The Berkshire Niche Market ~ What do I need to know?

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1 The Niche Market ~ What do I need to know? Larry K. McMullen ISU Extension Swine Field Specialist Jones County Extension Office Anamosa, Iowa (319) lkmcmull@iastate.edu BERKSHIRE SWINE PRODUCTION AND MARKETING Niche Market Opportunity Guidelines (PN03-05B) Prepared for: Pork Niche Market Working Group - (PNMWG) August 2006 Supported by the Value Chain Partnerships for a Sustainable Agriculture (VCPSA) and the Pork Niche Market Working Group (PNMWG) using funds from the W.K. Kellogg Foundation Prepared by: Larry McMullen, ISU Extension Swine Field Specialist Disclaimer: While every effort has been made to ensure the accuracy of the information supplied within the Swine Production and Marketing report, decision aids, and power point program, the Value Chain Partnerships for a Sustainable Agriculture (VCPSA), the Pork Niche Market Working Group (PNMWG), the W.K. Kellogg Foundation, Iowa State Univeristy Extension and/or the author assumes no liability for the accuracy of the information contained within or for the consequences of any actions taken on the basis of the information provided. What is a Niche Market?

2 Niche Market Niche Market A small distinct market that may provide a higher price for a product that meets a specific customer need. Each niche market has a maximum size. Problem with niche marketing is copycats mislabeling the product to gain short term premiums. What is the History and Background of the Niche Market? History and Background of the Niche Market What are the Production Characteristics? American Association founded in 1875 Oldest purebred breed The breed has always been noted for excellent carcass quality Gold Program (1994) Royal (1998) 100 % (1998)

3 Production Characteristics Hardy and adaptable to both outdoor and confinement production. Sows have an excellent disposition and are quite docile. Boars excellent libido and semen quality. Boars display an excellent disposition for handling. Expected Progeny Differences (EPD s) for sires are available from the American Association. Production Characteristics Purebred = limited heterois Litter Size = (farrow ~ 9.0 wean ~ 7.5) Pigs per Sow per Year = (~ 10 15) ADG = (birth to 250 lb. market, ~1.35) Days to 250 lb. = (~ ) FE = (5-10% poorer than x-bred, ~ lbs./cwt.) 250 = (~ sq. in.) 250 = (~ ) Production constraints may require a % price premium over commodity animals. Where to Locate Breeding Stock? Breeding Stock ABA Breeders Directory Good availability and excellent breeders in Iowa Approximately 300 breeders in USA May be limited volume availability of gilts Most breeders have small herd size Good representation in boar studs Cost = (Boars ~ $500 to $750 / Gilts ~ $225 to $275)

4 What are the Pork Quality Traits of the Breed? Pork Rankings for Sensory Quality (NBS progeny test) Attribute High Ultimate ph Score Loin Firmness / Drip Loss Meat Color Cooked Loin Quality Benefit Relates to low cooking loss, better water - holding capacity, high degree of tenderness Improved processing quality, tenderness Consumers consistently prefer darker pork High scores for intramuscular fat percent, tenderness and juiciness all predict better consumer satisfaction Rank First in 6 of 7 measures First in 4 of 4 measures First in 5 of 7 measures First in 4 of 5 measures Typical Pork Quality Scores High muscle color scores (3 5) Desirable marbling scores (2-4) High ultimate ph values (5.8 +) Consistently yields carcasses that have: Low cooking loss Low reflectance scores (Minolta) High intramuscular fat (IMF) scores Excellent tenderness and juicy scores

5 Pork What is the 100% Pure Pork Program pork is highly palatable to the consumer due to flavor characteristics. Excellent pork dining experience (taste, tenderness, and juiciness) Growing preference by chefs for pork on their menu. Have you had your serving of Pork today? 100 % Program Seal (2004) 100 % Pure 100% Pure Pork Program is a marketing program ABA makes three claims in the 100% Pure Pork program: Pork is from purebred market animals that are progeny of pedigreed parents. Pork from a given day s processing at licensed packers can be traced to the groups of market animals from farms where they were raised. Operators of all certified herds follow the production guidelines established in the National Pork Board s PQA Level III program.

6 Certification for 100% Program ABA certification program is an auditing program to ensure the integrity of the 100% program. Accomplished by the registration and certification of all pigs through the American Association. ABA 100% seal certifies that the pork is genuine, fully registered and with unbroken pure genetic heritage, traceable to its family farm origin. Certification for 100% Program Some producer groups are making the claim of 100% purebred s with DNA testing. Problem with DNA test Test does not detect the difference between pure s and crossbreds Refer to the scientific review of the DNA test for parentage by Dr. Rodger Johnson, University of Nebraska for a complete discussion of DNA testing. (available through the ABA) Only non-mutant HAL 1843 and non-mutant Rendement Napole gene sires can be used. 100 % Pure Two Methods to produce 100 % Pure s Maintain a purebred registered herd or Develop a Certified Commercial Herd Producer has the option to be a registered herd or a certified herd but not both 100 % Pure Registered Herd Senior Membership is $10.00 and an annual maintenance fee of $20.00/year. Junior Membership No charge for those under 18 years of age. Receive an ABA herdmark (3-4 letters or numbers) designation - $5.00 Fee Follow ABA pig registration guidelines Each litter and individual pig must be earnotched Record litter and all eligible pigs / $12 under 90 days of age (1-149 litters), $10 for 150 or more litters, and $50 over 90 days

7 100 % Pure Certified Commercial Herd Criteria for a Certified Commercial Herd All hogs pure Sows and boars registered with the ABA All breeding animals must be stress negative Herd must be PQA Level III All progeny will be ear notched within 7 days but pigs will not have to recorded with ABA. Only slaughter pigs may be produced. Gilts and boars are not to be retained in herd or sold for breeding stock. 100 % Pure Certified Herd Criteria for a Certified Herd Hogs are to be marketed only to an entity under contract with the ABA on the 100% Pure Program. (ex: SIG) Pigs sold and transferred into a certified herd must have a mandatory ABA ear tag ($1.00 tag cost). Tag number is recorded on the transferred pedigree. Fee for a certified herd is $12.00/sow/year to the ABA. 100 % Pure Feeder Pig Finisher Feeder Pig Finisher Receives pigs from either a registered or certified sow herd Fee is $1.00 / head at market to ABA 100 % Pure Certified Packer Certified Packer Sign licensing agreement Follow the ABA guidelines for handling incoming animals and outgoing pork Current licensed packers SIG International, Boyden, Iowa (~ 1400 head / month) Meats, Inc., Clarks Grove, Minnesota (~1000 head / month) Packer fee for license to ABA Export market - $1.25 per head Domestic market - $5.00 per head

8 100 % Pure Licensed ABA Certified ABA BMP What is the Relationship? Certified Registered Herds ~ 20 herds Certified Commercial Herds ~ 15 herds Certified Feeder Pig Producers ~ 4 producers (finishing pigs) Certified Packers Two (2) Packers SIG International, Iowa and Meats, Minnesota ABA and BMP Relationship American Association (ABA) Meat Products, LLC (BMP) BMP is a wholly owned subsidiary of the ABA BMP purpose is to provide marketing support for pork producers and their customers. BMP contracts with third parties for marketing and sales services. ABA BMP What is the Relationship?

9 Who are the ABA Certified Producer Marketing Groups? ABA Certified Marketing Groups Dr. Pete Hoffman Group, Iowa (7 farms = hd. / mo.) NW Missouri Berk Breeders, Sager, et al (6 farms) Beckman Farm, Minnesota (10 farms = hd. / mo.) Meats, Inc. (BMI), Dr. Rodney Goodwin Group, Iowa/Minnesota (6 farms = ~ 800 hd. / mo.) Oak Hill Farm, Mike and Dan Hodges, Nebraska/Kansas (8 farms = ~ 300 hd. / mo.) Who are the Non-Certified Producer Marketing Groups? Non-Certified ABA Marketing Groups Eden Natural ( Kelly Biensen),State Center, Iowa ( hd. / mo. 20 farms) Berkridge (Pro Pork & Sioux Preme Packing), Sioux Center, Iowa ( ~ 2400 hd. / mo. 18 farms) The Seaforth Company, LLC, Ken Kehrli Group, Winthrop, Iowa (Network of numerous independent family farms) Six Point, Cottonwood, Minnesota ( hd. / mo. 35 farms) Snake River, Boise, Idaho (Receives product from Midwest Growers, hd. / mo.)

10 Farm to Consumer Direct Marketing What Must Be Considered When Marketing Niche Pork? Several independent producers are using % s to market directly to the consumer. Check the National Pork Board Niche Pork web site Marketing Primarily export to Japan New Japanese maximum residue level standards implemented 5/29/06 Check National Pork Board Website for more information: ZERO tolerance for drug residues Black hair and mange problems at plant (trim of carcass) Maintain excellent health no condemned carcasses Practice animal handling and trucking as recommended by Trucker Quality Assurance (TQA) Follow Pork Quality Assurance Guidelines (PQA) Because extra premiums are paid for 100 % hogs extra management and care should be practiced to insure a quality product to the packer and consumer. What Market Premiums Can I Expect From a Niche Market?

11 / Input Cell / Calculated Cell PART I: Production Information Com m odity Number of Sows Number of Boars 5 5 Breeding Herd Death Loss 3.00% 3.00% Littters / Year / Sow Number of Litters / Year Pigs Born Alive per Litter Pre-Weaning Death Loss 10.00% 10.00% Pigs Weaned Per Litter Number of Finishing Pigs (Weaned) Death Loss of Finishing Pigs 5.00% 5.00% Total Head Marketed Market Weight, lb Days to Market Average Daily Gain (Birth to 250 lb.), lb./day Feed consum ption Gestation/ lbs per day Days in Gestation/ year Lactation / ave daily consumption. lb Days in Lactation / year Boar - Ave daily consumption. lb Finishing Pigs / Ave. Feed Consumption from Birth to Market, lb Feed Consumption / Breeding Herd, lb. 242, ,027 Feed Consumption / Finishing Pigs, lb. 1,306,707 1,353,286 Total Feed Consumption, lb. 1,548,734 1,595,313 Feed Efficiency / whole herd Feed Efficiency / Finishing Pigs PART II: Cost of Production Expenses Com m odity Feed Cost per lb of diet $0.06 $0.06 Total Feed Cost $92, $95, Feed Cost / cwt $26.67 $22.38 Non-Feed Cost / Cwt $17.00 $17.00 Niche Market Cost / Sow $13.00 $0.00 Total Niche Market Cost $1, $0.00 Total Non-Feed Costs $60, $74, Total Cost of Production $155, $170, Total Cost of Production / Cwt $44.49 $39.83 Total Cost / Sow $1, $1, Total Cost / Pig $ $ PART III: Production Receipts Com m odity Base Price / Cwt Live $43.00 $45.00 Carcass Premium / cwt. of Carcass wt $0.00 $2.00 Yield Per Cent 74.00% 74.00% Total Carcass Premium / Cwt Live $0.00 $1.48 Niche Premium/ Cwt Live $10.00 $0.00 Niche Premium / Total $34, $0.00 Total returns $184, $198, Total returns/ Sow $1, $1, Total returns/ Pig Marketed $ $ PAR T IV: Estimated N et R eturns Com m odity Total Receipts $184, $198, Total Expenses $155, $170, Profit / Pig $22.13 $17.96 Version 2.00 FF Supported by the Value Chain Partnerships for a Sustainable Agriculture (VCPSA) and the Pork Niche Market Working Group (PNMWG) using funds from the W.K. Kellogg Foundation Developed and Prepared by: Larry K. McMullen, Iowa State University Extension, Swine Field Specialist, 605 East Main, Anamosa, Iowa /19/2006 D i s c l a i m e r : W h i l e e v e r y e f f o r t h a s b e e n m a d e t o e n s u r e t h e a c c u r a c y o f t h e i n f o r m a t i o n s u p p l i e d w i t h i n t h e B e r k s h ire Production and Marketing r e p o r t, d e c i s i o n a i d s, a n d p o w e r p o i n t p r p g r a m, t h e V a l u e C h a i n P a r t n e r s h i p s f o r a S u s t a i n a b l e A g r i c u l t u r e ( V C P S A ), the Pork Niche Market W o r k i n g G r o u p ( P N M W G ), t h e W. K. K e l l o g g F o u n d a t i o n, I o w a S t a t e U n i v e r s i t y E x t e n s i o n a n d / o r t h e a u t h o r a s s u m e s n o liability for the accuracy o f t h e i n f o r m a t i o n c o n t a i n e d w i t h i n o r f o r t h e c o n s e q u e n c e s o f a n y a c t i o n t a k e n o n t h e b a s i s o f t h e i n f o r m a t i o n provided. / Input Cell / Calculated Cell Commodity Number of Finishing Pigs Placed on Feed Weight of Pigs Placed on Feed - lbs Cost per head of Pigs Placed on Feed - $/head $34.00 $34.00 Cost per CWT of Pigs Placed on Feed - $/Cwt. $ $ Death Loss - % 5.00% 5.00% Total Head Marketed Market Weight - lbs Days to Market Average Daily Gain - lbs/day Feed consumption Finishing Pigs / Ave. Feed Consumption from Placement to Mkt., lbs Total Feed Consumption, lbs. 83,363 77,220 Feed Consumption / Pig, lbs Feed Efficiency, lbs Commodity Feed Cost per lb of diet $0.06 $0.06 Total Feed Cost $5, $4, Feed Cost / cwt $20.25 $17.73 Non-Feed Cost / Cwt $17.00 $17.00 Niche Market Cost / Pig $1.00 $0.00 Total Niche Market Cost $ $0.00 Total Non-Feed Costs $4, $4, Total Cost of Feeder Pigs Placed on Feed $3, $3, Total Cost of Production $12, $12, Total Cost of Production / Cwt $51.87 $48.20 Total Cost / Pig Marketed $ $ Commodity Base Price / Cwt Live $43.00 $45.00 Carcass Premium / cwt. Carcass wt $0.00 $5.00 Yield Per Cent 74.00% 74.00% Total Carcass Premium / Cwt Live $0.00 $3.70 Niche Premium/ Cwt Live $10.00 $0.00 Niche Premium / Total $2, $0.00 Total returns $13, $12, Total returns/ Pig Marketed $ $ Commodity Total Receipts $13, $12, Total Expenses $12, $12, Profit / Pig Marketed $2.94 $1.38 Versi on 3.01 FP Supported by the Val ue Chai n P artnershi ps for a Sustai nabl e Agri cul ture (VCP SA) and the Pork Niche M arket Working Group (PNM WG) using funds from the W.K. Kellogg Foundation Devel oped and P repared by: Larry K. McMullen, Iowa State University Extension, Swine Field Specialist, 605 East Main, Anamosa, Iowa /19/2006 Disclaimer: While every effort has been made to ensure the accuracy of the information supplied within the Production and Marketing report, decision aids, and power point prpgram, the Value Chain Partnerships for a Sustainable Agriculture (VCPSA), the Pork Niche Market Working Group (PNMWG), the W.K. Kellogg Foundation, Iowa State University Extension and/ or the author assumes no liability for the accuracy of the information contained within or for the consequences of any action taken on the basis of the information provided. Market Premiums Approximately - $10 / cwt live base premiums are available Premiums and incentives paid by the various marketing groups will vary. Check with marketing group for specific specifications. What are Economics of Producing Niche Pork? Economics To be involved in the Niche Market a high level of management skills will be needed. Decision Aids are available on an Excel Spreadsheet to make a quick analysis of the Niche to Commodity Production. Decision Aids Swine Production and Marketing Decision Aid - Farrow to Finish TOTAL PROFIT $29, $28, Profit / Sow $ $ Swine Production and Marketing Decision Aid - Finishing Pigs PART I: Production Information PART II: Cost of Production Expenses PART III: Production Receipts PART IV: Estimated Net Returns TOTAL PROFIT $ $131.55

12 Where Can I Find Information and Educational Resources? Resource - Organizations American Association Meat Products National Pork Board Pork Niche Market Working Group Resources Magazines & Manuals Breeders Digest Official publication of the, Chester White, Poland China, and Spot breeds. 100% Pure Pork - Program manual 100% Pure Pork Producer Training Manual American Association Member Handbook Resource Scientific Publications DNA Tests to Certify Parentage Report to the American Association Dr. Rodger Johnson, University of Nebraska, Lincoln, Nebraska September 4, 2001

13 Resource - Web Sites American Association Meat Products, LLC Agricultural Marketing Resource Center National Pork Board Niche Market Eden Natural Berkridge Six Point Snake River Farms Pork Niche Market Working Group USDA / AMS - Heritage Foods USA NPB Japanese Drug Residue Levels Material Developed by Larry McMullen Project Document - Swine Production and Marketing Niche Market Opportunity Guidelines Decision Aid - Farrow Finish Excel Spreadsheet Decision Aid - Feeder Pig-Finisher Excel Spreadsheet Power Point Presentation Swine Production and Marketing Where do I find the Swine Production and Marketing Material by Larry McMullen Pork Niche Market Working Group (PNMWG) American Association (ABA) National Pork Board Niche Market (NPB) Iowa Pork Industry Center (IPIC) Is there a in your future?

14 Questions or Comments Thank you!

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