At Pork Expo earlier this month I sat in on the annual user group presentation on cost of production comparisons compiled for clients of Latta, Harris, Hanon & Penningroth, a CPA firm headquartered in Tipton, Iowa. John McNutt did most of the presenting and interpretation of the data. Since this is a confidential peer group I can’t give you the exact costs cited by John, but I can share with you some of the more interesting trends.
I think the biggest take home message of the day is that the best production units/systems are distancing themselves from even the ‘average’ producer. One of the basic economic principles is that to succeed long term you need to have a profit level at or above the average of all producers. Stated another way, if your cost of production is much above the group average, unless you have a market price advantage of some sort your long term survival is in danger.
John’s message – average is no longer good enough. The ‘average’ producer continues to lose ground compared to the top 10% of producers in terms of breakeven costs. By their estimates, the cost produce pork varies $7.35/cwt gain between the ‘average’ US producer and top 10% of producers. This is almost $20/pig at today’s heavier sales weights.