For many years pig performance has been reported in terms of physical performance. Factors such as pigs reared/sow/year and daily gain are interesting and certainly profit determining, but do little to indicate where improvements are needed in order to improve bottom- line profitability.

Unless performance parameters can be given a monetary value how can pig producers make economic assessments on how to improve their businesses? Quite simply which parameters need to be changed first to make the business more profitable?

Cost and Value

Knowing the economic impact of any change in physical performance indicates the value of the improvement and also enables producers to calculate the payback from an investment. This removes one of the great barriers against change – notably knowing the full cost it incurs, but NOT knowing its corresponding value.

Some investment-driven changes are short term and not ‘binding’. An example of this may be vaccination of pigs against respiratory disease. The cost per pig is relatively modest at £1 or less, and vaccination can be stopped at any time.

By contrast, spending £200,000 on a finishing unit upgrade is a much bigger outlay and a longer term commitment.

Both investments will generate payback and a return, but how can, for example, the value of an extra 70g a day in growth rate, a 3 percent reduction in mortality and/ or an improvement in food conversion ratio of 0.15 be calculated?

Economic values enable vets, nutritionists, housing manufacturers, advisors and pig producers to decide which planned changes are likely to be a more economic investment.

Industry Standards

A British Pig Health Scheme working group faced similar issues. When asked ‘What is the cost of poor pig health status – or the value of improved health status?’ the answers produced were diverse and could not be adopted as industry standards. As a result, detailed calculations were carried out, discussed and agreed.

The initial intention was to estimate the effect of health upon profitability, but this was seen to limit the scope of the calculations. It would also be imprecise as it is difficult to categorically show the true effect of disease on performance – particularly when, as is usually the case, it is caused by several pathogens. What can be shown is the effect of performance change – for whatever reason – on profitability, and this is a more useful tool.

The more precise and up to date the information used in any calculation, the more accurate the result will be – the converse is also true.

Computer programmes enable rapid calculation and easy updating of data tailored to an individual unit’s current performance level and cost base.

And while units do vary, and prices do change, using the following Industry Standards can still provide producers with a useful guide to the benefits of improved performance.

Economic values of improved performance

(Rounded to the nearest 5p a pig for pigs growing between 7-100kg liveweight.)

• 1% change in mortality is worth 50p a pig; this includes carcass disposal but does not include labour or any medication costs.
  
  
• 0.1 change in FCR is worth £1.40 a pig when the average feed cost is £150 a tonne and £1.20 a pig when the cost per tonne is £130.
  
  
• 50g/day change in growth rate is worth £1.05 a pig if pigs are sold at the same weight. If however they are sold at the same age as they were previously, but at a heavier weight, then it is worth £2.60 a pig. This does not account for any improvement in FCR which is generally found with faster growth rates, and can be demonstrated from trials data and by using pig growth models.
  
  
• 1 empty day per sow costs £2.30 a sow when pigs are sold at 100kg. When pigs are sold at 30kg the cost penalty would be £1.85 a sow. Included here are costs of production and the loss of revenue arising from empty days.
  
  
• Value of a marginal pig is £34 a sow, as these pigs only carry their own direct costs of production, and by definition do not incur any of the sow’s direct costs of production as these are carried by the first 18-19 pigs produced/sow/year.

Conclusion

So the answer to the question ‘What would be the economic value of relatively modest improvements in finishing herd performance, arising from planned investment?’ is the improvement would be equivalent to reducing cost of production by 9.25p a kilo deadweight, or increasing the margin per pig by £6.94.

Like any other business, a pig enterprise in order to remain profitable and competitive, requires regular investment to improve physical efficiency. Using Industry Standards that indicate the unit value of improved efficiency, pig producers can quickly, and easily, calculate where to invest money in their business, and what the likely payback is going to be.

March 2007