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Prairie Swine Centre is an affiliate of the University of Saskatchewan
Prairie Swine Centre is grateful for the assistance of the George Morris Centre in developing the economics portion of Pork Insight.
Financial support for the Enterprise Model Project and Pork Insight has been provided by:
Positioned for Success
Posted in: Economics, Pork Insight Articles by admin on March 27, 2014 | No Comments
2006-2013 supplied many financial challenges to producers, but cautious optimism is beginning to show for 2014. The past problems included a high Canadian dollar, high grain prices due to biofuel and ethanol, COOL laws, health challenges, Canadian pork packer problems, and reduced global demands from recessions. Short-term optimism is due to lower feed costs, higher hog prices, and a weaker Canadian dollar. Long-term optimism is due to the fact that Canada is a well-established exporter of pork, and can take advantage of the expected increased global demand. Canada also has the land, resources, herd health status, and technology availability to continue to be competitive in the global market.
The Economic Impact of Porcine Reproductive and Respiratory Syndrome (PRRS) on Nursery and Grower-Finisher Production in Ontario
Posted in: Economics, Pork Insight Articles by admin on January 29, 2014 | No Comments
PRRS is often referred to as the endemic swine disease with the largest economic impact, but few studies have determined the cost in nursery and grow-finish facilities. Cost was determined using records for 6 Ontario facilities, and taking into accout the cost of mortalities and reduced performance. Analysis was done on 0-6 months and 6-12 months post-outbreak, and in all-in all-out and continuous flow facilities. Nursery costs were calculated to be $2,485,831 per year, or $4.50 per pig per year, and grow-finish costs were $1,464,012, or $1.87 per pig. This is much lower than calcualted costs in another study because mortality rates and growth performance were less affected in this study/
Minimizing and Managing Ingredients Variablity
Posted in: Economics, Nutrition, Pork Insight Articles by admin on October 28, 2013 | No Comments
Profit loss can occur if nutrients that are paid for are not present, the full value of nutrients is not received, if nutrients are improperly utilized, or from increased health costs from under-formulation. 50% of the corn and wheat purchased is below the average nutrient content. If variability in feed nutrient content can be economically considered by assigning dollars per Mcal and the feed is assumed to be purchased at a constant price, then with greater variation in nutrients there could be a higher cost. Improved sampling techniques could help to stabilize the nutrient variation; however, this can increase the costs to the buyer or the seller. A quality insurance program could be useful for identifying problems with the supplier, lab, or livestock producer’s stores, but may be too expensive or impractical. Furthermore, the nutrient quantity in the ingredients does not guarantee that it will be utilized by the livestock, and the effect of local conditions on nutrient values is often overlook in broad recorded values for an ingredient.
Productivity and Optimal Returns
Posted in: Economics, Pork Insight Articles, Production by admin on June 10, 2013 | No Comments
Often the pork industry views maximum production as maximizing profit, but this only occurs with no costs associated (free input). When there are costs, the maximum level of production will be less than the maximum total production. In the 1980s to 2000s the focus shifted from the individual pig to herds and meat, and averages became the standard for evaluation. The goal became to spread fixed costs over more units, but did not account for the rise of variable costs after a certain output level. As well, it was about weight of meat produced, but failed to look at quality. Soon producing more specialized products did occur, and the global market opened. Then in the 2000s the volatile prices of feed and hogs changed the industry, and a high price for a hog no longer necessarily meant profit. Individual animal data is now rarely collected, and average group metrics are now used to determine future profitability. The future of production likely will continue to have volatile crop prices, and the need to keep records of crops will be important. The development of technology will continue, with more implementation. Metrics are currently looked at too individually, and correlations need to be assessed. In order to determine profit optimal production producers need to record more than averages because the distribution in a population is currently being overlooked.
Financial Considerations in Evaluating the Competitiveness of the Canadian Swine- Pork Segment
Posted in: Economics, Pork Insight Articles by admin on June 9, 2013 | No Comments
Past economic analysis of the market predicted that the Canadian pork industry was in a uniquely positive position for expansion and profit, yet the market fell and many producers were not able to make any profit. Examining past analysis from a financial point will hopefully provide some insight for why the market behaved as it did. The Canadian industry usually goes through a four year cycle, but after the low point in 2006 profits failed to rise again. Equity had been increasing 2001-2006, and then after 2006 declined back to around 2001 values. Because of this, producers’ borrowing capacity was vulnerable in 2012. As well, after 2006 both working capital, and earnings before interest taxes, depreciation, and amortization (EBITDA) declined. General economic analysis does not look at differences between farms, but those with an integrated crop enterprise would have had an advantage. They would be able to transfer input at cost, keep feed prices lower, and contribute to hog returns. However, these operations tend to be smaller, and there are economies of scale within the pork industry. Larger facilities tend to be more specialized, and are more exposed to risk when feed and hog prices are volatile. Overall, these contributions to the profit loss in 2012 should be considered mainly financial ones, and not economic.
Performance Metrics in a High Growth Environment
Posted in: Economics, Pork Insight Articles by admin on | No Comments
Metrics help business strategies become a reality, and allow stakeholder performance to be evaluated. Characteristics of successful metrics include cascading the effects, balancing the use of leading and lagging metrics, and streamline the number of metrics used. Shareholder value creation can be measured in multiple ways: return of assets and return on equity are commonly used, but are not great at predicting short-term results, are based on historical measures, and do not evaluate risk. Value per share addresses the flaws of ROE and ROA, and getting an independent valuation performed is a good idea to avoid bias. Shareholder value creation depends on current cash-flow, long-term growth rate, and risk-adjusted discount rate, with the latter two being the most important for business growth. The risk-adjusted discount rate is the cost of capital, and is composed of financial and business risks. As part of a business plan, management should identify metrics with target outcomes, and base the targets off of what will increase shareholder value creation. Metrics are a useful tool for management, and used correctly can help produce results from a proposed business strategy.
Hog Crush Margins
Posted in: Economics, Pork Insight Articles by admin on March 28, 2013 | No Comments
Crush margins in the hog industry are useful for monitoring the volatile feed (corn and soybean meal), weaner pig, and market pig prices. One model is the Gross Feed Margin Model (GFM), which uses corn, soybean, and wheat margins to determine return on feed purchases. The Hog Margin Tracker is a risk management tool and monitors both current and future markets. Either model can be useful on farm for assessing risks associated with feed and hog prices.
Top Profit Robbers Wean To Finish
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Paragon Farms lists their suggestions for minimizing profit loss in their wean to finish facility. Feeding correct amounts, adjusting feeders, and feed quality are important aspects to monitor in nutrition. The barn environment should be the proper temperature, and herd health should be constantly monitored.
Top Profit Robbers Wean to Finish
Posted in: Economics, Pork Insight Articles by admin on | No Comments
Schlegelhome farms Ltd. gives their points on areas that can be improved to minimize cost/maximize profit. They stress paying attention to details including barn environment, proper feed, setting targets and keeping records. Keeping animals healthy, having similar health status pigs mixed, and euthanizing when necessary are also important. Final recommendations are monitoring the market, and minimizing the days pigs spend in the barn.
Top Profit Robbers, Nursery-Finish
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RFW Farms Ltd gives their strategy to achieve maximum profit in nursery-finish. Among their strategy are points like having employees fully mentally engaged on the job, avoiding having allotted time slots for animal care, and reducing negative stressors to workers. As well, vaccines and treatments are provided when needed to pigs, which reduces mortality and morbidity. Finally, fixing things before they’re broken, upkeep on the pig environment as well as individual pig care, and fixing animal vices are listed.