Russia needs to become cost competitive

This means looking at ‘whole business decisions’, being able to do good calculations that take into account all production factors. Taking decisions on single traits, like born alive, have no place in a modern effective pig industry.

Tuesday 1 August 2017 (17 days ago)
chtrosserorpujol

The pig Price in Russia continues to remain high at 116 Roubles ($1.93) per live kg. High profits of up to $100 per pig for effective producers continue!

In pig production, there are only 3 drivers of profit. They are:

  1. Total kg sold from the farm, kg / m2 / year or pigs weaned per farrowing crate per year for a sow farm!
  2. How much those kg are sold for!
  3. The cost of production of those kg!

There are many many many other factors that are talked about, these include total born alive, pigs per sow per year, litters per sow per year, mortality, growth rate, feed conversion ratio, killing out % and backfat. None of these factors tell you how the business is doing only what the pigs are doing! Using these figures, especially on their own is very dangerous. Despite this many producers still chose their genetics based upon number born alive or the ‘leanest pig’.

When you get to these numbers it gets even more confusing. To calculate pigs sold per sow per year you first need to understand what a sow is. There are many different definitions as to what a sow is between countries and even within countries.

Let’s look at how this affects pigs per sow per year. If we take the standard definition of a sow as a sow and gilt as soon as it is inseminated. If we take a farm with 1,000 sows and bred gilts selling 30,000 pigs per year.

Number of sows Pigs weaned/Sow/Year
Sows and bred gilts (standard) 1000 30.00
Sows, bred sows and maiden gilts (sows in USA) 1058 28.36
Sows and farrowed gilts (traditional Danish measurement) 838 35.78
Sows and gilts confirmed pregnant (traditional Russian measurement) 947 31.68

Using different definitions of a sow from around, on the same farm, the difference in Pigs Sold per Sow per year is 28.63 to 35.78. Quite a difference for the same farm or even the same sow!

Another factor considered to be a critical one is FCR (Feed Conversion Ratio). On its own as a number it tells us only how much feed a pig has consumed per 1kg of gain. Assuming all pigs in the world were fed on the same food (obviously impossible) then on its own as a number it would have some use. The number that is important is cost of food per 1kg of gain. For this number, you have to know both FCR and feed cost per kg of feed!

Secondly FCR is affected by the weight pigs are sold. We know that as pigs get heavier their FCR gets worse.

The following table shows this effect:

FCR Finisher - Start Weight 30 kg FCR
110 kg 2.65
120 kg 2.71
130 kg 2.78

For the same pig, a 2.65 FCR if it was killed at 110kg is exactly the same as a 2.78 FCR if killed at 130kg!

In Russia, many farms use another calculation. The weight of dead pigs is used as part of the gain (FCR = Feed used / total gain). The purpose of doing calculations on a pig farm is to understand the cost of what we sell. We do not sell dead pigs! Using the gain from dead pigs reduces the real FCR and gives a false picture. FCR is actually very quick and easy to measure. Total gain = end weight – start weight for a group of pigs. Total food used is total feed used. Divide one by the other and you have FCR. Daily feed used and calculating feed days and then weighing dead pigs takes longer (lots of administration) and gives you a less accurate calculation at the end of it!

A figure rarely talked about is kg of sow food used per weaned piglet. I visit many farms where this figure is over 50kg per piglet, even as high as 56kg. Visiting farms in Canada I see figures of 40kg or below!

16kg of sow food at 14 Roubles per kg is 224 Roubles ($3.77) per pig extra cost of food per weaned piglet. Assuming you are paying $30 royalty for an F1 gilt that then produces 56 weaned pigs then genetic cost is $0.53 per weaned piglet!

The last figure seen as critical by many is mortality. The standard (correct) way to calculate mortality is as a % of pigs moved into a system. For example, a Nursery that has 1000 pigs moved in per week with 22 pigs dying per week has a mortality of 2.2%. Some companies use the number died Vs inventory to measure mortality. An 8-week nursery with 1000 pigs per week has an inventory of 8000 pigs. 22 dead pigs vs inventory is a mortality of 0.275% (same farm very different figures based upon how it is calculated).

Even the way mortality is costed can confuse. A piglet that dies in farrowing has actually cost nothing. There are no direct costs, other than maybe a direct cost of disposal. Yes of course if it had lived it could have been sold. This is an opportunity, but not a cost!

If pigs born alive or weaned per sow per year was the most economic factor in pig production, then the Danes would have the lowest cost of production by far. The reality.It is not. There are multiple factors which affect profitability, sow productivity being only one of them.

Figure 1 - Cost of production compared (€/kg hot carcass weight), split into cost categories in selected EU and non-EU countries.
Figure 1 - Cost of production compared (€/kg hot carcass weight), split into cost categories in selected EU and non-EU countries.

I visit farm after farm in Russia where the decision on which genetics to buy is based upon a single factor. The 2 most common are born alive per sow per litter or lack of backfat in the slaughter pig. The other common one is price of gilt or boar. Selecting genetics on single performance traits does not give best decision. It’s the most profitable pig that counts.

I understand ‘farmer mentality’ and of more pigs should mean more profit. But, Russian companies have teams of economists and accountants. The purpose of these people is to enable better decisions to be made, to make the business more profitable. These trained and qualified people should be able to do the relatively simple calculations required to allow for good decisions. If they can’t then they to also are only a cost to the business!!!!

Russia wants to export!

Pigmeat is a globally traded commodity. The producer with the lowest cost of production (for a product people want to buy) always has the advantage.

Cost of production (all cost including financial) for major exporting countries.

Cost per kg dead weight Rouble / kg liveweight
Brazil (MT) €0.94 50.2
USA €1.08 57.6
Brazil (SC) €1.17 62.4
Canada €1.25 66.7
Spain €1.44 76.8

This is cost of producing a live kg. It excludes the cost of slaughter, processing and then transporting to market. Central Brazil (Brazil (MT) has a disadvantage here!

To become a net exporter Russia needs to become cost competitive as well as focusing on producing a product that export markets want (how much you can sell your export kg for)!

The export market is Asia. This means darker meat with more intramuscular fat (Duroc sired).

Being cost competitive the focus is:

  1. Maximising output as it minimises fixed costs. Total kg sold from the farm, kg / m2 / year or pigs weaned per farrowing crate per year for a sow farm!
  2. The cost of production of those kg!

This means looking at ‘whole business decisions’, being able to do good calculations that take into account all production factors. Taking decisions on single traits, like born alive, have no place in a modern effective pig industry.

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