Understanding key production costs

One area worth review is feed conversion. If you're not measuring this, you're not focusing on the largest cost driver for growing pigs.

December 26, 2019

4 Min Read
Understanding key production costs
National Pork Board

Understanding your production costs is a key starting point to better managing and controlling your costs. Many farmers operate without good knowledge of their production costs, and oftentimes with the view of "after the feed bill is paid and I deposit the packer's check, was there anything left over?" You might know your pigs born alive or your nursery average daily gain or wean-to-finish percentage mortality but do you know what it is costing you? 

Two axioms come to mind that I think are very true here. 1.) "If you can measure it, you can improve it." And 2.) "If you're not managing your finances, they will end up managing you." Where are you spending money to build your pig? Let's break things down.

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There are two types of costs to think through. Those are variable costs and fixed costs.

Variable costs go with the animal. A porcine circovirus vaccination goes into every pig and weaning more pigs won't make that amount any less (per pig).

Fixed costs are the checks you write every month no matter how many pigs go out the door. If you wean half the normal amount (during a porcine reproductive and respiratory syndrome break for example), you still pay the same electric bill and the same people turn in the same time sheet. These costs respond to throughput and the cost advantage of increasing throughput can be massive.

On a sow farm with a steady breed-target, the only significant variable costs are your animal health items (vaccines, iron, antibiotics, and the labor to do this). You have to pay for everything else regardless of the number of pigs weaned. If your weaned pig cost of production is $35 and $2 of this is iron and mycoplasma/circovirus vaccination. That leaves $33 in the fixed cost bracket. Watch what happens when you increase littersize by one pig weaned (going from 11 pigs weaned to 12 pigs weaned). Twelve divided by 11 equals a 109% increase. Nine percent of $33 is $3 per pig. In other words, increasing from 12 pigs weaned per sow to 13 will save you $3 per pig on all the pigs going out the door. That is the power of improving throughput.

Another example is yardage in a finishing barn. You're paying the same barn rent regardless of how many pigs are in it. If it's a 1,200-head finisher and you only put 950 pigs in it, you're not using 11% of its capacity. If your yardage cost is $18/pig when the barn is full, now it's over $22/pig. That is a cost increase of over $4/pig. On average every 1% change in stocking density is worth $0.18/pig. Of course there are practical considerations. You can't stock a 1,200-head barn with 1,600 head and expect the same performance. However, understocking a barn is always a losing proposition.

Regarding the variable costs, there is usually money to save if you give it a critical review. Do you need all the vaccines you are using? Is that antibiotic application appropriate for your needs? You should constantly challenge this, as the alternative is the steady accumulation of cost and effort, all of which are not needed. It is not uncommon to find dollars per pig in animal health cost differences between units, for no clear reason. Confirm the reasons.

One final area worth review is feed conversion. If you're not measuring this, you're not focusing on the largest cost driver for growing pigs. This is influenced by many things including energy density of your diets, genetics, management, health, grind size, etc. Understanding your genetics lets you know what your potential feed costs/savings will be and there are significant differences in feed conversion between genetics. For example, one boar line might offer a 0.2 feed-to-gain advantage over your current boar. If feed costs $0.11/pound and your pigs gain 270 pounds from wean to market, then simple math would show you would save $5.94/pig in feed cost (0.2 pound of feed x 270 pounds of gain x $0.11 per pound of feed). Obtain good information on genetic potential of your animals, as there are real dollars at hand if you get this right.

There are other costs to focus on, but these are some significant ones. Work with professionals to help guide you through the math and the decisions. 

Source: Spencer Wayne, Pipestone Veterinary Services, who is solely responsible for the information provided, and wholly owns the information. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset. The opinions of this writer are not necessarily those of Farm Progress/Informa.

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