Production and Marketing Characteristics
The 2004 Pork Industry Structure Study

Table 1 reports the number of operations and market share of independent hog producers in the U.S. by size category based on the number of head of slaughtered hogs marketed in 2003 The total number of operations of 70,130—which is the United States Department of Agriculture (USDA) estimate of owner operators– is down ten percent from the 2000 survey. 

The category of largest producers—those marketing more than 500,000 head annually– are estimated to have marketed 40 percent of all slaughtered hogs in 2003.  In 2003, there were 25 entities in this category, up from 20 firms marketing 35 percent of all hogs in the year 2000.  It is estimated that the two categories of largest producers, which equals 159 producers or about one fourth of one percent (0.23 percent) of all producers, sold approximately 60 percent of slaughter hogs in 2003.  Combined with the firms marketing 10,000 to 50,000 hogs per year, the largest three categories, totaling 1,074 operations (1.5 percent of total operations), and produce 78 percent of the hog slaughter.  Conversely, the two smallest categories of producers, those marketing less than 3,000 hogs per year, represented almost 95 percent of all producers but produced less than 10 percent of the U.S. hog slaughter in 2003.

Table 1.              Estimated Total Number of Operations & Share of U.S. Slaughter in 2003 by Size Category

Firm size (thousand head mktd.)

Number of operations

Market share

Less than 1

59,950

1%

1 – 3

6,630

8%

3 – 5

950

4%

5 – 10

1,526

9%

10 – 50

915

19%

50 – 500

134

19%

500+

25

40%

Total

70,130

100%

Table 2 presents the changes in the share of U.S. hog slaughter of the various size classes of producers. In 1988, the smallest producers raised almost one third of the U.S. hog slaughter, but over 15 years, this group’s share of production has dwindled to only one percent. Over the same period, those producers in the over-50,000 category went from marketing 7 percent to almost 60 percent of all slaughter hogs.

Since 2000, only the largest two size categories, those marketing over 10,000 head per year, gained market share. The largest declines in market share since 2000 was that lost by the operations marketing between one and five thousand head per year. The five to ten thousand group has remained the most stable group since 1988 and may represent an economic breakpoint.

Table 2.              Share of Annual U.S. Hog Slaughter by Year and Size Category

Firm size (thousand head mktd.)

1988

1991

1994

1997

2000

2003

Less than 1

  32%

  23%

  17%

    5%

    2%

    1%

1 – 2

  19

  20

  17

  12

    7

    8

2 – 3

  11

  13

  12

  10

    5

3 – 5

  10

  12

  12

  10

    7

    4

5 – 10

    9

  10

  12

  10

  10

    9

10 – 50

  12

  13

  13

  16

  18

  19

50+

    7

    9

  17

  37

  51

  59

The change in composition of the two categories of largest producers and their market share is chronicled in Table 3 and Table 4.  From 1994 to 2000, the number of producers in both categories has more than doubled. The number of firms in the 50 to 500 thousand head category actually declined from 2000 to 2003, but this is due to those firm’s increased marketings and/or mergers which put them into the largest category. 

Market share of operations marketing over 500 thousand head quadrupled from ten percent in 1994 to 40 percent in 2003, going from 10 percent of marketings to 40 percent. Over the same period, operations marketing 50 to 500 thousand head saw their market share almost triple, from 7 percent to 19 percent. Both categories saw similar levels of growth relative to 2000. The 50 to 500 thousand head group market share grew by about 12 percent while the 500+ group market share grew by about 14 percent.

Table 3.              Number of Large Firms Producing Hogs

Firm size (thousand head mktd.)

1994

1997

2000

2003

50 – 500

57

127

136

134

500+

9

18

20

25

Table 4.              Percent of U.S. Slaughter Hogs Marketed by Large Firms

Firm size (thousand head mktd.)

1994

1997

2000

2003

50 – 500

7%

13%

17%

19%

500+

10%

24%

35%

40%

The distribution of hog marketings between market hogs, feeder pigs (including weaner pigs), and seedstock, are presented by size group in Table 5.  A “marketing” refers to each time a hog is sold.   The Total column is a summation of the number of times hogs were sold, whether as a feeder pig and/or as a fat hog, therefore allowing for some double counting. 

The market hogs column reflects the market share numbers discussed above. The number of feeder pigs sold by the larger producers, in terms of annual marketings is significant. The largest sellers of market hogs (500+ thousand head per year) also sell over five million head of feeder pigs. Producers marketing 10 to 50 thousand head per year market over a third of all feeder pigs. The 10 to 50 thousand head group also has the highest proportion of marketings sold as feeder pigs with almost one in four marketings being feeder pigs. 

Seedstock marketings represent slightly more than one half of one percent of total marketings and seedstock is now almost totally the realm of producers selling over ten thousand head of market hogs per year.  All three of the largest size categories sell 170 to 200 thousand head of seedstock per year which represents almost 97 percent of the total seedstock marketings. 

Table 5.              Hogs Marketed in 2003 by Type (million head)

Firm Size (thousand head mktd.)

Market hogs

Feeder pigs

Seedstock

Total

1 – 3

7.9

0.7

0.01

8.5

3 – 5

3.9

0.4

0.00

4.4

5 – 10

8.9

1.4

0.01

10.3

10 – 50

18.7

5.9

0.17

24.8

50 – 500

18.3

1.9

0.20

20.4

500+

39.7

5.1

0.20

44.9

Total

97.4

15.4

0.59

113.2

Table 6 reports the percentage of U.S. marketings by the type of firm or organization that owns the hog operations for the two categories of largest hog producing firms. The most notable total in Table 6 is that large hog operations owned by packers, and/or processors account for almost 25 percent of the total U.S. hog slaughter. Hog marketings by large firms owned by veterinarians, feed companies and/or international firms accounted for less than ten percent of marketings in 2003. Thus within the largest two categories, 28 percent of market hogs are associated with a vertically integrated entity, either a supplier or a packer.

Table 6.              Percent of U.S. Slaughter Hog Marketings by Type of Owner                         

Operation wholly or partly owned by:

Firm Size (thousand head mktd.)

50 - 500

500+

Veterinarian

0.20%

1.02%

Feed company

1.23%

2.82%

Packer or processor

0.47%

23.30%

Foreign firm or person

0.43%

3.54%

In our 2000 survey, producers were asked to reveal their growth plans for the 2000-2003 period. Table 7 reports that in 2000 all groups of producers indicated that they had planned expansion through 2003, albeit some more than others. However, the three smallest categories of producers actually saw their marketing decline significantly over the period. The producers in the 10 to 50 thousand head category did manage slight growth (3 percent) over the period relative to the planned 12 percent growth. This number is perhaps tempered by operations in this category that did grow significantly over the period and jumped into the next higher category. Growth for the largest firms was on target with expectations.  Again, much of the growth was likely achieved through acquisition of operations in the 10 to 50 thousand head category.

Table 7.              Growth* Planned 2000-03 as Reported in 2000 Study Compared to Actual Growth 2000-03

Firm Size (1,000 head mktd annually)

Planned in 2000

Actual

1 – 3

+6%

- 41%

3 – 5

+5

- 43

5 – 10

+12

- 12

10 – 50

+12

+3

50 or more

+14

+16

*Percent increase in number of head marketed.

Looking forward, Table 8 presents the growth plans for the 2003-2006 period reported by producers in each category. Over the 2003-2006 horizon, producers in every size category but the three to five thousand head category and the 500,000 plus category, plan for double digit growth in marketings. For size categories exceeding 5,000 head, growth plans for 2004 are similar, ranging from six to nine percent. However for the 2003-2006 period, there are significant differences in plans. The 20 percent growth projected by the 50 to 500 thousand hog category is most consistent with their immediate growth plans. For the largest category (500+), plans are for only one percent growth from 2004 to 2006, which may reflect the difficulty in growing from a large base.

The growth questions reflect attitudes of producers the day the survey was completed, and implication for hog supplies are not clear. Based on survey responses, it appears most producers plan growth through acquisitions, which if that is the only mode pursued, all of the planned growth in each category can not occur and total hog marketings may expand primarily through productivity gains. It will be interesting to watch the follow-through on the growth plans projected.  When the 2000 survey was being completed by producers (February – March 2001), hog prices were fairly strong.  When the current survey was arriving on the farms, hog prices were fairly weak prior to the 2004 run-up in prices. 

Table 8.              Growth* Planned by Each Size Group 2003-04 and 2003-06

Firm Size (1,000 head mktd annually)

Planned 2003-04

Planned 2003-06

1 – 3

13%

18%

3 – 5

0.5

3

5 – 10

9

22

10 – 50

6

11

50 – 500

7

20

500+

6

7

*Percent increase in number of head marketed.

The manner in which firms plan to expand over the 2003-2006 horizon is revealed in Table 9. From the first line of the table, it can be seen that on average, producers in all size categories plan to market more hogs in the 2003-2006 period, but the feeling is much stronger among the largest producers.  Only 16 percent of producers in the 50 to 500 head category and only 19 percent of producers in the 500+ category said they did not plan to market more hogs per year through 2006. 

Except for producers in the very largest size category, the primary game plan is to market more hogs through existing facilities, i.e. efficiency gains. In these smaller categories, seven to thirteen percent of producers planned to build new facilities and one to four percent anticipating buying existing facilities.  For the largest size category (500+), only nine percent of respondents planned to build new facilities.  The respondents in the largest category, who planned to market more hogs, were roughly split between increasing marketings through existing facilities, purchasing existing facilities, and contracting for more finishing space.  While some existing finishing space may convert to contract space, it appears that the largest producers will be seeking new contract producers and/or buildings over this period.

Table 9.              How Firms Plan to Expand 2003-06 (percent of firms responding in each size category)

 

Firm Size (thousand head mktd.)

1-3

3-5

5-10

10-50

50-500

500+

Do not plan to market more hogs

39%

40%

41%

32%

16%

19%

Market more through existing facilities

46

39

37

34

62

25

Construct new facilities

8

11

9

13

7

9

Purchase existing facilities

3

1

4

3

4

22

Contract for more finishing space

3

8

10

19

11

25