RED DEER – Saving money happens at two places in the hog business, says an American hog adviser.
It can occur when producers buy inputs or pay for construction, Gary Dial told a group of producers at a hog conference on finding money in the hog business. Savings can also occur in the barn when staff control how much product is used.
“Low production costs not only require that inputs be purchased competitively, but also that they be used sparingly,” Dial said.
Office staff must buy inputs as cheaply as possible and farm staff must ensure as few of the inputs as possible be used.
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“If either group fails in their responsibility, cost creep occurs,” said Dial, who developed PigChamp, a computerized swine production software program now used on many hog farms around the world.
The former University of Minnesota professor is also chief operating officer for New Fashion Pork, which has 30,000 sows. He is director of production operations for Iowa Select Farms with 92,000 sows and vice-president of production operations for Brown’s of Carolina, a 100,000-sow business.
Dial said the size of the hog operation doesn’t matter. Management and staff need to work together to find hidden “profit robbers” in the business.
Production managers need to take a close look at every line of their balance sheet to save money.
Depending on where barns are located in the United States, manure is either an expense or a revenue source.
Feed inputs can be hedged to offer price protection and replacement female costs can be reduced through volume buying or using an in-herd source. Bulk orders can lower supply costs and depending where the barn is located, labour costs can also be lowered.
Extra semen from top boars can be sold to offset production costs and offering a feed service from the farm’s mill can provide income.
“Production is about taking care of the details,” he said.
One of the keys to saving money is through budgets, added Dial, who advocated use of budgets to predict herd productivity for the upcoming year. Dial said his farms write budgets for each week of the year to predict the number of pigs weaned each week and their expected weaning weight.
By using those numbers, they know how many females should be bred and the number of pigs that will be born throughout the year.
Dial said his organization also uses a unit-use budget that predicts how much semen will be used, the number of replacement gilts that will be needed, the amount of feed used and the amount of antibiotics or veterinary services.
Semen prediction also helps determine if semen is being wasted or if more females were bred than budgeted.
Each expense is carefully analyzed and compared to the amount budgeted.
“Any deviation from budget must be explained, regardless of whether it is positive or negative,” Dial said.
If health costs are lower than budget, it’s possible farm staff may not be administering a vaccine.
Each discrepancy must be discussed, a report written, solutions found and an action plan put in place. The reports help form part of a plan that is given to banks and business partners.
Production managers give oral presentations at monthly meetings to explain variances.
“The peer pressure that comes from oral presentation of results compels all good farm managers to understand their costs and apply rigour to the creation of their action plans.”
Remaining vigilant about creating a “low-cost culture” is key to making money in the hog business, Dial said.
“When (breeding farm managers) are more proud of their break-even or their weaned pig cost than they are of their (average daily gain) or farrowing rate, you have been successful in making them businesspeople.”
