Puratone Corporation has applied a structural-solving methodology to improve performance across the company to do just that. Breakout Session 8.

Optimize feeding programs. The most successful producers do not chase maximum performance or minimum feed cost. They target maximum revenue over feed cost and margin over feed and facility cost. Breakout Session 4.

Find out what makes pig companies profitable. Benchmarking data shows the most profitable pig companies do not have the highest sow productivity or the best feed conversion. Breakout Session 2.

Controlling PRRS in USA and Canada. An outbreak can cost $225 per sow and up to $15 per growing pig. But PRRS can be controlled, even eliminated with vaccines and biosecurity protocols. Breakout Session # 3 will also describe successful regional elimination of PRRS in Canada and the U.S. Breakout Session 3.

How to get ag financing. Ag products suffer from extreme volatility, high risk and reluctant lenders. What do lenders want from clients? And what do clients want from lenders? Wednesday Plenary Session.

The question of bigger pigs. Carcass weights have been increasing, mostly pushed by packers. How do packers benefit and what's the dollar advantage? And what about producers? Heavier pigs create problems for facilities and management. What are the economic benefits and drawbacks. Breakout Session 6.

Optimize DDGS. It has become the most popular and economic alternative feed ingredient in swine diets. However, DDGS feeding has many challenges. Breakout Session 4.

Marketing pork to European consumers. They eat different products and a different product mix than North Americans, but Europeans respond differently to advertising and product characteristics. Break Session 5.

Reduce feed costs by $10 / sow. Recent information on amino acids and energy requirements shows we are overfeeding two thirds of the time and underfeeding the rest of the time. Better diet formulation for early and late gestation can save big dollars. Breakout Session 4.

Compare production costs across North and South America. A PIC survey of pork production across North and South America shows Canadian producers are at a competitive disadvantage because our market weights are too low. Breakout Session 9.

Better pig transportation. Learn the best handling techniques will make life easier and the operation more profitable. Breakout Session 7.

Pork production costs for 2011 and 2012. Ron Plain, one of the best forecasters in the business will make his predictions in the Wednesday Plenary.

Europe's rapidly changing pork industry. Packers and processors in Europe have developed several new business models to survive the poor economic situation. Thursday Plenary Session.

Government policies can ruin the best laid plans. Government actions are having an increasing impact on the pork industry. Hear predictions on biofuels, environment, animal welfare, antibiotics, trade and competition. Breakout Session 9.

Don't let a food safety incident destroy the industry. Food safety crises can destroy a company and ruin an industry. Learn strategies for the industry and yourself to maintain and restore public confidence. Breakout Session 5.

Improving pork quality. It's worth money at every stage in the market chain. Breakout Session 1.

What consumers want from pork? Consumers today are more responsive to advertising and more flexible on pricing. So how do we get consumers and chefs to use a greater variety of cuts? Breakout Session 5.

40 years from now – the pork industry in 2050. What will the pork and food industry look like 40 years down the road? New technologies and what we need to do to prepare. Friday Plenary Session.

The full program and registration details are at www.banffpork.ca. Registration is cheapest before Dec. 31, 2010.

A reminder to those of you wanting to attend the 2011 Banff Pork Seminar - there is a $100 per person discount for registering before December 15, 2010. And don't forget that when you register five people for the seminar from the same company/farm/ organization, you will receive the sixth registration free. You can register online on the Banff Pork Seminar website.

The Banff Pork Seminar has launched a new website just in time for the 2011 conference. The site has new features, making it simpler to review the program, get the best deals on registration and find accommodation. Visitors can also order back issues of previous BPS programs. It's all at www.banffpork.ca.

Available for reprint. Inside BPS articles are available for use free of charge to media and others. Please give credit to Meristem Land & Science. www.meristem.com.

Inside BPS

Tough years in pork business show benefits of benchmarking, recordkeeping

Manage social media to influence public opinion

'Rockstar' chef's three key strategies to capture consumer mindset

Checklist of major value added opportunities for pork products

First R.O.Ball Award winner

Food vs. fuel and the China silver lining

Four keys: Winning marketing strategies and 'the stigma effect'

Half marathons, financial ER and pork production: A lender's perspective

Strong registrations have BPS organizers smiling

Aherne Awards drew record participation

Graduate student award named after Dr. Ron Ball

Celebrating 40 years: 'Déjà vu all over again?'

Ron Ball's 18 excellent reasons to attend Banff Pork Seminar 2011

Save with early registration for BPS 2011

New BPS website launched