Levels of production in a farrow to finish operation have significant impact on
the bottom line under two of the four scenarios we have analyzed. From our
observations, we have demonstrated that when the revenue per hog is below that of a variable cost structure, the advantages of chasing reduced fixed cost
are eliminated. When revenue does not cover variable costs, the advantages
of gained in fixed cost savings through high output are quickly eroded, and
this situation promotes financial losses. This would suggest that maintaining
high pig production levels during any combination of feed cost level or any
type of pig price level is not always the best option for the bottom line. Our
model has shown that there are significant disadvantages to maintaining
constant high production during periods of low pig prices/high feed costs and
low pig prices/low feed costs in a farrow to finish operation. It is impossible to show all scenarios and the reality is that each farm has its
own. We have tried to keep a simple approach by showing the relationships
among fixed and variable costs, and productivity and income, in a few
scenarios.