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From International PigLetter

With all the changes in pig production over the last few years, all pig production analysts, including me, are struggling to change our methods of identifying opportunities for improvement!

In my experience, the basic diagnostic analyses involve the following questions:

• Is the unit full?
• Can we increase the speed of throughput?
• Can we reduce variable costs?
• Can we increase the quality of outputs?
• Is the system robust?

These questions are in the order that I usually take them, though the answers are not independent. The order is based on the ease of analysis and thus has reflected the common emphases we have taken in pig production.

It is important that stocking rates on the farm are at the right level to maximise efficiency.

Is the unit full?

Keeping our facilities full is a basic aim of a production system and an initial diagnosis can be made on a walk-through. It is the main reason to emphasize reproductive efficiency, in that reproductive failure results in under used facilities for growing pigs in a closed system. Underutilization results in excessive fixed costs and thus this connects into our second question.

Nonetheless, a facility at capacity is not as easily defined as you might think. The basic calculation that I use is:

% utilization =	Avg. # of pigs in facility when inhabited X # of days inhabited per year
	Number of pig spaces X 365

Rarely will this figure reach 100%, nor should it in most cases. For instance, farrowing room utilizations in my calculations rarely exceed 60%. I view capacity in terms of piglets and not sows. If each crate has space for 12 piglets, the average litter is 9.5 and a crate has a litter in it for 250 days a year, the % utilization is 54%. As we have lowered weaning age and created more stringent all-in/all-out rules this figure has dropped, and there have hopefully been positive answers to the other questions on the list.

Can we increase the speed of throughput?

After considering utilization, we look at how to increase the rate of throughput. This is usually less of an opportunity than filling the unit. We cannot speed up gestation, but piglet growth rates during lactation can be increased, though age is still a strong determinant of quality at time of weaning. This opportunity mainly exists in weaning through marketing, where an increase in average daily gain allows for an increased turnover of facilities or an increased weight of pigs at marketing and thus an increased output.

Though this can be true, in all-in/all-out production, facilities' turnover is defined by slower growing pigs. I try to avoid using average daily gain and instead focus on the slowest-growing pigs. Improvements in these pigs are more closely correlated with improvements in barn turnover. My calculation on the number of days to turn over a barn (excluding downtime) is:

New number of days + old number of days X	New ADG in slow growing third
	Old ADG in slow growing third

This is more difficult to measure but much more useful.

Can we reduce the variable costs?

A number of industry members believe this question has been overemphasized. Cost control is important, especially during low prices, but often leads to short-run decisions that do not address the other questions. It is a figure to monitor closely as answers to other questions are pursued.

To aid in most decision-making, cost of production should be split in two parts. The first part is the fixed cost of running the operation, whether or not it is full or at the correct throughput. This is a long-run problem, usually called a "sunk" cost and difficult to manipulate. This includes building, startup and labor costs. The challenge, in most cases, is in controlling variable costs, which are predominantly feed costs, yet it ignores costs such as mortality and culling. In feed manufacturing such "shrinkage" is usually identified as a cost and has been controlled in many circumstances.

Though it is attractive to report this on the basis of a price per pound of output, it makes more sense to calculate it on a per pig basis for most farms. It is also usually calculated on the number of pigs sold, often just to the primary market. Thus, it is:

Variable cost per pig produced =	Total variable costs
	Pigs marketed

I think this method is logical, but dangerous as it buries some costs such as mortality and culling. These cannot be extracted easily and are thus ignored. These are "opportunity costs" that are probably best addressed by looking at the quality of output.

Can we increase the quality of outputs?

Quality is defined in many ways, but I define it as opportunities to increase the value and profitability of the output. Some of this value may be difficult to measure as it involves market accessibility and long-range opportunities, but most of the opportunity to increase value is readily available. My basic calculation involves calculating the potential margin over variable costs for pigs placed and compare it to the actual margin. The difference is opportunity costs. The potential margin should be based on pigs being marketed at their correct weight and with good carcass characteristics and can include other potential improvements.

The calculation, which looks more gruesome than it actually is, is thus:

(Pigs placed X (potential value at marketing - potential variable costs) - pigs marketed X (value at marketing - variable costs)) / pigs placed = opportunity costs per pig placed

These opportunity costs almost invariably exceed $10.00 per pig and are very significant. The majority of these costs are in mortality, culls and marketing lightweight pigs. Each cost can be calculated by simply calculating the above formula for each type of pig.

Is the system robust?

This is a difficult question, but needs to be addressed in every diagnostic evaluation. We need to make sure that the system reliably continues on its present or projected level of productivity and that improvements in reliability are considered. The system should avoid risks where possible and be able to handle the unavoidable.

We need to be able to identify potential costs of breakdowns. There are formulae to calculate the robustness of systems, but in general we lack the data to calculate it properly and thus we are driven to best guesses in most cases. Yet we must provide those guesses or we end up with unreliable systems. Measuring the reliability of a system is risk management and it is built on providing those very guesses.

A simple formula is to identify the upside and downside of changes in production and then guess the probabilities of each. For instance, introducing a new source of gilts may have the upside of reducing replacement costs and improving carcass characteristics while having the downside of introducing a new pathogen. The formula to evaluate it is:

The sum of the upsides X their probabilities - the sum of the downsides X their probabilities = the net benefit

The important decisions are where the downsides are large, such as pathogen introductions. The problem is that minimization of cost of production as well as the other aims (***???***) almost always increases risk.

Summary

Each of these questions demands careful consideration built on intimate knowledge of the production system. In too many cases we have emphasized one area, to the detriment of other aspects of analyses. The downside is that answering these questions takes more work. The upside is that there are many more opportunities to improve pig production than there were before the basic improvements of the last few years.

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Reproduced with kind permission of the Author, John Deen and International Pigletter

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