The balance between performance indicators and profitability is crucial for the success of the pig industry. The demand to enhance performance has driven advancements in genetics, nutrition, management practices, and herd health. Nonetheless, improved performance does not guarantee increased profitability. In today’s changing economy, where costs fluctuate, markets shift, and consumer preferences change, we need to look closely at how performance and making money are connected. Dr Alex Sly, nutritional adviser at Elanco Animal Health, shared her thoughts on this topic.
“When asked, ‘What is the relationship between productivity and profitability?’, new entrants to pig farming often assume a direct, linear relationship between the two. The presumption is that more sows result in more piglets and, therefore, increased profitability. However, other factors must also be taken into consideration, including market demand and price, the cost of raw materials, the effects of disease and health interventions, environmental constraints, load-shedding, water shortages, and overall farm costs,” said Dr Sly. ”When looking at farm performance, there comes a point of diminishing marginal returns where the initial increases in production resulting from adding more of a specific input will gradually decrease until it levels off. And that is why, in very efficient systems every unit of extra performance becomes increasingly more difficult and more expensive to achieve. The smart move is to stop before things go wrong.”
She outlined three possible strategies to drive profitability. The first strategy is focused on optimising animal performance, which could be costly. The second one minimises farm costs, particularly those expenses that result in lower returns. The final strategy maximises profitability by considering financial implications under different scenarios, balancing inputs needed for the desired level of performance with costs. In all cases industry support is needed to achieve good results Industry support includes a reliable team of veterinarians, consultants, nutritionists, geneticists, and biosecurity consultants. “If a farm continues to be unprofitable, consider whether it’s due to a challenging environment or are we not accurately assessing the true capabilities and areas for potential improvement.”
Dr Sly shared a model developed in the United States during the COVID-19 pandemic to help farmers remain profitable (Table 1). In the case study, the control farm consisted of 4 000 sows, even though it was designed for 3 600. It was compared to farm A with a 10% reduction in sows, and farm B with a targeted reduction of 18% by removing less profitable sows. A comprehensive analysis evaluated changes in piglet production, variable costs, weaning age, and post-weaning practices to uncover the most profitable strategy.
In terms of pigs per sow per year (PSY), the control farm and farm A produced 27,3 piglets. Farm B produced 30,1 PSY due to older, less efficient animals of all parities being removed. The control farm produced 109 337 pigs per year, while farm A produced 98 404 pigs, as did farm B. Using $10 (R187,76) as the annualised value profitability per pig, the differential between the control farm and farm A or B was $109 330 (R2,053 million). This is called the lost opportunity of having fewer animals on farm, according to Dr Sly.
Table 1 Pigs per sow per year
| Control | Farm A | Farm B | |
| Sow herd | 4 000 | 3 600 | 3 266 |
| % of original sow herd | 100% | 90% | 82% |
| PSY | 27,3 | 27,33 | 30,13 |
| Pigs/year | 109 337 | 98 404 | 98 404 |
| Annualised value: Profitability per pig ($10) | $1 093 370,00 | $984 040,00 | $984 040,00 |
| Lost opportunity : Sows | $1 093 370,00 | $1 093 370,00 |
The variable costs of production (the amount of feed, medication, labour costs, transport costs) changed in direct proportion to the scale of the farm, while the fixed costs remained the same regardless of the number of sows. The variable cost per sow on the control farm and farm A remained the same ($27,90 or R523,85). However, the variable cost per sow on farm B decreased ($24,50 or R460,02) as the younger, healthier herd did not include inefficient sows that ate the feed but produced fewer piglets.
By reducing the number of sows on farm the overall farm saving on farm A was $304 505 (R5,72 million) and $638 319 (R11,99 million) on farm B. This is coupled with the salvage value of the sows in the first year, namely $34 000 (R638 389) on farm A, and $62 410 (R1,17 million) on farm B. Consider this in view of the lost opportunity ($109 330 or R2,053 million) on farm A and B, discussed earlier.
Table 2 Variable costs and savings on farm
| Control | Farm A | Farm B | |
| Variable cost per pig | $27,90 | $ 27,90 | $24,50 |
| Variable cost per sow | $761,00 | $ 761,00 | $737,00 |
| Total var. cost/farm | $3 045 047,00 | $2 740 542,00 | $2 406 728,00 |
| Total fixed cost/farm | $1 652 088,00 | $1 652 088,00 | $1 652 088,00 |
| Total cost/farm | $4 697 135,00 | $4 392 630,00 | $638 319,00 |
| Total cost/farm saving | $304 505,00 | $638 319,00 | |
| Salvage value of sows | $34 000,00 | $62 410,00 |
With fewer sows on farms A and B, space was less of an issue. This increased the weaning age of piglets, making them healthier and heavier. The cost of the additional feed that the nursing sows would eat would be subtracted from the equation. However, there would be a cost saving during the nursery phase, as the piglets would remain with their nursing sow for longer and would, hence, eat less feed. The piglets would also go to market sooner; six days sooner on farm A and 12 days sooner on farm B. This would account for additional feed and housing capacity savings.
This contributed to a post-weaning advantage of $71 (R1 333,11) per sow and a total of $257 000 (R4,82 million) for farm A, and $159 (R2 985,41) per sow and a total of $520 000 (R9,76 million) for farm B. The total impact of these strategies was as follows: on farm A around $600 000 (R11,3 million), and around $1,2 million (R22,5 million) on farm B.
Table 3 Variable costs and savings on farm
| Control | Farm A | Farm B | |
| Wean age (days) | 21 | 23,3 | 25,7 |
| Wean weight (kg) | 5,44 | 6,29 | 7,16 |
| Sow feed cost for gain/year | 0 | $17,86 | $39,83 |
| Days sooner to market | 0 | 6,22 | 12,59 |
| Less feed for main-tenance/pig ($) | 0 | $1,74 | $3,53 |
| Less barn cost, rent ($/pig) | 0 | $0,87 | $1,76 |
| Less N1 feed (1:1 at 35 cents) | $0,65 | $1,32 | |
| Post-weaning advantage per sow | 0 | $71,43 | $159,34 |
| Post-weaning impact | $257 162,00 | $520 352,00 |
“By thinking differently, it is possible to improve profitability while decreasing the scale of farming when the sow inventory on-farm is greater than the capacity that the farm was originally designed for. While these strategies may not work in each instance, non-profitable farms that have industry support may consider adopting this, somewhat controversial, approach.”
This article will be published in the summer 2023 issue of PORCUS PrimeCuts.
The South African Pork Producers’ Organisation (SAPPO) coordinates industry interventions and collaboratively manages risks in the value chain to enable the sustainability and profitability of pork producers in South Africa.
