Focus on Feed Conversion

By R. Dean Boyd PhD., The Hanor Family of Companies

(From presentation to PPPE 2008 meeting)

Our world has fundamentally changed. The cheap feed era is over for the foreseeable future and we must deal with the fact that ingredient prices are increasingly subject to global markets and global politics.

In our company, key decisions have been made to improve our financial resilience over the next 10 years because what we are presently doing is not sufficient going forward.

The doubling of feed costs – to over $120/pig has led to expected average losses in 2008 of at least $34/pig. We expect the red ink will continue to flow into next year due to the high feed cost and the oversupply of pigs. We also expect a loss of 250,000 sows from North American production, 90% from Canada. And we predict a new price record for pigs – over 90 cents/lb for carcass.

Virtually every feed ingredient has increased in price, but corn and soybean meal increases account for 85% of it. The aggressive ethanol mandates are to blame for the corn increase. Within our company, bid prices for corn went from an average of $82/ton between 1999 and 2006 to $138/ton in 2007 and an estimated $227/ton in 2008. Our finisher diet for 2008 will be around $317/ton, pushing our cost of live gain to $0.43/lb.

The growing export market has certainly helped us. This year, one in five pigs produced in North America will be exported. But we can’t export our way out of the feed cost predicament. The U.S. food-for-fuel energy policy is producing a demand shock in world agriculture and by the time policy makers recognize that the bio-fuels policy makes no sense, the entire world will have paid a significant price.

To survive, pig producers must maximize their equity in land and facilities, lower debt, increase emergency funds in the bank, lower fixed costs, and establish a strategic grain reserve to ensure supply of grain.

On the production side, a key area to be addressed is feed conversion. Every 0.01 improvement in FCR will reduce feed cost by $0.28 to $0.30 per pig. Conversion ratios must be improved by every possible means. Collective disciplines must both increase the rate of FCR change and maintain FCR despite elimination of protein or energy components in the diet.

When addressing FCR, remember the goal is to achieve the best feed cost per pound of gain. The best FCR will not always be the best cost of gain. Key areas which can impact FCR include:

• Matching net energy levels to growth times
• Amino acid curves matched to input costs
• Grinding feed to the lowest particle size practical
• Earlier and longer metabolism modification (eg Paylean use through step-up programs)
• Maximizing phytase enzyme use
• Adding finishing feed phases
• Timing first marketing cut to prevent FCR deterioration
• Re-ranking AI sires to FCR alone for foreseeable future
• Feeding pelleted diets to deliver fine particle size grain, where health can be adequately controlled

The table below with data from our system illustrates the affect that pen unloading can have on FCR and on cost of gain.

Impact of Pen Unloading on FCR and ADG

Giving pigs more room for the last 30 lbs of growth clearly improves FCR, lowers cost per pound gained, and nets more marginal dollars per pen. Note that the biggest impact comes from removing the first six pigs. Taking out double that does not double the benefits.

In summary, the feed crisis has forced Hanor to take some actions that it would not have taken otherwise. There is some attention to detail that may not have been quite as important under less extreme circumstances. To survive, we have to fast track chronic feed cost reduction steps.

R. Dean Boyd is Technical Director and Nutrition Leader for The Hanor Company, one of the top 20 pork producers in the U.S. with a multi-state production system.

Presented at the Australian Pan Pacific Pork Expo. June 2008

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