Production

2007 Leman Conference: Francois Cardinal, finishing mortality in a system using different PCV2 vaccination protocols.

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SwineCast 0220 for July 24 2007

SwineCast 0220 Show Notes:

  • In that next interview... dive deep!
  • Dennis DiPietre looks at China pork landscape
  • Jim Long says a good year for producers... if a bit anxious
  • Soil quality and manure management
  • Sweden's experience with manure digesters

How Chasing Return on Equity May Lower Return on Equity

    Reducing variation requires first an understanding of the source(s) of variation, the likelihood of mitigation strategies to successfully reduce the variation and the cost/benefit trade-off in source mitigation. As we have discussed, the typical farm record systems and the procedures which are considered practical to perform, work against developing the necessary data and anaylysis to gain a clear understanding of the return for variance reduction.

    However, one of the most powerful aspects of variance reduction strategies is that if they are successful, they favorably affect both revenue and cost simultaneously. This results in a double bang for the buck when considering the potential financial outcomes of variance reduction investments.

    Since little was understood about the role of production variance on net income; building systems, equipment systems, management systems, contract production systems and pig flow rules of thumb etc. have been put in place over the years causing inflexibility and making it difficult to deploy certain new strategies.

    For instance, contract production systems save equity and allow for greater expansion of the sow base since the capital of the grower forms a significant portion of the total investment required. Many growers elect to make this investment because the returns are generally very high to equity and the value of the manure has been increasing dramatically where it can be used as a commercial fertilizer substitute.

Don Tyler Biographical Sketch

Don Tyler grew up on a diversified family farm in Northwest Indiana and graduated from Purdue University in 1979. He and his family managed farms in Illinois for several years before returning to Indiana to become a partner in a grain and livestock operation in Clarks Hill.

Opportunity Revenue and the Cost of Intervention

Causes of variation in pig production are many and not well understood. One of the key issues arises from the spread in pig weights which begins through a kind of competitive process among the pigs beginning well before birth. Competition in the uterus and during lactation results in a sometimes widely spread distribution of potential in pigs by the time they reach weaning. Some common management procedures are implemented beginning at birth to attempt to reduce variation but their outcome is often marginal, while others, such as processing and castration introduce new challenges to subsets of pigs. Pigs of different weights require different environmental temperatures, feed types and other conditions, yet as variation increases, "average" conditions are provided which probably miss the ideal environment for all but a very small number of pigs.

Some producers are experimenting with simply euthanizing the smallest pigs either at weaning or prior to weaning. An arbitrary percentage is chosen, such as the smallest 3-5% as candidates for euthanizing. Recently published trials (Wolff, Lehe, Keffaber and Deen, "A Producer's Tool for Measuring Attrition", IPVS, 2006) suggest that the weight of the pig, relative to its cohort at both weaning and the end of nursery phase are sentinel indicators of eventual final quality with the weight at the end of the nursery phase a stronger predictor. The result was obtained with all other things held constant so it isn’t clear if targeted or more intensive individual interventions aimed at the smallest pigs at weaning and feeder pig stages would affect the outcome.

Its Not as Simple as Leveling the Playing Field

Reduction in variation of growing pigs can have significant impacts on both cost of production and on return from the packer. This double impact on both cost and return makes this an especially lucrative subject for both study and the development of strategy leading to standard operating procedure (SOP) creation or amendments. Simply reducing variation is not the goal however since there is no guarantee that this will produce either cost reduction or income increase.

Too Much of a Good Thing...Is Rarely a Good Thing (with apologies to Martha Stewart)

Variation is a natural part of biological systems and a characteristic that cannot be eliminated. However, the wise producer will institute procedures from the boar stud to the final loading of the finished animals which at a minimum, does not increase the natural variation in growth. Variation costs money, lots of it. Since we adopted systems which produce weekly lots of pigs, the pigs flow through the farm in age-segregated groups, often moving two or three times to different locations. When their growth performance begins to spread, the time and the cost associated with their completion and marketing begins to rise.

Two Peas in a Pod---They Ain't"

So we are talking about not adding to the fundamental problems which biological production systems deal out just because of their nature. Some of those problems include seasonality, the complexity of growth mechanisms as a key variance enhancer (compared to non-biological production—like automobile manufacture etc.) and the fixed periods of production which cannot be speeded up with an extra shift (like gestation). I’m contending that the next major movement forward in competitiveness is the producer’s ability to manage (certainly never eliminate!) variation more effectively. There is lots of money on that table.

"Don't Let Your Assets...,Well, Sit on Their Assets"

Agricultural production is kind of a strange bird compared to other business processes. In economic terms, one of the real challenges is something called “asset turnover”. Asset turnover is the time it takes to generate the value of all assets used in the production process through sales of finished products. Asset turnover is a key determinate of Return on Equity along with net income and level of leverage employed (see the Dupont Equation if you are a budding MBA).

If you think about it, crop producers purchase a $400,000 combine which they operate a few weeks a year and then it is a high-priced bird perch for the next 10 or so months. This is the killer of asset turnover in most biological production processes since many of them are not continuous.

WPX2007: Dr. Tom Gillespie discusses PRRS management and its impact on porcine PCVAD.

Dr. Tom Gillespie, veterinarian with Rensselaer Swine Services in Rensselaer, Ind., and past president of the American Association of Swine Veterinarians, discusses porcine respiratory and reproductive syndrome (PRRS) management and its impact on porcine circovirus associated disease (PCVAD).
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