Guidelines for Estimating. Weaner Pig (Nursery) Costs 2012 in Manitoba

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Randolph Blankenship
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1 Guidelines for Estimating Weaner Pig (Nursery) Costs 2012 in Manitoba

2 Guidelines For Estimating Weaner Pig (Nursery) Costs 6-23 kg Based on marketing 35,381 pigs Date: October, 2012 This publication is intended to provide a format and a set of guidelines for determining the cost of production for a weaner pig 6-23 kg enterprise. This type of operation is intended to represent the second stage, or nursery, of a three stage pork system. The three production stages are as follows: first stage - farrow to 6 kg, second stage - weaner pig (nursery) 6 to 23 kg, third stage - grower/finisher 23 kg to market weight. Adjustments will be necessary when applying these figures to your enterprise. The assumptions on which the costs are based are outlined in the supporting pages. These assumptions were arrived at using the breeding stock, management practices, and facilities seen in modern, well managed swine operations of comparable size in Manitoba. Productivity and performance assumptions are based on information collected by department specialists, feed companies and other organizations. Where individual herd productivity and performance levels differ from those listed adjustments will be required. Accurate, up to date, production and financial records are essential for the effective application of these guidelines to an individual operation. Without such information accurate cost of production projections cannot be determined. Disclaimer: This budget is only a guide and is not intended as an in depth study of the cost of production of this industry. Interpretation and utilization of this information is the responsibility of the user. If you require assistance with developing your individual budget, please contact your local MAFRI office.

3 Guidelines: Weaner Pig (Nursery) Costs 6-23 kg 2 Weaner Pig (Nursery) Costs 6-23 kg Cost of Production The following farrow wean cost of production budget is based on the assumption that all feed is purchased. The budget also includes a land investment cost based on the assumption that 160 acres would be required for this size of operation, with 140 acres being rented out at $50 per acre. This landbase is in accordance with environmental regulations and permits a 2x P2O5 crop removal rate on suitable land. If developing a cost of production budget to include home mixed rations the following items should be added to the budget: - additional equipment costs associated with a mix mill; - additional bins for different ingredients; - additional labour for feed preparation. The rations illustrated in this budget are examples only. Individual farm conditions should be taken into account when formulating the diets. Producers need to know what the feed intakes of their animals are. Please consult with a nutritionist for diet formulations suggestions. The Manitoba pork production industry profile is changing and this budget was specifically designed to address the need of producers who may want to analyze the cost of starting up or switching to a swine nursery 6-23 kg operation. Several companies are offering contracts with varying levels of guarantees. Producers need to accurately calculate their costs before they can properly make a decision.

4 Guidelines: Weaner Pig (Nursery) Costs 6-23 kg 3 Weaner Pig (Nursery) 6-23 kg Summary October, 2012 $/Pig Total A. Operating Costs Sold Cost Your Cost 1. Feed Costs: 1.01 Pre Starter 1 $0.67 $23, Pre Starter 2 $1.84 $65, Starter 1 $3.88 $137, Starter 2 $8.99 $318,075 Total Feed Cost $15.38 $544, Other Operating Costs: 2.01 Weanling cost $24.20 $856, Veterinary Medicine & Supplies $2.83 $100, Maintenance & Repairs $0.20 $7, Hydro & Propane $0.94 $33, Insurance $0.32 $11, Manure Costs $0.36 $12, Office Supplies $0.04 $1, Levy, Marketing & Transportation $3.24 $114, Property Taxes $0.20 $6,945 Subtotal Operating Costs $47.71 $1,687, Interest on Operating Cost $0.28 $9,907 Total Operating Costs $47.99 $1,697,830 B. Fixed Costs 3. Depreciation: 3.01 Buildings and Manure Storage $1.15 $40, Equipment $1.08 $38,211 Total Depreciation Cost $2.23 $78, Investment: 4.01 Land Cost $0.04 $1, Buildings and Manure Storage $0.35 $12, Equipment $0.17 $6,015 Total Investment Cost $0.56 $19,648 Total Fixed Costs $2.79 $98,548 C. Labour Wages, benefits and hired manager $1.50 $53,072 Total Cost of Production $52.27 $1,849,450 Break-Even Price $/Pig Operating Cost $47.99 Operating & Labour Cost $49.49 Operating Labour & Fixed Cost $52.27 Disclaimer: This budget is only a guide and is not intended as an in depth study of the cost of production of this industry. Interpretation and utilization of this information is the responsibility of the user.

5 Guidelines: Weaner Pig (Nursery) Costs 6-23 kg This input table outlines the cost of production for the weaner barn only. 2. Buildings and equipment are valued at new cost. 3. Manure haulage is contracted out. Herd Profile Weaner Pig (Nursery) Production Costs 6-23 kg Weaner Pig Places 5,200 Number of turns 7 Weaner Pigs Purchased 36,400 Percent Post-Weaning Mortality 2.8 Pigs Died, Post-Weaning 1,019 Weaner Pigs Sold 35,381 Average Market Price $44.00 /cwt $97.00 /ckg Weanling Formula Factor (% of Mkt Price) % Calculated Weanling Puchase Price $24.20 /pig Feed Requirements Ration Cost Purchased Home-Mixed Pre Starter 1(sew) 0.5 kg/pig $1, $0.00 /tonne Pre Starter kg/pig $1, $0.00 /tonne Starter kg/pig $ $0.00 /tonne Starter kg/pig $ $0.00 /tonne Total Feed 26.8 kg/pig Weaner Pig Efficiency Ration 1 Ration 2 Ration 3 Ration 4 Days Post-Weaning (nursery) Target Starting Weight (kg) Target Ending Weight (kg) Feed Conversion Ratio Average Daily Gain (kg) Days Weaner on feed (nursery) Total Cycle Days (per turn) Target Starting Weight Target Ending Weight Feed Conversion Ratio (feed:gain) Average Daily Gain Labour Total Hours per 7-day week Wage (includes benefits & hired manager) 41 days 52 days 6.0 kg 23.0 kg 1.58 kg 0.45 kg 60.0 hours/week $17.00 /hour

6 Guidelines: Weaner Pig (Nursery) Costs 6-23 kg 14 Capital Investment $/Sq. Ft. $/Pig Place Total Your Cost Buildings Barn 15,600 sq ft $52.92 $ $825,552 Office & loading $5,000 Feed Mill (building only) $0 Total Building Cost $830,552 Equipment Nursery barn $310,000 Generator $13,000 Electrical & other $90,000 Fire Alarm System $1,000 Feed Bins $11,000 Ingredient Bins $0 Total Equipment Cost $425,000 Total Buildings and Equipment Cost $ $1,255,552 Land Value Land Investment 20 $1,000 $20,000 Other Costs Site preparation $30,000 Manure Storage $35,000 Total Other Costs $65,000 Total Capital Investment $ $1,340,552 Fixed Costs Depreciation (straight line): Useful Life: Buildings 20 years Equipment 10 years Salvage Value (% of original cost): Buildings % Equipment % Investment Interest Rate 2.5 % Other Operating Costs, Taxes and Land Veterinary Costs: Professional Services $2,000 total Medication $98,000 total Maintenance & Repair 0.55 % of Total Capital Investment

7 Guidelines: Weaner Pig (Nursery) Costs 6-23 kg 15 Hydro & Propane Insurance Manure Costs: Storage volume Buildings and Equipment Market Pigs Business Interruption Business Interruption Value Market Hog Value $10,600 hydro $22,500 propane $0.65 /$100 Capital Invested $0.65 /$100 Capital Invested $0.65 /$100 Capital Invested $45.00 per market pig $55.00 market value 2.4 litres/pig/day $0.002 /litre $0.010 /gallon Odour control (barley straw) Manure Management Fee Office supplies $0 total cost $3,000 total cost $0.30 /pig place Marketing & Transportation Trucking in Trucking out Council Levy Grading Charge Truck Washing Insurance Special Levy Tax on Weanling Barn & Land $3.00 /pig $0.00 /pig $0.19 /pig $0.00 /pig $0.00 /pig $0.05 /pig $0.00 /pig $6,945 /year Land Value Number of acres 160 Number of acres rented out 140 Rental rate $50 Land value per acre $1,000 Operating Loan Interest Rate 5.50 % ** FOOTNOTE: 1 cubic metre = 1000 litres 1 cubic metre = cubic feet 1 cubic metre = imperial gallons

8 Guidelines: Weaner Pig (Nursery) Costs 6-23 kg 16 Feed Ingredient Costs Ingredients Price/tonne Your Cost Wheat $ Barley $ Corn $ Soybean Meal - 47 % $ Canola Meal - 34% $ Peas $ Grower Micro Premix $3, Canola Oil $1, Whey Powder $ Fish Meal $1, Plasma $5, Limestone $85.00 Dical (16% Ca-21% P) $ Salt - 96% $ Phytase $7, L-Lysine HCL $2, L-Threonine $2, D,L-Methionine $4, Oats - Steam rolled $ Processing Cost (Hydro & Repairs/Maintenance & Insurance) $5.00 Percent Weight loss due to processing 1.25 % Labour $7.00 Suggested Home Mixed Rations Pre starter 1 Pre starter 2 Starter 1 Starter 2 (kg) (kg) (kg) (kg) Wheat Barley Corn Soybean Meal - 47 % Canola Meal - 34% Peas Grower Micro Premix Canola Oil Whey Powder Fish Meal Plasma Limestone Dical (16% Ca-21% P) Salt - 96% Phytase L-Lysine HCL L-Threonine D,L-Methionine Oats - Steam rolled Total must equal 1000 kg 1, , , ,000.00

9 Guidelines: Weaner Pig (Nursery) Costs 6-23 kg 4 Feed Requirement and Cost Summary Amount Price Ration Cost Your Pre starter 1 (kg) $ /tonne $ /tonne Cost Wheat $ $30.48 Soybean Meal - 47 % $ $69.72 Grower Micro Premix 5.0 $3, $15.00 Canola Oil 27.0 $1, $36.45 Whey Powder $ $ Fish Meal 61.0 $1, $ Plasma 59.0 $5, $ Limestone 12.5 $85.00 $1.06 Dical (16% Ca-21% P) 10.0 $ $7.51 Salt - 96% 3.5 $ $0.88 L-Lysine HCL 0.5 $2, $1.26 Oats - Steam rolled $ $ Total Pre Starter 1 1,000.0 kg $ Adjusted for weight loss (percentage) 1.25 % $ Plus processing cost per tonne $5.00 $ Plus Labour Cost $7.00 $ Pre starter 2 Wheat $ $38.67 Soybean Meal - 47 % $ $75.53 Grower Micro Premix 5.0 $3, $15.00 Canola Oil 19.0 $1, $25.65 Whey Powder $ $ Fish Meal 75.0 $1, $ Limestone 12.5 $85.00 $1.06 Dical (16% Ca-21% P) 10.0 $ $7.51 Salt - 96% 3.5 $ $0.88 L-Lysine HCL 0.5 $2, $1.26 Oats - Steam rolled $ $ Total Pre Starter 2 1,000.0 kg $ Adjusted for weight loss (percentage) 1.25 % $ Plus processing cost per tonne $5.00 $ Plus Labour Cost $7.00 $536.67

10 Guidelines: Weaner Pig (Nursery) Costs 6-23 kg 5 Starter 1 Wheat $ $ Soybean Meal - 47 % $ $ Corn $ $77.07 Grower Micro Premix 5.0 $3, $15.00 Canola Oil 11.0 $1, $14.85 Whey Powder 70.0 $ $69.65 Fish Meal 40.0 $1, $65.60 Limestone 7.0 $85.00 $0.60 Dical (16% Ca-21% P) 8.0 $ $6.01 Salt - 96% 3.5 $ $0.88 Phytase 0.5 $7, $3.59 L-Lysine HCL 1.0 $2, $2.52 Total Starter 1 1,000.0 kg $ Adjusted for weight loss (percentage) 1.25 % $ Plus processing cost per tonne $5.00 $ Plus Labour Cost $7.00 $ Starter 2 Wheat $ $ Barley 65.0 $ $17.62 Corn $ $77.38 Soybean Meal - 47 % $ $ Grower Micro Premix 5.0 $3, $15.00 Fish Meal 25.0 $1, $41.00 Limestone 11.0 $85.00 $0.94 Dical (16% Ca-21% P) 8.0 $ $6.01 Salt - 96% 3.5 $ $0.88 Phytase 0.5 $7, $3.59 L-Lysine HCL 1.0 $2, $2.52 Total Starter 2 1,000.0 kg $ Adjusted for weight loss (percentage) 1.25 % $ Plus processing cost per tonne $5.00 $ Plus Labour Cost $7.00 $430.14

11 Guidelines: Weaner Pig (Nursery) Costs 6-23 kg 8 A. Operating Costs Weaner Pig (Nursery) 6-23kg Production Costs Worksheet 1. Feed Requirements and Costs Your Cost 1.01 Pre starter kg ration/pig x $1, /tonne 1,000 kg/tonne = $0.67 /pig sold 1.02 Pre starter kg ration/pig x $1, /tonne 1,000 kg/tonne = $1.84 /pig sold 1.03 Starter kg ration/pig x $ /tonne 1,000 kg/tonne = $3.88 /pig sold 1.04 Starter kg ration/pig x $ /tonne 1,000 kg/tonne = $8.99 /pig sold 2. Other Operating Costs 2.01 Weanling Purchase $44.00 $/cwt average market price x % of mkt price weanling formula factor $24.20 purchase cost 2.02 Veterinary Medicine & Supplies $2,000 professional services + $98,000 medication = $2.83 /pig sold

12 Guidelines: Weaner Pig (Nursery) Costs 6-23 kg Maintenance & Repairs $1,255,552 building & equipment cost x 0.55 % year repair & maintenance = $0.20 /pig sold 2.04 Hydro & Propane $10,600 hydro + $22,500 propane = $0.94 /pig sold 2.05 Insurance $1,255,552 investment x $0.65 rate/$ /$100 capital = $0.23 /pig sold $286,000 market hogs value x $0.65 /$100 capital invested = $0.05 /pig sold $45.00 business interruption coverage/feeder x 5,200 feeders x $0.65 /$100 capital invested = $0.04 /pig sold Total = $0.32 /pig sold 2.06 Manure Costs Haulage 2.4 litres/pig/day x 365 days x $0.002 /litre x 5,200 pig places = $0.28 /pig sold Odour control & Mgmt Fees $3,000 total cost = $0.08 /pig sold Total = $0.36 /pig sold

13 Guidelines: Weaner Pig (Nursery) Costs 6-23 kg Office Supplies $0.30 /pig place $5,200 pig places = $0.04 /pig sold 2.08 Levy, Marketing & Transportation $3.00 trucking in + $0.19 council levy + $0.05 insurance = $3.24 /pig sold 2.09 Property Taxes $6,945 total taxes = $0.20 /pig sold 2.10 Interest on Operating Cost: $24.20 weaner cost + $23.51 subtotal operating 2 average x 52 days per turn 365 days per year x 5.50 % operating interest = $0.28 /pig sold B. Fixed Costs 3. Depreciation: Original cost - Salvage Value Useful Life 3.01 Buildings $895,552 building cost (including manure storage) - $83,055 salvage value (building only) 20 years useful life = $1.15 /pig sold

14 Guidelines: Weaner Pig (Nursery) Costs 6-23 kg Equipment $425,000 equipment cost - $42,500 salvage value 10 years useful life = $1.08 /pig sold 4. Investment: Original Cost + Salvage Value x Investment Rate Land $20,000 land value + $30,000 site preparation x 2.5 % investment rate = $0.04 /pig sold 4.02 Buildings $895,552 building cost (including manure storage) + $83,055 salvage value (building only) 2 average x 2.5 % investment rate = $0.35 /pig sold 4.03 Equipment $425,000 equipment cost + $42,500 salvage value 2 average x 2.5 % investment rate = $0.17 /pig sold C. Labour 60.0 hours/week x 52 weeks/year x $17.00 /hour = $1.50 /pig sold

15 Guidelines: Weaner Pig (Nursery) Costs 6-23 kg 12 Summary of Home Mixed Feed Ingredients Used Total pigs sold 35,381 Total Total Total Total per Year per Month per Pig per Pig (tonnes) (tonnes) (kgs) (lbs) Wheat Barley Corn Soybean Meal - 47 % Canola Meal - 34% Peas Grower Micro Premix Canola Oil Whey Powder Fish Meal Plasma Limestone Dical (16% Ca-21% P) Salt - 96% Phytase L-Lysine HCL L-Threonine D,L-Methionine Oats - Steam rolled Total Summary of Purchased Feed Ingredients Used Total per Total Total Total per Pig Mkt per Year per Month Pig Mkt (kgs) (tonnes) (tonnes) (lbs) Pre starter Pre starter Starter Starter Total Total For further information contact your local MAFRI office. Prepared by: Robyn Harte Business Development Specialist - Swine Ellen McPherson Business Development Specialist Roy Arnott Business Development Specialist

16 Guidelines: Weaner Pig (Nursery) Costs 6-23 kg 7 Return On Assets (ROA) Assumptions Total Assets $1,340,552 Total Hogs Sold 35,381 Days to Market 52 Average Market Weight 23 kg/hog (live) Market Price $48.72 /head Return On Assets Calculation $/Hog Sold % of Total Total Revenue $48.72 Less Expenses Feed Costs $ % Feeder Purchase $ % Other Operating Costs $ % Interest on Operating Costs $ % Total Operating Costs $ % Depreciation $ % Interest on Investment $ % Labour (Family & Hired) $ % Total Expenses (Cost Of Production) $ % Net Income ($3.55) Return On Assets (ROA) -7.17% Equation Total Assets Net Income + Operating Interest + Investment Interest - Value of Unpaid Family and Operator Labour Total Assets Definition: Total Assets includes the buildings, equipment, land, and manure storage.

17 Guidelines: Weaner Pig (Nursery) Costs 6-23 kg 6 Cash Flow Calculation Income Total Per market pig $48.72 Number of pigs marketed 35,381 Total Income $1,723,762 Operating Expenses Feed Cost $544,159 Feeder Cost $856,220 Veterinary Medicine & Supplies $100,000 Maintenance & Repairs $7,076 Hydro & Propane $33,100 Insurance $11,322 Manure Costs $12,907 Office Supplies $1,560 Levy, Marketing & Transportation $114,634 Property Taxes $6,945 Interest on Operating Cost $9,907 Total Operating Costs $1,697,830 Manure Value $0 Total Operating Costs $1,697,830 Labour Costs $53,072 Loan Payment Total Capital Investment $1,340,552 Portion financed % 60.0% Loan Amount $804,331 Term in years 15.0 Interest Rate 6.0% Annual Payment $82,816 Returns to Enterprise Cash over operating costs $25,932 Cash over operating & loan payments -$56,884 Cash over total (includes labour) -$109,956 Breakeven Calculations $/market pig Breakeven operating $47.99 Breakeven operating & loan payments $50.33 Breakeven total (includes labour) $51.83

18 For more information Contact your local Manitoba Agriculture, Food and Rural Initiatives (MAFRI) Growing Opportunities (GO) Office. Visit us at manitoba.ca/agriculture. ESR January 2013

Weaner Pig (Nursery) Costs 5-23 kg

Guidelines For Estimating Weaner Pig (Nursery) Costs 5-23 kg Based on marketing 35,308 pigs Date: March, 2007 This publication is intended to provide a format and a set of guidelines for determining the