AgDM newsletter article, April 1998

Payoff from new swine technologies

James KliebensteinBy James Kliebenstein, Professor of Economics, 515-294,7111, jklieben@iastate.edu

New production technologies are continually emerging in pork production.  These technologies impact the costs, revenues, and profits from producing pork.  A recent study conducted at Purdue University examined the economic impact of many of these technologies. The analysis is based on a 150 sow, low technology production system and the impacts below reflect improvements over that system.  However, the economic impact will vary due to the type of production system.

The economic impact of these technologies is shown in Table 1. The technologies are listed in rank order with those having the greatest economic impact listed first.  They are also ranked according to the ease of adopting the technologies. 

Most of the economic impacts shown in Table 1 represent cost savings through increased efficiencies.  However, some of the impacts such as genetics (revenue) represent revenue premiums. 

Table 1.  Returns for swine production technologies

Rank *

Technology

Impact
$/cwt.

$/head

Ease of
Adoption

1

SEW/AIAO

$4.73

$11.59

7

2

Genetics (prod)

3.38

8.28

3

3

Throughput

3.09

7.57

8

4

Genetics (rev.)

2.24

5.48

4

5

Split sex / phase feeding

1.79

4.39

1

6

All in / all out

.73

1.79

2

7

Network (selling)

.75

1.83

5

8

Network (buying)

.70

1.72

6

* 1 represents easiest and 7 represents hardest.

Source: Positioning Your Pork Operation for the 21st Century, Purdue University Cooperative Extension, July, 1995

SEW/AIAO

The technology providing the greatest economic impact ($4.73 per cwt. of pork produced) is the combination of the segregated early weaning and all in/all out production technologies (SEW/AIAO).  These technologies enhance the health of the nursery and grow-finisher pigs. 

While SEW/AIAO has the potential for large economic gains, it can also be difficult to adopt.  Major modifications involving high capital outlays may be needed to successfully implement this technology.

Genetics

The economic impact of genetics on production efficiencies provides a $3.38 per cwt. lower cost. This would include improvements in the number of pigs weaned and litter size, along with feed efficiency and weaning weights.

The economic impact of improved genetics on the revenue side of hog production, such as the value of leaner hogs, is estimated at $2.24 per cwt.  If the cost and revenue benefits of improved genetics are combined, the economic impact is $5.62 per cwt. ($3.38 + $2.24).

Throughput

The importance of throughput (movement of animals through the operation in an effective manner) is shown to have an impact of $3.09 per cwt. The cost reduction occurs because, as more animals are moved through a production system, the fixed costs of buildings and equipment per animal decline. 

In the analysis, the number of hogs produced per one thousand dollars of building and equipment investment increased from 5.5 to 10.2 pigs per year. This shows the advantage of spreading fixed cost over more animals – the cost per animal declines.  However, throughput is identified as the most difficult of the technologies to adopt.

Split sex/phase feeding & all in/all out 

Split sex/phase feeding has been projected to provide an economic impact of about $1.79 per hundredweight of pork produced.  All-in/all-out production by itself (without segregated early weaning) is projected to provide a $.75 impact per cwt.

Although the economic payoff from these technologies is not high, they are ranked first and second in ease of adoption. With both of these technologies, it may be a matter of doing some remodeling of existing facilities to allow the pigs to be sorted by sex, as well as movement of pigs in and out of a particular room or facility on a group basis.

Networking

The networking of producers, both in buying inputs and selling hogs, provides about a $.70 to $.75 impact per cwt.  Networking is identified as one of the more difficult technologies to adopt.

Implications

Most of these technologies are not necessarily specific to any certain size of operation.  Depending on the approach used and the willingness of producers to work together, these technologies can be effectively implemented in many different sizes of operations.

The efficient retrofitting of existing facilities may gain many of the efficiencies. Constructing new facilities is another alternative.  The bottom line is developing a system where the various phases of the operation fit together.

 

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