How Does Multi-site Production Stack Up?
During the 1990s, pork production has undergone a revolution in the province, changing from single- site production to multi-site production. Segregated Early Weaning (SEW) and all-in, all-out production accompanied this change, but what system is best for Ontario producers?
Single vs. Multiple Sites
A typical land-based, feed integrated farm in Ontario might have 200 sows and 300 to 400 acres of land. These units are costed out regularly in Pork News and Views. In the last five to 10 years, very large hog farms have developed in other areas of the continent. According to Waterloo region pork producer Bob Hunsberger, Canadian producers have responded by increasing the size of the average sow herd and forming alliances with other producers to specialize production. These production loops are attempting to simulate the benefits of large, industrial producers.Production Performance
According to Cate Dewey, a University of Guelph veterinarian who has done SEW trials, the number of pigs born alive per litter and the number weaned per litter was lower for SEW farms, but was not significantly different from farrow-to-finish operations.There was no significant difference in overall farrowing rates between farrow-to-finish and SEW herds.
The number of days to market was lower in SEW (159) than in farrow-to-finish (164) operations.
Economics
Ridgetown college economist Ken McEwen indicated the traditional farrow-to-finish farmer may carry $1.5 million and as much as two-thirds equity position. The return on equity has run between 10 and 15 per cent. He has found in these operations 55 per cent of net farm income can be attributed to the number of sows, the number of assets and amount of debt.In a 2,000-head nursery, the return on equity can average 10 per cent, and in the finishing operation eight to nine per cent. In general, return on equity can be similar in farrow-to-finish and multi-site production. Marketing returns may be better in multi-site systems where loads of cookie-cutter animals can be put together. Marketability or sale of multi-site systems may be easier than farrow-to-finish operations.
Herd Health
Cathy Templeton, a veterinarian in Listowel, suggests single-site and multi-site systems require the same operating principles. High health source herds with strict attention to biosecurity are important in both systems.Feed Costs
Ken Palen, livestock specialist with Kenpal Farm Products, indicated feed costs on both production systems can be considered equal in well-managed facilities with moderate to low disease challenges.Factors Affecting Production
- Health is an important factor in achieving productivity. SEW systems using all-in, all-out by site are disciplined and effective.- SEW systems have better production records than typical farrow-to-finish systems.
- Feed is the biggest cost in hog production. Feed cost per tonne is generally lower in land-based operations.
- Labour utilization tends to be better in larger systems.
- Industrialized operations require professional managers.
- Differentiated marketing and contract production are easier with industrial operations.
Manure Management
Frank Kains, agricultural engineer for the provincial ministry, suggested the traditional 180-sow farrow-to-finish operation resulted in a total of 358 animal units, a measure of manure production. A 600-sow unit resulting in 120 animal units, a 2,000-head nursery, 240 animal units, and a 1,000 finishing operation, 250 animal units. The conclusion is that swine farms operating under multi-site systems are not, on average, larger manure producers than typical farrow-to-finish systems.Conclusions
In evaluating farrow-to-finish and multi-site systems, there is no clear "best" system. The variation within systems is greater than the variation between systems. If productivity is the same on big and small farms, the cost of production will not be much different.
Bill MacDougald, Fullarton, Ont., operated a finishing operation until 1979. From 1980 to 1983, he operated an 80- to 125-sow farrow-to-finish operation. In 1994, he expanded to 185 sows. In 1996, he changed to an 850-sow farrow-to-wean SEW operation.
MacDougald posed several questions producers should ask themselves before jumping into multi-site production, including whether it fits your personal and family goals. Careful analysis of the entire system should be the first step.
Can you manage intensively? If you can manage 185 sows well, you can manage 850 sows. Do you have production and financial plans that work? You can input figures into a computer program until you have one that is attainable.
Why switch at all? Will your present unit be a viable unit in the future?
A large expansion will mean dealing with many people. Are you getting into business with people you can trust and work with?
Making the Switch
Good management is always good management, MacDougald says. People and time management, stockmanship and good records are all essential. The only value added is the production of pigs. Without pigs, there is no income or profit.Management factors to consider include breeding barn management, which is 90 to 95 per cent AI, and open-day management, including heat detection, returns and pregnancy detection. Know your breeding targets or you're beat, MacDougald said. There is no profit from unbred sows.
Gilt pool management, including scheduling, introduction and acclimatization, must also be taken into account. In the farrowing barn, lactation intake is important. -AB
Sticking with single-site production
Dave and Brenda Linton, Blyth, Ont., feel the single-site system is the right choice for them. They are small in some respects, with 90 sows marketing 1,900 to 2,000 pigs per year. They get input from their veterinarian, field representative, engineer, accountant, banker and others. The Lintons are the experts on their farm and jointly make all decisions pertaining to the farm.
Recently, Dave attended a meeting at which European pig specialist John Gadd suggested three-site production would improve performance 30 per cent. Dave checked with a builder to get plans and costs. Then he discussed the option with his banker and Brenda.
A 30-per-cent improvement would yield finishing hogs weighing 108 kg in 11 days and pigs in the weaner barn would be going from nine kg to 15 kg with almost a 1:1 feed conversion ratio. Brenda didn't think that was a realistic expectation.
Brenda was concerned about the high cost of expansion versus the return on investment. Low-cost housing is one of their biggest business advantages. What costs less than a building that is already paid for?
She asked whether they really wanted to specialize to the point of spending all day processing piglets, breeding sows and supervising people.
Brenda also provided reasons for staying with their single-site operation, including excellent income per sow and not carrying the responsibility for supplying packers with more hogs.
She also didn't want to be at the mercy of so-called experts deciding how the farm should be run. -AB
Hog price cycles predict futurelows
By Kevin Simpson
While hog production trends have been quite stable recently, prices have continued their wild and woolly swings. Hog production has varied by two to five per cent during the last three years, but prices have varied by 225 per cent. Keep this volatility in mind as you plan for the future. It's easy to say things will be different this time, but something usually happens to prove once again that farm prices and profitability are extremely cyclical.
With this in mind, consider the price cycle that shows a low point about every three years. See Fig. One. The last cycle low was in 1994. Using simple math, then, the next cycle low is expected in November 1997. When I add a time window of four months on either side of a November low, I say that an important low price is due between August, 1997, and March, 1998. Some will criticize this analysis as simple-minded and point out that a cycle low is not a sure bet. But others will insist that a cycle low is on the horizon.
I think studying hog price cycles is a useful planning tool. Hog producers can use it to plan their expansion and predict levels over the next six months.
Now that we know roughly when the low will happen, what will the price be? When you look at the typical price drop from the cycle high to the cycle low, you will observe that it is in the range of $22 to $30 per cwt. carcass price. Subtracting this from the recent high of $90 gives a downside of $60 to $68.
Evidence in the cash market - falling pork product prices just as we enter a period of increased hog deliveries, and weights - indicates that this market is on a slippery slope with only an occasional foothold before prices fall again.
My advise for clients who need price protection: sell 25 to 50 per cent of your production using October $70 puts and December $66 puts. Sell the rest on a rally, for example, $73 to $74 for the October and $69 to $70 for the December lean hog futures. Check with your futures broker to determine if this advice is suitable for you.
Kevin Simpson is a futures and options broker for Midland Walwyn. 1-888-417-4459.
The information contained in this report was obtained from sources believed to be reliable; however, we cannot represent that it is accurate or complete. The views expressed are those of the author and not necessarily those of Midland Walwyn Capital Inc.
Pinching pennies with PorkMa$ter
By ROBERT IRWIN
Forget all the time-honoured adages you've heard about there being no such thing as a free lunch. PorkMa$ter is free and it's worth a lot more than any lunch.
This new software, developed by Bill Szkotnicki, senior analyst, animal and poultry science at the University of Guelph, should boost profits for anyone producing market hogs.
The program will run on any personal computer running Microsoft Windows 95 with at least eight megabytes of memory (RAM). You can use it for cash flow projections, to estimate animal and financial performance over the entire grower-finisher phase, or for selected body weight ranges.
Optimum shipping weights can vary for individual grower-finisher units even within the same production system. Once you install the program, you spend a few minutes entering raw data from your grading slips and operation and then find out what your ideal shipping weights are.
PorkMa$ter considers a number of factors to give you a unique look at your business. These include: unit-specific feed intake and growth curves, variation in shipping weights, carcass lean yield, and economic conditions. Once you're satisfied with your inputs, you'll find it easy to view, edit or print the pig performance report.
I downloaded the 3.5-megabyte program from the Internet <http://www.aps.uoguelph.ca/~porkm> in less than half an hour using a 28,800 modem. If you aren't connected to the Internet, you can purchase the program by contacting Sandra Brown at the University of Guelph, (519) 824-4120, ext. 3688. The university will sell you the software on three floppy disks.
Installation on your hard drive takes just a few minutes and is easily accomplished without any special skills.
Like all software, PorkMa$ter has a few idiosyncrasies. For example, you can ignore the missing file warnings during installation.
Whenever you run the program, a display appears that indicates registration is required. In software parlance, this is sometimes known as a "nag screen". It's there to apply pressure on you, but you can make it disappear by simply hitting the X in the top right-hand corner of the screen display with your mouse.
At press time, Szkotnicki was ironing out one serious problem. This is a glitch that seems to prevent the program from running on computers that don't already have Microsoft Word 97, the word processing program, installed. If you were unable to run PorkMa$ter when it was first released, you might try downloading a newer version now.
As I mentioned, the software is absolutely free from the Internet. The free version isn't crippled in any way and it won't expire, but there are some good reasons to register and pay the $90 fee.
Registration entitles you to support. You can also become a member of a listserv set up by Szkotnicki. It allows users to compare notes and receive upgrades or notification of bugs such as the ones described above.
The help section of the program is put together well enough that you shouldn't need a user manual.
This is a world-class program, developed in Ontario, which promises to put more money in your jeans. It has been offered free to Ontario producers since its launch at the Ontario Pork Congress this summer.
Still, according to Szkotnicki, only a few dozen producers have given PorkMa$ter a try.
Robert Irwin is Pork Producer's computer guru.