Pig Producer

When pig feed prices rise

Recent increases in feed prices have turned the spotlight back on to ways of controlling production costs by attending to the basics and making improvements in efficiency.

Feeder space requirements increase more with pig size on a restricted feeding regime than on ad lib.

What can pig producers do when feed prices increase and impact their cost of production to the extent seen this year? A series of suggestions has been offered in the UK, by the industry agency called the British Pig Executive.

Increasing pig feed prices bring a need for improved pig production efficiency, it declares. Within Britain, feeds represent nearly 80% of the variable costs of producing a pig and 50% of total costs. Feed price increases therefore have a major influence on profitability. Responses by producers could include changing to a cheaper type of ration or purchasing feeds in larger quantities to obtain an extra discount, but more often can involve finding improvements in the unit's technical performance.

Start with feed efficiency. Checking feed intake on a regular basis will help in optimizing diet formulations and will enable fluctuations of intake to be detected, say the agency's bulletins, assisting the identification of likely causes of reductions or increases. Therefore try to devise a way of measuring the feed intake of the whole building or of individual pens.

Too often, expensive feed is wasted by being spilled onto the floor. The spillage is either lost through the gaps between the slats or it forms a residue of spoiled feed around the trough. The cause of the wastage needs to be identified. Ask if the hopper design is correct for the size of pig. Look whether overstocking means crowded pens in which pig feeding is uneven. Possibly the feeder flow rates require adjustment or the feed distribution system is in need of repair.

Higher flow rates are needed for drinkers in pens of the breeding herd than in grow-finish places.

Routine checks should include the feeding space you provide for your pigs. The accompanying Table 1 from welfare codes supplies a guide. Any signs of the pigs crowding around the feed hopper or trough may mean there is insufficient feeder/hopper space for the number and size of animals in the pen. For example, evidence of ear biting or fresh shoulder scars in the group from fighting at or around the feeder would indicate either that there was not enough feeding space or that hopper placement/access was inadequate.

Obviously the feeders must be clean, without caked feed or fouling in the trough area. Troughs should be cleaned out on a daily basis, to reduce wastage and to encourage intake. Make sure that the hoppers are working correctly. Adjust the feeder flow rates to maintain intake while reducing wastage. Depending on the hopper, flow rates may need to be adjusted as the pigs grow. Examine each hopper to ensure that the feeding system works.

Feed quality also enters the equation. The presence of dust, fine particles or lumps of clogged feed will reduce the amount eaten. It is possible the hopper or auger mechanism is crushing particles or affecting pellet size and so increasing wastage.

Inspect the storage bins or feed silos. Any sign of mould and mites should be followed by a prompt search for the source. Perhaps there is clogged feed in the hopper or storage conditions are poor by being damp. Mouldy feed must be discarded immediately. Look again at rodent and bird control, perhaps the bait needs renewing. Vermin are more than a health risk, they can also lead to expensive feed waste.

Then there is the question of diet specification. A review of your feed strategies should aim to ensure that the composition of the feeds and the timing of diet changes match pig flow, age of pig and actual growth rates. A fixed policy on changing animal diets needs to be reviewed regularly to reflect changes on the unit that may have affected growth rates.

With sharply rising prices for feed ingredients, it pays even more than usual to review storage and distribution methods for feeds with the aim of saving wastage.

The pigs' intake of water is crucial as it drives the amount of feed they eat and therefore their growth rate. The British bulletins point out that good management on the unit should always include a check on water availability and flow rates. It is simple to measure the rate of flow, they add. All you need is a measuring jug and a stopwatch. See in Table 2 how flow rates compare with the pigs' daily requirement for water. The recommendation is to have at least one nipple drinker for every 10 pigs, functioning correctly so that it supplies them with a ready source of clean water. These drinkers have to be at the correct height for the production stage or pig size and they must be positioned correctly to allow ready access. Ensure that all water systems are part of the pen cleaning routine, that waterers are flushed to clear them on a regular basis (at least between each batch) and that header storage tanks have intact covers.

See the rest of this article: Pig Producer.

A production specialist with experience of both contractual and independent pig enterprises gives his reasons for favoring the pig integration business model.

Independent or integrated it has long been the fundamental choice for the pig producer. My own view after seeing both sides of the fence is that independence can too often mean the freedom to fail, whereas integration can offer a basis for the business to survive.

I contend that all the growth areas of the world of pork over the past few years have been ones with integrated systems. The exact form of the system may differ according to the location. It could mean corporate integrators as in the USA and Spain, farmer ownership of slaughterhouses as in Denmark or the existence of the joint ventures, group farming agreements and co-operatives found in a number of other countries. But the up-and-coming pork industries typically feature pig integration in some shape or other. By contrast, places lacking integrators have tended to see a continual reduction in their pig numbers.

Critics have tried to characterize the world's large integrators as operating horrible factory farms in which the housing for pigs is all slats and crates while the unit is badly run, with poor animal welfare. It is far from the truth, of course. On integrated units I have been fortunate to work in good facilities alongside people who are very skilled in their care of the pigs. The companies are well managed and fully costed, with excellent financial control. They have in-house training programs for the staff, whole departments dealing with environmental issues and a rigorous regime of internal auditing.

The integrated system is successful for several reasons. The main ones are worth examining here.

1 Integration is bankable. The cyclical nature of the pig price in all markets inevitably means that both producers and processors go through periods when the margin is negative so that lenders are deterred. However, production and processing are opposites in the sense that one will be up financially when the other is down. In an integrated company active in both spheres, the overall business remains profitable so it keeps friendly with the banks and may even be represented on the stockmarket.

Simon Grey: "On integrated units I have been fortunate to work in good facilities alongside people who are very skilled in their care of the pigs."

2 Integration lowers costs. This is true principally because it is practiced in large enterprises that can achieve economies of scale, although the corporate pig producer is also helped by the fact that it incurs no sales cost in moving product along the various parts of its pork chain. The system is entirely cost-driven until the point of sale of the final processed product.

3 Integration is efficient. My strong impression is that the standards of pig production efficiency are higher than in the independent sector, because the managers within an integrated system can focus on the job of producing pigs at low cost rather than being distracted by the market situation or any other consideration.

4 Integration can more easily supply what the customer wants. This aspect of customizing is an important one. Pigs can be produced to order because all parts of the chain are under the same ownership. Of course there is competition between departments but this is healthy and it improves results.

I have referred to the fact that integration can assume various guises, so I should suggest how it might be defined. To my mind all 3 of the vital components must be represented, meaning feed production, pig production and slaughter/processing. Some examples may additionally include the supply of genetics to the pig units. In the standard Russian model, an integration is not complete without also owning farmland where the feed crops are produced. But I am not convinced this is an essential part of the business model, any more than that there is a requirement for the integrator to own a pig breeding company.

More efficient: "Standards of efficiency are higher than in the independent sector, because the managers within an integrated system can focus on the job of producing pigs at low cost."

On the other hand, in most places another factor stands out as integral to the system. Most people call it producing on contract. Around the world, the rise of contract farming has revolutionized agriculture. Its application in the pork chain usually centres on an agreement for the third-party contractor to provide land and facilities while the integrator invests in the pigs. It releases the integrator from the need to tie up capital in farmland and so makes the business more interesting for stockmarket investors looking for high returns.

First and foremost, contract pig production is successful because it works for both of the parties involved. The pig producer gains stability as income no longer fluctuates with the market. He or she can concentrate on looking after the animals without worrying about cash-flows. For the integrator, the gain is in the high return on capital where the investment is solely in animals and not in depreciating pig farms. Working mainly with small pig farmers is also beneficial. It eliminates layers of cost that a large company structure would have, but it is even more attractive for its political image. Big corporate farms are not popular anywhere in the world, except perhaps in Russia. Contracting allows corporate money to support local farming and keep the small farmers (the traditional custodians of the countryside) in business.

The safety angle of contracts is another consideration. Processors always need pigs, regardless of the price on the open market. Producers can operate with more confidence when they know the processor has a financial interest in taking their output. This security that the contract provides has the further advantage that banks are happier to lend to a contracted pig business than to one that is independent. In some circumstances the contract itself has become the security allowing the bank to approve a loan of up to 100% on a nursery or finisher building.

The integrated model was born during hard times. Every time a farmgate price crisis occurs, a pork processor or feed manufacturer in that country will have realised just how much they could suffer from losing their supply network or customer base. To protect their own business, they have taken on the stock from farmers and started integrated systems on contract. A period of high farmgate prices and short supplies will have had similar consequences when the processor loses money.

For example, Spain's largest integrated company started out making feed. It was forced to acquire the stock inventory of a customer to cover a debt in a difficult period and grew from there to a structure with around 170 000 sows. Several years ago it closed the circle and purchased a slaughtering business. Various large integrators have grown by buying an ailing company at below normal market value and turning it into a successful business.

Feed manufacturing: "Each of the 3 vital components of feed production, pig production and slaughter/processing must be represented in the integration."

Today, I firmly believe it is impossible to compete with the integrators as an independent producer. They have their own feedmills, transport, veterinary services, genetics base and house construction department. What they do not have are marketing groups, mark-ups on purchases or sales costs. The integrated sector is simply a collection of efficient companies, delivering a commodity at the lowest cost ready for processing to add value. Even at today's grain prices, a well-run integrated company can still produce pigmeat competitively in almost any environment. In many European countries the surviving independents are struggling to compete, whatever the cost of their labor and utilities. I would say the contest to find the right business model in pork production has been won and the victor is integration.