A fresh-eye look at past decisions can lead to long-term savings

Saturday, January 31, 2015

How an orientation tour with a new employee led to a review of some decisions made for short-term savings which may not be in the operation's best long-term interests

by LEE WHITTINGTON

With positive margins predicted for the next two years we need to revisit some of those short-term decisions made in haste to cut costs.

To this end, we take a walk through the barn with a new, fresh set of eyes. Our eyes and habits can become jaded and blinded to what has become a daily routine of accepting that we are in "survival mode," which translates into there being "no money to fix that."

But today is different. I am accompanied by a new employee and she is a rare find. She has no pig experience but has significant animal background, has tried a few careers and, as a mature individual, has developed an interest in reconnecting with livestock. She isn't shy and has a quick wit. "Why" is her favorite word. The following is what we "saw" through fresh eyes. Where possible, I have punctuated our tour with the facts garnered from research and experience in an attempt to address her staccato of "whys."

In less than two hours, we accumulated a list of items needing attention and I realized that what we were seeing was a culmination of five years of mostly negative margins, its effect on staffing and Band-Aid equipment repairs. By the time lunch came, I was seriously wondering if all those short-term savings were really the best way to optimize farm output profitably.

But that comes later. For now, I want to share some of the highlights of our barn tour with you in hopes that you can capitalize on our experience and avoid short-term thinking that leads to costly long-term errors.

We started in the grow-finish barn. The farrow-to-finish farm allows the new employee to see why we do what we do. Here you can talk about carcass, meat quality, how the right pig is marketed each week and why we aim for 120 kilograms at shipping. I launch into margin over feed cost and packer grids and it occurs to me that we have not revisited optimum shipping weight. In 2013, finishing diets were $288/per tonne, this year $182/ per tonne or 37 per cent less.

Although we are very pleased with our net income of more than $30 per hog, it could be better. This was the first of many examples where the work that went into identifying the right marketing weight and packer grid combination for our barn was a priority during high feed pricing period, but because of time pressures we hadn't adjusted this since feed prices fell significantly last fall.

This area of the barn provided lots of places to inject a "why," such as the two nipples that were stuck partially open and dripping. This led to a close inspection of one room where we went pen by pen and she commented that "that seems like a very awkward angle to drink." Indeed, the nipples were at a variety of heights throughout the room. Waste water from a nipple drinker could be 40 per cent of water disappearance when the drinkers are never raised (ideally adjust to 2.5 centimetres above pig shoulder). Well-managed nipple drinkers can reduce water waste to the same level as bowl drinkers – $0.31 per pig.

We talked about research that spoke directly to nipple height which did not affect feed and water intake in either growers or finishers. The flow rate of nipple drinkers did not change feed intake either, or the ratio of water to feed intake. Water wastage was increased by about seven per cent at the higher flow rate (more than 700 millilitres per minute) in both grower and finisher pigs, or $0.45 per pig.

I shared my experience that about 10 per cent of feeders are typically not working at any one time with empty bins, broken lines and simply blockages being the most common causes and all preventable. Some people had even switched back to old-style dry feeders because they thought the wet/dry feeder was plugging too often – a good example of short-term problem fixing. But, yes, we found a few feeders plugged and discussed what an extra day in the barn was costing us.

If 10 per cent of the pigs were not getting feed, that means 1,500 pigs on an annual basis or $375 per day (assuming a simple $0.25 per day charge for easy barn figuring). How many days did this occur each year? I didn't have a good answer because it should never happen, and yet typically 10 per cent of the feeders in barns I visit are not delivering feed. We did switch back to those wet/dry feeders because, in addition to optimizing feed intake, water disappearance and manure volume are also reduced, and we estimate this saving at $0.70 per pig based on manure hauling costs alone.

"It seems a little cool in here," she said. So we took a look at the quality of our barn and high health status of the herd. Based on our veterinarian observing that it is the variation in temperature and humidity that is really hardest on pigs, we decided to turn our set point temperatures down by a degree in face of anticipated natural gas prices. After observing the behaviour of the pigs, we determined they were comfortable and moved the set point another one degree C lower and we achieved the short-term impact we sought.

In fact, we have lowered annual heating costs over the past three winters. We were pretty proud of that; the pigs are comfortable, have no vices and their health is stable.

"Do you think it cost you anything in increased feed consumed to keep them warm?" she asked. A good question and one we had never tested in our short-term pursuit to drive costs down. Now that we have positive margins, we need to reassess even those short-term decisions in an effort to make sure they are providing long-term benefits.

In a few months, we will be dealing with excess heat and we have some pretty good information on how to deal with that effectively. In two trials conducted over two summers to evaluate the impact of a reduced nocturnal temperature strategy on the performance and carcass quality of growing-finishing pigs, we compared the standard room setpoint strategy with a reduced night time temperature of 6 C. The results suggest that a reduced temperature setpoint strategy would provide a net return of $1 per pig sold for pigs raised over the summer period.

We looked at the mash diet in the feeders, mostly barley and a little wheat this week. "Why don't you feed corn and wheat and make the pigs grow faster?" she asked. Under typical market conditions, high energy diets do not necessarily result in the highest return over feed cost. We must frequently evaluate the dietary energy concentrations which maximize net income and not just consider growth rate.

Reducing the energy levels of diets will slightly reduce performance of finishing pigs, but the lower feed costs result in a greater return to the producer. At current prices, we could save up to $3.40 per pig with this lower energy diet strategy. We felt confident that our short-term decision to engage a nutritionist to stay on top of these diets was also a good long-term decision since 65-70 per cent of the cost of production is feed. When resources were tight, we focused where they would do the most good.

As time was quickly slipping away, we took a brisk walk to the gestation barn, the heart of our farm, to look at optimizing the reproduction efficiency of sows and gilts. It starts with giving the gilts a special diet and a little more room, as well as more solid flooring to develop feet and legs that will serve the sow well for years to come. Extra space also allowed us to increase selection pressure on these important traits, so that we take only the best gilts into our breeding herd.

We discussed research just published on the subject of lameness, which included a 3,000-sow barn where 41 per cent were not lame, 53 per cent were mildly lame, and six per cent showed moderate to severe lameness. Examining parity differences, between 42 and 59 per cent of sows in parities 0-3 were found to be lame. The number of sows with mild lameness was very high. The majority of these cases may go unnoticed by stock persons and contributes to the general under reporting of the problem. This illustrates a significant problem we wanted to avoid, which is that early parity sows are showing lameness and, as a result, may be prematurely lost from the herd. The research showed that production of non-lame sows is six per cent higher compared to lame sows, representing a value of $5 per hog.

Our orientation tour had been very beneficial for me and I hope the discussion engaged the new employee in the "continuous improvement" mindset that will benefit the farm. It pointed out that decisions made for short-term savings may not be in our best long-term interests and need to be reviewed. We were getting a number of things right, but it was obvious not every part of the operation was optimized. With current feed cost and market outlook, we made the commitment to refill a couple positions to allow our manager time to work on taking the production system to the next profitability level. BP

Lee Whittington is President and Chief Executive Officer, Prairie Swine Centre Inc., Saskatoon, Saskatchewan.