Changing pork business affects pork prices and quality

Food Review, May-August, 1997 by Steve Martinez, Kevin Smith, Kelly Zering

Second, changes in vertical coordination can affect the quality of hogs slaughtered, which may lower packing costs. Hogs with excessive fat lead to higher packer costs because more trimming of excess fat is required. Moreover, lean hogs provide a larger amount of salable lean meat, and thereby reduce the number of hogs needed by the packer to produce a given quantity of pork. A 1992 study for the National Pork Producers Council estimated that a leaner hog could reduce packer costs by $6.32 for each hog slaughtered (table 2). These packer savings are controlled by the hog producer through the choice of genetic stock. ERS calculations indicate that the hog associated with these cost savings would be 19 percent leaner than the average.

Table 2
Leaner Hogs Save Packer Costs

Packer defect                     Reduction in costs(1)
                                   Dollars per head

Backfat thickness                          2.80
Degree of ham and butt trimming            1.87
Excessive seam fat                          .63
Bellies too fat or too thin                 .14
Weight problems                             .88
Total packer costs                         6.32

Note: (1) ERS calculations indicate that the hog associated with these cost savings would be 19 percent leaner that the average. Source: National Pork Producers Council. Pork Chain Quality Audit, David Meeker and Steve Sonka, eds., Progress Report prepared for the National Pork Producers Council. Des Moines, IA: National Pork Producers Council in cooperation with the National Pork Board, April 6, 1994.

Packers also incur costs because of trimming damaged areas and discarding damaged and unusable areas. Packers and consumers do not want pale, soft pork that has low water-holding capacity. When hogs are stressed by loading and handling, their meat can have an unattractive appearance to consumers and can be less juicy after cooking. These quality problems may cause pork cuts generally suited for fresh pork to be utilized in further processed products, like sausage. These packer costs are controlled by the hog producer through the choice of genetic stock and through proper management, such as reducing the incidence of improperly injected medication and rough handling of hogs.

The use of long-term contracts and hog ownership by the packer may reduce packers' costs of acquiring hogs, including: operating buying stations (facilities for buying and loading hogs for shipment to packing plants), paying salaried or commissioned buying agents, and transporting hogs to packing facilities. Recently, Thorn Apple Valley, a meat processing company, entered into an agreement with the Michigan Livestock Exchange to manage Thorn Apple Valley's buying stations, and supply the quantity and quality of hogs specified. The cost to Thorn Apple Valley of acquiring hogs in this way was $0.48 per hog (not including transportation or the cost of operating buying stations), plus the cost of the hogs. Packers raising their own hogs or using long-term contracts do not incur this buying station management fee.