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Thinking About Genetic Costs?

by 5m Editor
23 October 2008, at 12:00am

Production costs for three commercial breeding strategies are compared by Ronald O. Bates, State Swine Specialist at Michigan State University and published in MSU Pork Quarterly (volume 13, number 2)

Introduction

With the corn futures market exceeding $8.00 per bushel in early June, 2008 the cost of production has everybody’s keen attention. Unfortunately the dark reality of what could hardly be imagined, only months ago, is oozing into our being. In an effort to reduce the red ink on many pork producer’s ledgers every expense item is undergoing heavy scrutiny.

One of these is certainly genetic costs. Genetic costs are those costs associated with the procurement of specialized animals and/or semen to operate a crossbreeding system. Genetic costs take the form of the increased cost over market to procure specific cross females, boars or semen for great-grandparent, grandparent or parent stock programs. As pork producers scrutinize each budget item, difficult decisions have to be made regarding what expenditures have to be reduced in order to sustain the farm during these difficult times. Certainly the regular cash expense regarding genetic expenditures is undergoing close examination.

System Comparisons

As farms consider, “Can I reduce this cost?” regarding genetic expenses certainly questions arise regarding what changes can be made in cash expenditures while still maintaining a supply of replacement females within in the farm so to keep operations intact.

When trying to reduce genetics associated disbursements, the question often becomes, “Can I change my breeding system, maintain similar productivity and reduce genetic costs?”

In this report, three commercial breeding systems will be compared in an effort to demonstrate what can happen to production costs when breeding programs change. The three programs that are compared are the Grandparent, Parent Stock and Rota-terminal systems. Grandparent and Parent Stock or Parent systems are commonly used within today’s pork industry. Rota-terminal systems are in place across the pork industry but are not as prevalent as other crossbreeding systems.


Figure 1. Grandparent Breeding Systems

Figure 2. Parent Stock Breeding System

Figure 3. Rota-terminal Breeding System

Grandparent systems typically are those in which a small portion of the total sow herd is comprised of purchased females (Figure 1). Females produced from grandparents are the commercial replacement gilts for the farm system and are identified and managed accordingly.

Parent Stock programs are those programs in which all replacement females are purchased and market hogs are the only type of offspring produced (Figure 2).

Rotaterminal programs (Figure 3) also produce replacement females for the farm system using a maternal backcross mating scheme. Prospective replacement females from the maternal matings within a Rota-terminal system must also be identified and managed accordingly.

For further descriptions of these commercial breeding systems, see the Pork Quarterly article, “Closed Breeding Systems” (Vol. 9. Issue 4). This and other previous issues of the Pork Quarterly can be found on the MSU Pork Team web site by clicking here and following the Pork Quarterly link.

These three systems were compared in a simulation using the Michigan Swine Budgets (Betz and Bates, 2001) as the basis for the calculations. Feed input costs used were $7.84/bu for corn and $400/ton for soybean meal. All other feed ingredients were as quoted in mid-June 2008. Market hogs were priced by using a base price of $72/carcass cwt. Lean premiums averaged $4/cwt.

Genetic inputs for breeding stock and semen are listed in Table 1. All grandparent animals were pureline or purebred animals. All parent females were either two-breed F1 females or two-breed backcross females. All boar needs were met with purchased semen. Maternal semen was priced at $7.50 per dose over terminal semen.

Pure females were simulated to have 1.9 litters per sow per year while F1 and backcross females were simulated to have 2.2 litters per sow per year. The F1 females were simulated to wean 0.8 more pigs than the purebred females while the backcross females were simulated to wean 0.25 more pigs than the purebred females. Purebred females had a 10% higher replacement rate than crossbred females. Crossbred maternal litters were simulated to have a lower growth rate and poorer feed efficiency that terminal cross pigs. Terminal cross pigs had greater lean yield than did maternal cross pigs.

Table 1. Genetic Inputs
Input Price
Grandparent Females $300
Maternal Semen $7.50 per dose over terminal semen

Results

In Table 2 are calculated estimates of gross profit per sow per year by system along with calculated genetic input costs per sow per year. In addition the percentage of maternal matings for the Grandparent and Rotat-terminal systems were varied from 15% to 10%. Furthermore the replacement rate within the Parent Stock system was also varied from 50% to 55%. This allowed for genetic costs to vary depending on level of culling and percentage of maternal matings needed to maintain the production system.

Upon initial inspection of Table 2, it is evident what impact the present cost structure is having on Michigan pork producers. Across all comparisons, profit per sow was $451.60. This indicates that the Michigan pork industry could accrue losses of over $45 million in the next year, which may be considered conservative compared to some predictions.

Table 2. Yearly Profit Per Sow By System
Grandparent Parent Stock Rota-terminal
Maternal Matings Replacement Rate Maternal Matings
15% 10% 50% 55% 15% 10%
Gross Profits per Sow -$442.22 -$429.19 -$403.15 -$403.15 -$451.47 -439.92
Genetic Cost per Sow 30.56 20.57 37.50 41.25 6.19 4.13
Net Profits per Sow -$473.08 -$449.76 -$440.65 -$444.40 -$457.66 -$444.05

In comparing Gross Profit per Sow, the Parent Stock system had the least losses with the Grandparent system intermediate while the Rota-terminal system had the greatest losses. In reviewing genetic inputs per system the ranking was reversed. The Rota-terminal system had the lowest genetic input costs, followed by the Grandparent system with the Parent Stock system having the highest genetic input costs. When evaluating Net Profit Per Sow (Gross Profit per Sow minus Genetic Input Costs per Sow), the Parent Stock system again had the lowest losses, with the Rota-terminal system being intermediate and the Grandparent system having the highest losses per sow per year. However the differences between systems became much smaller.

There are some things to be learned through this exercise. Within the Grandparent system, if the percentage of Grandparent females can remain low (e.g. 10%), the reduction in maternal matings and consequential increased terminal matings yield similar economic returns compared to the Parent Stock and Rota-terminal Systems.

Parent Stock systems are consistently the most profitable with all things being equal, such as health status, availability of replacements, etc.

Within Rota-terminal systems, if maternal matings can remain low (e.g. 10%) economic return per sow can be as competitive as that observed within the other two systems. If expenses associated with genetic inputs must be reduced within a farm system, changing to a Rota-terminal system would accommodate a reduction in genetic costs while maintaining a supply of replacement females and efficiencies of production that are close to that of other crossbreeding systems.

Conclusions and Final Thoughts

Simulation results are based on the assumptions that are used to construct them. Using breeds or lines with differing performance levels than what was used here could change the outcome. Furthermore, multiple genetic pricing structures are prevalent within the industry. This simulation only considered one of several that are in use. Others in place across the industry can impact cash flow differently than what was simulated here.

Before considering a breeding program change producers should work with someone that can complete this type of analysis to assist in their decision-making.

Furthermore if changes within the breeding system are to be made, ensure that replacement females needs are considered in the process.

Maintaining an ongoing supply of replacement females will be necessary to reduce losses over the planning horizon under consideration.

Literature Cited

Betz, R.A. and R.O. Bates, 2001. Swine Budgets. In B. Dardt and G. D. Schwab (Eds.) 2001
Crops and Livestock Budgets Estimates for Michigan. Agric. Econ. Rep. No. 609.

October 2008