Characteristics and Production Costs of U.S. Hog Farms, 2004
by William McBride
and Nigel Key
Economic Information Bulletin No. (EIB-32) 41 pp, December 2007
The U.S. swine industry has undergone significant changes in the
size and ownership structure of operations during the past two
decades. Farm survey data on hog operations (locations with hogs)
for 2004 reveal an industry characterized by wide variation in the
types, sizes, and economic performance of operations. Once
dominated by small, owner-operated crop-hog farms, hog ownership
has become increasingly concentrated. The traditional approach of
farrow-to-finish production, where all phases of production are
performed on one operation, is being replaced by operations that
specialize in a single production phase.
What Is the Issue?
Changes in the structure and performance of hog operations have
important implications for those associated with the industry. Hog
producers continually face decisions about adjusting the size,
organizational structure, and technological base of their
operations to improve economic performance and farm viability. The
restructuring in the hog industry has given rise to many concerns:
environmental risks and nuisance effects from large hog operations,
social implications of a declining rural population, and food
safety, nutrition, and animal welfare concerns. Consequently,
information about structural characteristics and economic
relationships in hog production and what they suggest for the
future of hog farming is needed.
What Are the Major Findings?
A wide variation in the types, sizes, and economic performances
of hog operations characterized the industry in 2004. Specialized
farrowing, weanling, and hog finishing operations averaged nearly
$1 million or more of production value. By contrast,
farrow-to-finish operations averaged about $322,000 in production
value per year.
Large specialized hog operations had been in business an average
of no more than 13 years in 2004, compared with 20 years for the
farrow-to-finish operations. The specialized operations also showed
more recent investment in production facilities and equipment, and
greater technical innovation, using such innovations as artificial
insemination, terminal crossbreeding, and all-in/all-out
management, than did farrow-to-finish operations.
Hog farms with the lowest costs of production in 2004 tended to
be large, located in the Heartland, and operated by farmers whose
primary occupation was farming. Performance indicators--such as
pigs per litter, death loss, and feed and labor efficiency--were
also better on lowcost operations. The better performance may be
due to their greater use of improved technologies in such areas as
breeding, feeding, and facilities management.
Small and medium hog operations far outnumbered large and very
large operations during 2004, but large and very large operations
accounted for most of the production. The use of contracts for
finishing hogs increased with size of the operation. Contracts were
used by 75 percent or more of large and very large hog finishing
operations compared with less than 50 percent of smaller
operations. Operators of small and medium operations were generally
older and more often reported plans to exit the hog industry in the
next 5 years, suggesting that the trend toward fewer and larger
operations will likely continue.
Most indicators of physical and economic performance improved as
the size of operation increased. These differences may be partly
due to less-than-full capacity utilization by small operations as
well as to the superior technologies used on larger operations.
Average production costs declined as the size of the hog operation
increased, a result of spreading capital ownership costs over more
units of production as well as more efficient input use.
Variation in production costs was most pronounced among the more
diverse small operations, and fewer of these operations could cover
their costs at a live market hog price of $40 per hundredweight.
Despite the higher average costs of small operations, several had
costs competitive with those of larger operations.
Hog production was highly concentrated in the Heartland in 2004,
but the largest operations were in the Southern Seaboard, where hog
finishing operations averaged more than 12,000 head sold or removed
per year. The larger hog finishing operations in the Southern
Seaboard were more feed and labor efficient than those in other
regions, but their production costs were higher than in the
Heartland, where lower corn prices offset the better feed
How Was the Study Conducted?
This report uses data from an in-depth survey of U.S. hog
producers in 2004 as part of USDA's annual Agricultural Resource
Management Survey (ARMS). The survey collected information from a
cross section of U.S. hog operations, including measures of size,
production costs, business arrangements, production facilities and
practices, and farm operator and financial characteristics.
Surveyed farms were first divided into the types of producers
common to the U.S. hog industry, and differences among the producer
types were evaluated. Differences among farrow-to-finish and feeder
pigto-finish operations were explored in-depth. Data on structural
and farm characteristics and on hog production practices and costs
were summarized for these producers in order to explore variations
in production cost, economies of size, and regional diversity in
U.S. hog production.