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# Dave Stender - Find the Edge for Successful Niche Production

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Find the Edge for Successful Niche Production - Dave Stender, ISU Swine Field Specialist, from the 2012 Iowa Pork Congress, January 24 - 26, Des Moines, IA, USA.

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• Comparing top to bottom in 2006 those that raised 2X had 1/5 the profit--Twice as much work for 1/5 the money. But in 2007 the least profitable herds tended to be smaller herds
• Top ten best profitability herds, herds shaded in pink are the high performing herds. Note that many of the high profit herds are not very good at productivity.
• This set of farms is the least profitable, and yet a few farms with higher productivity are still found in this group, and again a variation in productivity exists in this profit group.
• Look at the non-feed cost structure of this operation. If you add up operating (supplies, repairs, bedding, rent, etc), fixed (facilities, equipment, taxes, interest and insurance), and labor totals for the year and divide by sows you get the red line cost per 1/10 of a sow. I used 1/10 cost so it fits the graph nicely, meaning 35 would be non-feed cost of \$350/sow, 45 would be \$450/sow, and so on. P/S/Y is on the horizontal axis and is each individual farms P/S/Y productivity numbers. For example farm one had 7 P/S/Y and a red dot at 34, so that farm had fixed, operating and labor cost of \$340/sow. The green line is the non-feed cost per pig sold, farm one that cost is about \$49/pig sold. If feed costs run \$70/pig sold and the market price is \$120, that leaves \$50 non-feed cost per pig sold as the number that is very competitive with anyone in the swine industry. In this group of producers that have a non-feed cost structure of \$350 to 450/sow, we see that 8 out of the thirteen farms have a very competitive non-feed cost per pig.
• Look at the non-feed cost structure in these herds from \$470 to \$700/sow and here we see maybe 3 out of 12 farms (really only 1 at or below \$50) with a competitive non-feed cost per pig sold.
• In this final group of \$700 to \$1350 non-feed costs per sow, we see one operation at \$50/pig sold and one about \$55/pig sold out of 15 farms in this group. These numbers are what we mean when we are talking about keeping costs in line with throughput. If farms can reduce non-feed cost, they need to do so through labor efficiency, operating cost savings, etc.. If these farms have more room to finish pigs and have high non-feed costs/sow because of underutilizing the facilities, they need to fix this. Of course, the obvious answer is increasing productivity P/S/Y, however, that may not be easy. The nice thing about niche production is that there is sometimes room to add more sows to make sure the throughput matches the cost structure. The best solution if finishing facilities are underutilized is to do both, increase productivity and increase the sow herd. For example, a 75 sow herd increases to 100 sows and increases from 10 to 12 P/S/Y. Assume non-feed cost per sow day at \$.15 and assume a cull sow market high enough that the sow gain pays for part of the extra gestation sow feed. The starting scenario with a 75 sow herd would have \$65,000 in non-feed cost. \$65000/750 is \$86.67 non-feed cost per pig sold. Up to 100 sows, and the non-feed cost is now \$70,000 because we saved some utility bills by not having to heat ½ full buildings. \$70000/1000 pigs is \$70 non-feed cost per pig sold, which is \$16.67 more profit per head than the 75 sow herd. Or better yet, also increase productivity to 12 P/S/Y, which means \$70000/1200 pig would reduce non- feed cost per pig sold to \$58, almost \$30/head difference. The key here is throughput must match the cost structure, and options exist to correct imbalances.
• ### Dave Stender - Find the Edge for Successful Niche Production

1. 1. Find the Edge for Successful Niche Production Prepared by Dave Stender, ISU Swine Field Specialist
2. 3. U.S. Corn Price, 1970-12
3. 4. Source: USDA/ERS 2011 per person meat consumption lowest since 1997; 2012 lowest since 1991
4. 5. Niche Pork Can be a marketing attempt to capture retail dollar?
5. 6. Market Potential is There <ul><li>A portion of consumers are willing to pay more for certain attributes such as: </li></ul><ul><ul><li>Great eating quality </li></ul></ul><ul><ul><li>Organic or natural </li></ul></ul><ul><ul><li>Environmentally </li></ul></ul><ul><ul><li>Certified, farmer owned etc. </li></ul></ul>
6. 7. 130 lb of meat sold at average retail price ~ \$3.50/lb = \$455
7. 8. 130 lb of meat at \$5/lb = \$650 gross value
8. 9. What will people pay? <ul><li>Range - \$300 for half </li></ul><ul><li>Up to \$20/lb </li></ul>
9. 11. Search for customers or processors, distributors, retailers agMRC.org
10. 12. 2006 Sorted by Return to C, L & M Avg n=41 Top N=15 Bottom n=15 # of pigs sold 682 462 1076 2006 \$ to CLM \$17,740 \$29,875 \$5,886
11. 13. Niche cost of production
12. 15. Looking for the Advantage <ul><li>Market premium </li></ul><ul><li>Feed cost </li></ul><ul><li>Non-feed cost </li></ul><ul><li>Health </li></ul>
13. 16. Use Less feed <ul><li>Genetics </li></ul><ul><li>Diet </li></ul><ul><ul><li>Formulation (energy, amino acids) </li></ul></ul><ul><ul><li>Diet form (pellet vs meal, particle size) </li></ul></ul><ul><li>Sow feeding </li></ul><ul><li>Wastage </li></ul><ul><li>Air Quality </li></ul><ul><li>Handling </li></ul><ul><li>Market weight/sorting </li></ul><ul><li>Yield – fiber </li></ul><ul><li>Health </li></ul>
14. 17. Feeding the Sow 2 litters, 10 avg, \$18.55 1.7 litters, 6 avg \$46.59 \$46.59-\$18.55= \$28.05/hd worth more than \$10/cwt. live weight premium
15. 18. Productivity from 10 most Profitable Herds Economic Rank Pigs/L Litters/Sow P/S/Y 1 7.5 2.2 16.6 2 8.1 2.1 16.7 3 7.8 1.6 12.8 4 6.4 1.5 9.6 5 6.9 1.0 6.6 6 7.3 1.7 12.4 7 5.6 1.1 5.9 8 4.8 1.5 7.0 9 8.5 1.4 11.5 10 8.8 0.9 8.1
16. 19. Least Profitable Farms Economic Rank Pigs/L Litters/Sow P/S/Y 31 6.1 1.8 10.9 32 7.2 0.4 3.0 33 6.3 1.0 6.2 34 5.6 1.4 8.1 35 6.7 1.9 12.4 36 6.5 1.4 9.2 37 7.4 1.9 13.8 38 6.6 1.5 10.2 39 7.1 1.8 12.9 40 5.2 1.2 6.4 41 5.9 1.4 8.4
17. 20. Effect of p/s/y on non-feed cost/pig sold ( \$350 to \$450 non-feed cost per Breeding Female)
18. 21. Effect of p/s/y on non-feed cost/pig sold (\$470 to \$700 non-feed cost per Breeding Female)
19. 22. Effect of p/s/y on non-feed cost/pig sold ( \$700 to \$1,350 non-feed cost per Breeding Female)
20. 23. Minimum level of productivity needed --- relative to non-feed cost level. <ul><li>In niche herds non-feed cost is driven by total production target output relative to herd cost structure. </li></ul><ul><li>In niche herds \$50 to \$70/head non-feed cost goal. Amounts to ~\$20/cwt </li></ul>
21. 24. Healthy Pigs – less feed <ul><li>Clean stock </li></ul><ul><li>Extra care at market assess point </li></ul><ul><ul><li>Boots, hands, pickup, cab, and trailer must stay clean so pathogens are not hauled home </li></ul></ul><ul><li>Batch farrow </li></ul><ul><li>Tail end pigs moved off site </li></ul><ul><li>Same breeding stock four to eight parities </li></ul><ul><li>Clean out grow finish pigs - summer </li></ul>
22. 25. Questions? <ul><li>Contact information – </li></ul><ul><ul><li>Dave Stender, Swine Field Specialist </li></ul></ul><ul><ul><ul><li>Location: Cherokee County Extension Office </li></ul></ul></ul><ul><ul><ul><li>Phone: Mobile – 712 261 0225 </li></ul></ul></ul><ul><ul><ul><ul><li>Office – 712 225 6196 </li></ul></ul></ul></ul><ul><ul><ul><ul><li>FAX – 712 225 3173 </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Email – dstender@iastate.edu </li></ul></ul></ul></ul>