In Part II of the Paylean model research reports, Purdue University researchers focus on the impact of fixed-schedule finishing barn closeouts, returns for more accurate sorting and the value of split-weight feeding management programs.
Researchers from Purdue University's Departments of Animal Science and Agricultural Economics recently conducted a five-part research project in which they created a model to evaluate the economic returns from feeding Paylean in conjunction with optimal nutrition and different strategies for marketing pigs.
Part I of this two-part report focused on development of the model, optimal management strategies and the best time to begin feeding Paylean to maximize return. (See “Study Focuses on Auto-Sort, Paylean Payback,” February 15, 2004, pages 26-30).
Paylean, Elanco Animal Health's trade name for ractopamine hydrochloride, improves growth performance and carcass leanness by causing a pig to increase lean tissue growth and decrease fat tissue growth. The ractopamine response in growth rate and protein deposition increases rapidly within the first couple days of feeding, plateaus, and then gradually declines over the 3- to 5-week feeding period.
Researchers also investigated how more accurate weighing and sorting of pigs could help reduce sort loss and increase marketing returns. Advances in Automatic Sorting Technology (AST) make it possible to equip barns with one or more electronic scales capable of automatically weighing, recording, and sorting pigs as they pass through the scales to access food or water.
Management with Paylean in a Fixed-Schedule Environment
Finishing barns are often operated on a fixed closeout schedule. Contracted delivery of market hogs or the arrival of the next finishing group often means a shift in growth rate could help empty the barn and hit the packer's desired weight range. Researchers studied how different strategies for feeding Paylean would affect timing of final marketing and returns above variable costs.
Researchers assumed pigs would be marketed under the payment scheme with a lean-to-fat price ratio of 2:1, including discounts for underweight and overweight carcasses (see Scheme 3 in “Payment Schemes” sidebar). Under this payment scheme, revenue is approximately related to lean growth through a linear function. Alternative fixed schedule environments were simulated as restricted marketing dates for the last batch of pigs.
Fixed schedules studied ranged from Day 137 to Day 177, with a step size of four days. Day 157 was considered the optimal marketing age of the last batch of pigs without any restrictions when feeding Paylean and 165 days of age when not feeding Paylean (Tables 1 and 2).
Two types of Paylean management strategies were investigated. The first fixed the dietary Paylean concentration at 5.9 g./ton (6.5 ppm), which was optimal without restrictions. The second strategy optimized the Paylean concentration under each fixed schedule.
The results showed that tight schedules lead to fewer batches of market hogs. Loose schedules lead to more batches. When pigs were not marketed in a single batch, optimal sort weight was 270 lb. (approximate 200-lb. carcass weight) for both tight and loose schedules.
The highest premium carcass weight range on Hormel's grid is 181 to 208 lb. Therefore, the optimal sort weight was near the heaviest part of the grid. There was no optimal sort weight for schedules resulting in a single-batch marketing (i.e. tight schedules).
Paylean increased net returns under every production schedule and increased net returns more for tight schedules than for loose schedules. The economic value of Paylean was higher when producers faced relatively tight schedules.
When dietary Paylean concentrations were optimized, pigs on tight schedules had relatively higher optimal Paylean concentrations (10-12 g./ton) than those with loose schedules (4.5 to 9 g./ton). As expected, the net returns of the optimal Paylean concentrations were higher than or equal to those with a fixed Paylean concentration of 5.9 g./ton (6.5 ppm). Net returns per dollar spent on Paylean were also higher for tight schedules. The highest return ratio for Paylean was 5.86 and the lowest was 1.83. Even the loosest schedules using Paylean yielded a positive return ratio.
The model also predicted the number of pigs discounted for carcass weights outside of the packer's desired range. When pigs were marketed at their optimal weight or age, there were fewer underweight and overweight pigs, close to 7-8%. However, in tight or loose schedules, either the underweight or the overweight pigs were higher than the optimal level. This indicated that balancing and minimizing the number of underweight and overweight pigs obtained the optimal marketing age. Total sort loss was least with a loose fixed schedule. The packer's discount grid was a critical factor in determining production revenue and the optimal marketing ages for each batch.
Day 165 yielded the highest average daily return for non-Paylean-fed (control) pigs. Thus, the restricted marketing days before Day 165 were tight schedules and those after were loose schedules. Compared with Paylean-treated pigs, control pigs had a higher percentage of underweight carcasses and a lower percentage of overweight carcasses under the same restricted marketing age. Control pigs generally had a higher sort loss than Paylean-fed pigs, except around Day 165, which was close to the optimal marketing age under non-Paylean use.
Because Paylean can enhance growth rate, as well as lean growth rate, researchers say it is a tool producers could use to manage fixed-schedule marketings and increase economic returns. Paylean increased daily returns above controls more with tight schedules than the optimal or loose schedules because it reduced sort loss due to light pigs. The number of batches sold increased as the fixed age at last marketing increased.
The optimal dietary concentration of Paylean increased as the fixed marketing age decreased. The optimal average duration of Paylean feeding ranged from 23 days for 177-day final marketings, to 28 days for final ages of 149 days or less. Under all schedules, the first pigs marketed were fed Paylean at least 10 days. Thus, tightness of the schedule affects the optimal Paylean feeding management and marketing strategy.
Return of Accurate Sorting For Marketing
Recent value-based marketing studies have focused on reducing sort loss under various packer grids. Weighing each pig before marketing can reduce sort loss, but individual weighing by hand is not practical nor feasible for most producers. However, with the relatively new AST equipment, the task becomes more practical. Electronic scales automatically weigh, record, and sort pigs as they pass through the scales to access food and water. The producer sets the scale's threshold weight for sorting. Recorded weights give producers growth performance information on the group.
|Fixed schedule daya (pig age in days)||137||141||145||149||153||157||161||165||169||173||177|
|Return, $/barn, day||177.52||237.43||278.72||301.51||311.08||315.64||313.11||308.14||300.79||291.91||283.95|
|Return over control pig at same fixed schedule ($/head)b||12.00||10.13||10.02||6.55||4.86||4.02||3.09||2.57||2.21||1.79||1.65|
|Days on RAC (first semi-load)||28||28||28||28||26||23||20||18||16||11||11|
|Days on RAC (last semi-load)||28||28||28||28||28||29||29||31||30||25||25|
|Average days on RACc||28.0||28.0||28.0||28.0||27.7||28.0||26.8||26.9||26.7||22.3||23.1|
|RAC intake (gram/group)||910.04||924.62||938.06||950.04||473.70||484.72||463.98||466.50||460.76||389.19||400.87|
|Return Ratio of RAC ($/$)d||5.86||4.87||4.75||3.06||4.56||3.68||2.96||2.45||2.14||2.04||1.83|
|Avg. slaughter wt.,lb.||234.5||234.6||242.1||249.8||256.7||262.7||267.3||270.9||271.6||274.9||275.9|
|Underweight carcass, %||76.0||58.6||40.2||23.8||13.5||7.5||3.8||1.8||1.1||0.6||0.2|
|Overweight carcass, %||0.1||0.4||1.2||4.3||6.7||10.8||12.3||14.0||10.1||15.9||16.9|
|Sort loss due to underweight carcasses ($/1,000 head)||13,285||8,321||4,664||2,455||1,267||808||259||141||83||35||20|
|Sort loss due to overweight carcasses ($/1,000 head)||24||51||116||319||574||485||883||900||644||880||931|
|aFixed schedule day is the marketing day for the last batch.|
|bReturn over control pigs is calculated as the daily return of RAC-treated pigs minus that for control pigs under the same payment scheme, then the difference is multiplied by the number of days on feed for RAC pigs from a 50-day old feeder pig, allowing five days with the barn empty inbetween each group. RAC = ractopamine hydrochloride (trade name, Paylean)|
|cAverage days on RAC is computed as the weighed average of days for each batch of pigs fed on RAC.|
|dThe ratio is the net return of RAC divided by total cost of RAC, which denotes the amount of dollars received for one dollar spent on RAC.|
|Fixed schedule daya||137||141||145||149||153||157||161||165||169||173||177|
|Return, $/barn, day||47.05||131.93||178.52||238.58||266.05||279.78||286.43||286.74||282.93||277.95||271.48|
|Sort weight, lb.||—||—||—||—||—||269||269||269||271||271||271|
|Avg. slaughter wt., lb.||220||228||235||243||251||257||263||268||272||274||276|
|Underweight carcasses, %||90.4||78.0||62.9||44.4||27.8||16.1||9.2||4.5||2.6||1.4||0.7|
|Overweight carcasses, %||0.1||0.1||0.5||1.2||3.0||3.2||3.9||4.8||9.7||10.7||13.0|
|Sort loss due to underweight carcasses ($/1,000 head)||21,039||14,303||9,302||5,383||2,874||1,551||710||342||211||109||59|
|Sort loss due to overweight carcasses ($/1,000 head)||10||31||47||101||284||291||319||353||702||720||907|
Purdue researchers investigated the potential for reducing sort loss using AST. They acknowledged that the optimal levels of dietary lysine and Paylean may shift when accurate sorting and marketing decisions are being implemented.
By managing Paylean onset time, dietary lysine concentrations and marketing times more precisely, the full benefits of the feed additive could be realized, they explained. Therefore, their second research goal was to investigate the optimal production and marketing strategies of using Paylean in an AST-equipped barn. The research focused solely on assessing the savings of AST by optimizing sorting and marketing; it is not a full economic evaluation of the AST barn.
The stochastic model was used to evaluate the economic return for AST vs. hand sorting. The model assumed AST weight accuracy was 0.22 lb. The model was used to simulate multiple runs of hand sorting with three levels of inspection errors (low, medium, high) to produce unbiased results.
Two types of visual inspection errors were incorporated into the model:
Pig-specific error — The error by which the producer over- or under-predicts the weight of a specific pig relative to the mean weight of the pigs in the facility.
Daily bias — The amount the producer over- or under-predicts the true mean weight of the pigs at visual inspection.
The model used optimal lysine concentration, Paylean concentration (if fed) and sort weight derived for visual inspection cases in simulating hand sorting. Pigs were sold above 271 lb. (about 201-lb. carcass weight), near the upper limit of the processor's optimal carcass weight range. This sort weight was close to optimal given the level of visual errors, as it was close to minimum sort loss.
The marketing days were set up on a weekly basis (each marketing day had to be seven days apart). The first marketing day was identified when 170 pigs (a semi-trailer load) appeared to be above the 271-lb. sort weight. The optimal management was derived for the four payment schemes outlined in the sidebar.
The difference in return/day/barn for control pigs was approximately $21 to $27 between AST sorting and hand sorting, with a medium level of visual inspection error. This corresponds to an annual increase of $7,665 to $9,855 for a 1,000-head barn using AST over hand sorting ($27 × 365 days/year = $9,855). For control pigs, the difference of daily return between low and medium visual error was $3, and between medium and high, $4.
|Payment System||First semi-load, day||Last semi-load, day||Number of loadout batches||Average selling wt., lb.|
|Optimal — AST sorting||Weekly visual sorting|
|Reduction in sort loss due to use of ASTa vs. visual inspection, $/year||Optimizing the production schedule, Paylean use, and their interaction with AST, $/yr||Total optimized potential improvement due to AST vs. visual inspection, $/year|
|aAST = Auto-Sorting Technology|
The differences between AST and hand sorting were higher for Paylean-treated pigs than for control pigs. Averaging the three error levels, the differences in daily return/barn were $34, $38, $44 and $51 for payment Schemes 1 to 4, respectively, for Paylean-fed pigs.
When converted into annual returns, the optimal marketing and accurate sorting increased annual profits by approximately $12,000-$19,000 for a 1,000-pig barn when using Paylean. If a greater group-to-group variance in profitability were associated with the return for hand sorting than for AST sorting, the benefit of accurate sorting would be even higher.
Compared with AST marketing ages, pigs were marketed one to two days earlier in the first batch and 15 days later in the last batch with hand sorting, and averaged a 173-day “loose” schedule (Table 3) across the four marketing programs. The impact of this loose schedule can be seen when observing that 46% of the control pigs' and 40% of the Paylean-fed pigs' total potential increase in profit was from the reduced sort loss when using the AST system.
A greater return from the AST comes from optimizing the barn flow and Paylean use (Table 5). Also, with hand sorting, it was optimal to market pigs in more batches than with AST sorting. The sort weights were not optimized for hand sorting; therefore, it was not comparable with those from AST-equipped barns.
The return on the high-accuracy sorting system made a total difference of $6,000 to $9,000/barn/year without supplementation with Paylean (Table 5). When the high-accuracy automatic weighing system was coupled with diets supplemented with Paylean, the financial bonus exceeded $11,000/barn /year (Table 5). These returns were obtainable only when all aspects of the production and marketing system were optimized, researchers explained. Labor differences were not included in the comparison, however.
Split-Weight Management with And without Paylean
The fifth research study estimates the potential increase in returns that could be achieved if pigs were divided into two groups — half heavies, half lights — then fed according to their weight classification when Paylean supplementation was initiated.
The returns were found to be negligible given the assumptions that the initial population of feeder pigs was highly uniform — all the same sex and farrowed within one week. Returns to split-weight feeding would likely be higher if the initial populations were more variable, they said.
The stochastic growth model assumed pigs were split into two even groups, by weight, when pigs were 100 days old. The split into a heavy group and a lighter group was made when the pigs averaged 146 lb. The model assumed Paylean could be fed at different concentrations and durations for each group. Different dietary lysine concentrations were fed with Paylean.
Several model restrictions were incorporated:
The model assumed three diets were fed to each split-weight group — one before Paylean onset, two containing Paylean.
The same dietary lysine concentration, fixed at the optimum level (Diet 1), was fed to both groups before Paylean.
Diet 2 was fed for exactly two weeks, then switched to Diet 3.
The optimal management was derived for the four payment schemes explained in the “Payment Schemes” sidebar, p. 23.
A 1,000-head finishing barn was used; thus, each weight group consisted of 500 pigs.
Pigs were marketed together regardless of weight groups. As long as the number of pigs heavier than the sort weight exceeded 170 head, the heaviest 170 pigs were marketed; 1,000 head required six truckloads to market all pigs.
In all, the model optimized 14 variables: two Paylean concentrations, two optimal Paylean onset ages, two dietary lysine concentrations for Diet 2, two dietary lysine concentrations for Diet 3 and six marketing days.
Compared with the non-split return, the increased return for split-weight management ranged from $64-$129/barn/year, which indicated that the returns would be very close to each other (Table 6).
The difference in optimal dietary Paylean concentration was not significantly different for the heavier half vs. the lighter half, but was significantly different between marketing schemes. The optimal Paylean concentrations for the lighter group were equal to, or 0.5 ppm higher than, that for the heavier group. Pigs with low growth rate in the lighter group required approximately .05% higher dietary lysine concentrations than pigs in the heavier group.
Three marketing batches were optimal for payment Scheme 1, while two batches were optimal for the other three schemes. The results, as well as the optimal marketing ages, were very similar to the optimal management without splitting.
|Payment System||Scheme 1||Scheme 2||Scheme 3||Scheme 4|
|Return over control ($/pig)||1.81||—||2.66||—||3.14||—||4.97|
|Return over non-splitting ($/barn/year)||113.51||—||125.19||—||63.62||—||128.88|
|1st batch, day||152||—||152||—||152||—||149|
|2nd batch, day||158||—||157||—||157||—||155|
|3rd batch, day||160||—||—||—||—||—||—|
|Marketing sort weight, lb.||271||—||271||—||271||—||267|
|Lysine in diet 1, %||0.77||0.77||0.83||0.83||0.79||0.79||0.82||0.82|
|Lysine in diet 2, %||0.86||0.92||0.91||0.98||0.94||0.98||1.01||1.04|
|Lysine in diet 3, %||0.76||0.78||0.80||0.84||0.78||0.83||0.85||0.87|
|RAC start age, day||133||134||131||130||128||129||125||127|
|Pigs on 1st batch||170||0||169||1||169||1||170||0|
|Pigs on 2nd batch||151||19||331||499||331||499||330||500|
|Pigs on 3rd batch||179||481||-||-||-||-||-||-|
|Average days on RAC||23.7||25.9||22.7||27.0||27.3||28.0||28.0||30.0|
|aPigs are split based on weight at 100 days of age with equal numbers in heavy and light groups.|
The first batch marketed was almost exclusively made up of pigs from the heavier group; the last batch consisted of mostly, or all, pigs from the lighter group. Therefore, even with split-weight management for Paylean and dietary lysine concentrations, the lighter half of pigs still marketed at the same older ages as the non-split groups.
The optimal average duration of feeding Paylean increased, as the payment for lean increased and was 1-4 days longer for the light group than for the heavy group. Overall, the optimal management resulted in the two groups starting Paylean at similar ages. However, the heavier group started on Paylean and was marketed at heavier weights than pigs in the light group. Other than the initial and final weights on Paylean, the optimal management for the two groups was similar. Heavier pigs sold a few days sooner than pigs from the light half.
Again, it is important to note that this simulation was for gilts only, farrowed within a seven-day period, from a high-health system. Greater variation would be expected if barrows and gilts were fed, if age range was wider or health status was poorer.
The optimal average duration of Paylean feeding for each group is within a 22- to 30-day range with the heaviest pigs fed Paylean for at least 7-10 days. The benefits of split-weight management are likely a function of the weight variation in the groups and closely associated differences in optimal Paylean feeding start date for the two groups. Increased variation means the annual returns will decline. Further research is required to evaluate these production issues and evaluate alternative scenarios and costs to optimize pig flow and profitability, using variables such as mixed-sex barns, longer fill times, Paylean step-up programs, dietary fat inclusions and crowding.
Researchers: Ning Li, Paul V. Preckel, Allan P. Schinckel and Brian T. Richert, Departments of Agricultural Economics and Animal Science, Purdue University. Contact Schinckel at (765) 494-4836.
Scheme 1 — Carcass payment with discounts on underweight and overweight carcasses.
Scheme 2 — Carcass merit payment system adapted from Hormel's Carcass Lean Value Program based on last-rib backfat thickness.
Scheme 3 — Lean-to-fat price ratio of 2:1, with discounts on underweight and overweight carcasses.
Scheme 4 — A lean-to-fat price ratio of 4:1, with discounts on underweight and overweight carcasses.
The carcass weight discount grid for Schemes 1, 3, and 4 were also adapted from Hormel's Carcass Lean Value Program, which was the standardized grid for 0.51-0.90-in. last-rib backfat.
Payment Schemes 1 and 2 reflected the marketing approaches by independent producers.
Payment Scheme 3 simulated the producers under limited coordination with packers, while payment Scheme 4 reflected vertically integrated producers, because the lean-to-fat ratio of 4:1 allowed producers to capture the full benefit of the increase in carcass value.