Although there are no current data to support how much contract hog farmers make; however, note that these farmers made around $19,318 in 2019, and nearly half that amount the year before for the same metric ($10,741).
According to the same reports, in 2017 there were 64,871 hog farms in the U.S. and these businesses sold more than 235.5 million hogs and pigs for $26.3 billion. Have it in mind that a good number of these sales were from concentrated animal feeding operations. Only 0.23 percent of sales came from farms with fewer than 50 hogs.
The hog farming industry has divided the rearing of hogs into specialized farms: breeding and taking care of pregnant female hogs, farrowing (birthing baby pigs and weaning them), nursery (post-weaning period), and finishing (feeding hogs until they are prime to become meat).
Note that these farms could be large corporations that have all the stages it requires to rear hogs until they are used for meat.
In recent times, these corporations are beginning to form contracts with smaller hog farmers. These smaller farmers tend to concentrate solely on the farrowing via the finishing, the farrowing via nursery, or they may choose to concentrate only on the finishing.
Have it in mind that around 2 percent of hogs sold or bought in the United States are purchased the same way anyone can purchase used equipment on Facebook Marketplace or eBay.
Factors That Influence How Much Contract Hog Farmers Make Yearly
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There are numerous processes when it comes to rearing hogs. This will most often encompass farrowing, nursery, as well as the other finishing stages.
You will also want to take into consideration the transporting and marketing of live hogs, pork, and other pig products. Have it in mind that how much a contract hog farmer can earn will vary depending on the amount of output realized per unit of input achieved by the farm.
Productivity is the rate of output in relation to the work, time, and money needed to produce them. Note that productivity in this sort of business can be increased by longer hours, more effort, improved technology, or better management.
Farm Physical Products
Although a good number of contract farmers make money from live hogs, they can also sell other physical products that come from farm animal rearing and production. These products can be piglets, adult pigs, pork, lard, bristles, pig skin, manure, and hooves. The sale of physical products will guarantee more income for the business.
Variable Costs and Contract Agreement
You have to understand that there are expenses that come with rearing pigs. These usually include the cost of feed, fuel, water, electricity, employee costs, and other associated expenses. These expenses will add up to the farm’s total production cost (costs of inputs).
When the products (output) are sold and revenue is obtained, the difference between them will provide either profit or loss, and this will dictate how much the farmer takes home.
In most situations, the integrator will have to make available the piglets, feed, and veterinary services, while the farmer provides the housing facilities, labor, and management. It is essential to note that the financial arrangements between the farmer and the integrator can vary exponentially, but a common model tends to include a prearranged or agreed profit-sharing formula.
This is another valid factor that will indicate the potential profit of the hog farm. You need to understand that different hog breeds possess varying traits, characteristics, or qualities that will in one way or another help to promote increased productivity in the business.
In this line of business, have it in mind that the basis for the selection of breeding stock includes growth rate, reproductive qualities, physical and genetic factors, general character, adaptation, overall farm performance, conformation, health condition, and consumer preference.
You might also want to consider feed conversion ratio, back fat thickness, milk production, quality of meat, color, carcass quality, mothering ability, temperament, litter size, weaning age, weaning weight, piglet mortality rate, and slaughter weight.
Farm Size and Management Practices
The size of the farm and the management practices adopted by the farm can also impact how much the farm will make. Most often, contract hog farmers make their decision based on the interests of the farmer, the prevailing weather condition, financial capability, availability of pig feeds, and the type of breeding stock.
Maintenance of farm records tends to bolster farm profits, as farm records ensure that the farmer can stay up to date with activities that are going on. The use of hired labor on the farm may lead to a decrease in profits, as the farmer has to spend extra money to house, feed, and also pay workers on the farm. The availability of extension services is another factor that affects profitability.
Profit Margin for Contract Hog Farmers
It can be quite tough to establish a profit margin for enterprises in this line of business. However, you have to understand that the profit margin for contract hog farmers usually depends on certain variables such as market conditions, input costs, management practices, and contract terms.
Aside from that, their profit margins can also fluctuate significantly from year to year and even among individual Farmers. Also, note that this business can be quite complex and challenging coupled with the numerous risks and challenges it comes with.
Contract hog farmers are tasked with rearing hogs for an integrator or a big meatpacking company. In most situations, the integrator makes available the piglets, feed, and veterinary services, while the farmer provides the housing facilities, labor, and management.
It is essential to note that the financial arrangements between the farmer and the integrator can vary exponentially, but a common model tends to include a prearranged or agreed profit-sharing formula.