The introduction of automatic weighing and sorting technology and the rollout of Paylean, aimed at improving finishing growth rate and carcass leanness, have captured pork producers' attention in recent years.
In an effort to evaluate the impact these new technologies could have on profitability, 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 applying different strategies for marketing pigs.
Paylean, Elanco Animal Health's trade name for ractopamine hydrochloride, improves growth performance and carcass leanness by increasing lean tissue growth and decreasing fat deposition. The ractopamine response in growth rate and protein deposition increases rapidly within the first couple days of feeding, then plateaus and gradually declines over the 3- to 5-week feeding period. Therefore, optimum feeding levels and duration were studied. Through the model, researchers were hoping to target strategies for maximizing the daily returns above feed and variable costs.
They learned that the optimal marketing age is reduced with Paylean. One research phase showed starting Paylean three to seven days too early or too late did not substantially reduce the economic returns from feeding the product.
Automatic weighing/sorting technologies allowed researchers to evaluate whether knowing exact pig weights could improve management and returns, with or without Paylean.
The returns from feeding Paylean are dependent on proper nutrition, especially lysine, and the other essential amino acid levels, they noted. Feeding the right ration at the right time, and marketing at the best possible weight, are crucial parameters.
Economic returns from using Paylean in finishing rations are tied to making sure animals are at the correct weight to initiate feeding and for hitting market weight targets. Minimizing sort loss is not the objective, they emphasize. Rather, the objective is to maximize the daily returns above daily feed and other variable costs.
Fixed schedules that are too tight (too short), or too loose, reduce the annual returns to the grow-finish facility. The emptying and quick refilling of grow-finish units, in conjunction with optimal Paylean use and marketing strategies, all work together to help producers maximize grow-finish returns, they said.
Five separate research reports summarize the Purdue University findings. Results of the first two reports are summarized herein. The next three reports will appear in the next issue of National Hog Farmer.
Model Development and Optimal Management Strategies
The Purdue University research is based on a stochastic model developed to simulate pigs moving through the grow-finish production stage. The model can be used to optimize the level of nutrition, the concentration and duration of Paylean feeding, and annual pig flow under different marketing strategies.
Past research studying the economic benefits of Paylean used a growth model for a single pig with average growth properties, researchers explained. However, pigs are raised in groups and all-in, all-out management usually means group size equals barn capacity. Finishing barn turnover depends on the marketing day of the last batch, not the pig with the average growth rate.
The Purdue research investigates feeding Paylean to a group of pigs using a growth model that reflects a unique body weight growth curve and carcass composition growth curve for each pig, similar to the normal variation seen in a group. An economic model was then developed to simulate realistic industry practices.
Researchers wanted the model to objectively predict how to maximize daily return for a typical 1,000-head, grow-finish barn. Model parameters were estimated for a modern high-lean genetic line of gilts raised under a segregated early weaning (SEW) program. The return was optimized under 10-year average prices and costs. The price of Paylean was assumed to be $2.25/g., the 2002 market price.
The model looked at the optimal management strategies for four payment schemes, designed to simulate producers with various marketing channels and market structures.
Scheme 1 simulated carcass payment with discounts on underweight and overweight carcasses.
Scheme 2 represented a carcass merit payment system adopted from Hormel's Carcass Lean Value Program based on last-rib backfat thickness.
Scheme 3 represented a lean-to-fat price ratio of 2:1, with discounts on underweight and overweight carcasses.
Scheme 4 simulated 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 adopted from Hormel's Carcass Lean Value Program and was the standardized grid for the column of 0.51-0.90 in. last-rib backfat. Schemes 1 and 2 reflected the marketing approaches by independent producers. Scheme 3 simulated the producers under limited coordination with packers. And, 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 lean and value.
The model optimized the return for 50-day-old feeder pigs to market. The optimization for dietary lysine and Paylean concentration management focused on the late finishing pigs starting at 101 days of age, with an average weight of 146 lb. for SEW gilts. In the model, pigs were fed three diets from 101 days of age to market, with switching days for diets 2 and 3 optimized by the model.
For Paylean-treated pigs, the second and third diets contained the same concentration of Paylean. Pigs were not started on Paylean until they weighed more than 150 lb. Accumulative weight gain on Paylean was restricted to less than 90 lb. These restrictions reflect FDA regulations on product usage. The program focused on the optimization relative to today's average slaughter weights of 260-270 lb., fitting the payment schemes outlined above; therefore, most starting weights were above 200 lb.
Pigs were marketed in 170-head truckload lots. One or more truckloads could be marketed on the same day, so marketing batches could be six or less for the 1,000-head finisher. The model specified that pigs must be marketed as long as the number of pigs heavier than the sort weight exceeded one truckload. The exception being the last batch that was marketed when the optimal profit for these pigs relative to the opportunity cost of refilling the barn was reached, regardless of the pig weights. Labor cost was included in the daily variable cost; no extra labor cost was included in the marketing management segment of the model.
The results demonstrate it was optimal to market “control” pigs in three batches under Schemes 2, 3 and 4. However, under Scheme 1, pigs were marketed as four batches (Table 1  ). The optimal marketing age for the last batches ranged from 162 to 166 days of age, with the earliest age associated with Scheme 4.
The marketing day for the first batch was in a close range of Days 153 to 155 across marketing schemes. Without Paylean, the dietary lysine concentration in each diet and the optimal time to start each diet were similar under each payment scheme. Two marketing batches were optimal for Paylean-fed pigs under Schemes 2, 3 and 4. Three batches were optimal under payment Scheme 1 (Table 2  ). The marketing ages for the last batch ranged from Days 155 to 160, six to seven days earlier than control pigs.
The sort weights for control and Paylean-treated pigs were very close, indicating the payment grid was important in determining the optimal market weight for both treated and non-treated (control) programs.
The optimal return per day, per barn (barn-day) ranged from $230 to $302 for control pigs. The returns were higher with higher lean-to-fat price ratios.
Numbers of underweight carcasses ranged from 41 to 75 head, with the highest number associated with Scheme 4. The numbers of overweight carcasses ranged from 42 to 92 head, with the highest number belonging to payment Scheme 1. The combined sort loss with Schemes 1 to 4, respectively, was $938, $1,327, $774 and $929.
Sort loss for Scheme 2 was higher than the others for two possible reasons. First, unlike the other three schemes, the carcass weight discount rate in Scheme 2 was not standardized. And, carcass fatness was discounted more severely under Scheme 2.
The net return for pigs fed Paylean was estimated to be from $245 to $347 per barn-day, going from Scheme 1 to 4, respectively. This equates to an additional profit over the control pigs of $5,624 to $16,368 per year, per barn in a 1,000-head, grow-finish facility based on marketing Schemes 1 through 4.
When converted to return per pig, these annual net returns from using Paylean corresponded to approximately $1.77 to $4.93 higher return per pig than control pigs. The net returns from using Paylean increased from Scheme 1 to 4, with a greater value of lean relative to fat ratio resulting in a higher net return.
Sort loss from pigs fed Paylean was higher than control pigs under each payment scheme. The numbers of pigs receiving discounts due to underweight or overweight carcasses were also higher for Paylean treatment. This indicated that with higher returns in Paylean-fed pigs, it was economically optimal to sacrifice some sort loss in order to market the pigs at a younger age and have faster barn turnover.
The optimal Paylean concentration ranged from 4.5 to 8.6 g./ton, which increased from payment Scheme 1 to 4. Because higher Paylean concentrations further increase the lean growth rate and the payment for lean is higher in Schemes 3 and 4, maximizing lean accretion requires a higher crude protein and lysine level to be fed. Consequently, the optimal dietary lysine concentrations in the second and third diets varied considerably under each payment scheme.
Average duration for feeding Paylean ranged from 24 to 29 days from Schemes 1 to 4, respectively. Under all schemes, it was optimal to have the first semi-load of pigs being fed Paylean between 18 to 24 days before marketing.
The stochastic model indicates that pigs fed Paylean were marketed at a younger age, and in fewer batches, than pigs without Paylean. Returns were higher for the Paylean-treated groups than for controls. The estimated increase with Paylean use was $3.11/pig, averaged over the four payment schemes.
The researchers concluded it is economically optimal to sacrifice some sort loss in order to market the pigs at a younger age, realize a faster barn turnover, and obtain a higher average daily return for pigs fed Paylean.
Investigating Optimal Paylean Onset Time Based on Accurate Pig Weights
This segment of the research investigates whether starting Paylean supplementation at precisely the correct day before slaughter would impact the returns over variable costs or returns to facilities and labor. Use of an automatic weighing system could improve the accuracy of the start time, researchers said.
They found that when the deviation from optimal timing is less than one week, the impact on returns is small, perhaps a few hundred dollars/barn/year. However, as Table 3  shows, the potential lost income increases if supplementation is started 21 days late ($5,527) or 21 days too early ($8,681).
Producers may inadvertently reduce economic returns by basing the supplement start date on inaccurate pig weights. The stochastic growth model discussed in the first report implicitly assumed producers know the exact weight of each animal and thus could make precise decisions based on this complete knowledge. This assumption can't be realized unless producers are using technology such as new automatic weighing and sorting systems, the researchers said.
The difference between the estimated weight and the true weight is referred to as the visual inspection error. Research has shown the standard deviation of visual inspection error ranged from 9 to 11 lb., depending on producer experience. Therefore, if the decision to begin feeding Paylean is based on the average weight of the group, starting time may not be optimized.
Simulation research was conducted for SEW gilts to demonstrate the implications of starting Paylean at a less optimum time. The researchers used their new model to look at optimizing the return and management for alternative Paylean onset ages under a payment scheme utilizing a lean-to-fat price ratio of 2:1. This payment scheme discounts underweight and overweight carcasses, and simulates a carcass merit payment system. The model restricted Paylean to be fed either earlier or later than the optimal onset age, as well as fixed the Paylean concentration at 5.9 g./ton, while leaving the dietary lysine concentrations in each diet, time to switch to diet 3 and marketing management to be optimized.
The optimal Paylean onset age was Day 128, which corresponds to the zero value in Table 3  . The column under Day 28 in the table simulates a 28-day delay in Paylean feeding relative to the optimal. This results in not feeding Paylean to the first batch of heaviest pigs and means the whole barn averages only 7.6 days on Paylean.
As expected, results indicate that the further away from the optimal Paylean onset age, the less return was obtained. It was found when the Paylean starting day was shifted further from the optimal, the potential loss would increase at an accelerating rate (Figure 1  ). The loss was calculated as the difference of the annual return between the obtained level under restriction and the non-restricted optimal. The loss resulting from delaying Paylean onset by one week, relative to the optimal usage of Paylean, was $623/barn/year. This total grew to $2,672 if the delay covered two weeks. The curve of annual losses vs. the numbers of days off the optimal Paylean starting age shown in Figure 1 was non-symmetric.
The loss of delaying Paylean administration by three days was approximately $68/barn/year, while starting Paylean three days earlier would result in a loss of $161/barn/year. The simulation results indicated that feeding Paylean at an earlier age relative to the optimal incurred a lower loss than delaying Paylean feeding as we move from seven to 14 days away from the optimal. The magnitude of the loss suggested that the acceptable window for Paylean onset was around 14 days, seven days ahead of, and seven days behind, optimal.
For some conservative producers, the strategies of Paylean onset time might depend on the ratio of return from Paylean, such as the amount of net return/dollar spent on the product. This ratio was also calculated in Table 3.
The highest ratio of net return/dollar spent on Paylean was 3.57, where Paylean was started at Day 143 of age, and pigs were fed Paylean for an average of 16.1 days, with the first group being fed Paylean for 10 days prior to market. While this may maximize the return/dollar spent, the producer would be missing out on approximately $2,700 of profit potential per year for each 1,000-head barn by not feeding the optimal Paylean duration. Bottom line, the highest return ratio does not provide the maximal return per day for the barn.
The optimal number of batches of pigs marketed was between one and four. When Paylean was started too early, such as 21 days ahead, it was optimal to market pigs in one day. On the contrary, when Paylean feeding was started too late, such as a delay of 28 days, it was optimal to market the pigs in four batches, resulting in a slightly longer (10-12 days) barn turnover period.
Paylean use was profitable under every duration of feeding and always returned more profit than the control pigs. The returns per barn, per day were optimized when Paylean was fed close to the optimal durations of 24 to 28 days, depending on the marketing program used. Feeding Paylean for longer periods of time produced higher returns than feeding Paylean for shorter periods. Paylean-fed pigs did have greater sort loss than the control pigs, indicating that the lowest sort loss is not the best indicator of the highest profit for the facility.
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.
Next month, results of the Purdue University Paylean model research will focus on the impact of fixed-schedule finishing barn closeouts, returns for more accurate sorting, and split-weight feeding management programs.