Chapter Three: 1200 SOW FARROW-TO-FINISH

Transcription

1 Chapter Three: 1200 SOW FARROW-TO-FINISH Kenneth Foster, Chris Hurt, and Jeffrey Hale Introduction This chapter presents the 1200 sow capitalization and cost of production budgets and the associated economic and production assumptions. The first section is an introduction to the model. The second section provides details on capitalization. The last two sections include cost of production estimations and technical specifications of the system, including production assumptions and lay-out drawings. This system is composed of 1,412 total sows, which provide 1200 productive sows farrowing sixty litters per week. A total of 3,197 litters are assumed to be produced each year, with 9.5 pigs weaned per litter, or 30,372 hogs weaned annually. A 5% death loss results in pigs marketed per litter, or 28,853 market hogs sold annually. A complete discussion of the production assumptions is located in the section entitled Specifications. The operation is designed as a high investment totally confined farrow-to-finish swine unit. General technologies employed include: All-In/All-Out production; less than 21 day weaning with two week age variation; split-sex and phase feeding; physical separation of pigs by room and age group and separation by building phase for greater bio-security; high quality genetics; and artificial insemination. Table 3-1: Summary of Budgeting Results Total Per Litter Per Head Per Cwt. Capitalization $3,817,939 Cost of Production $2,562,267(annual) $ $83.91 $34.25 Table 3-1 summarizes the capitalization required to construct the operation. Additionally, the projected costs of production on an annual, per litter, per head, and per hundred weight basis are presented. 23

2 Capitalization Capitalization is subdivided into five categories: land, buildings, equipment, production inventory, and market inventory. The Table 3-2: Capitalization numbers presented represent a snapshot of Land $22,400 the operation at full capacity, on any Buildings $1,489,366 given day. The full capitalization of the Equipment $1,536,377 operation is presented in Table 3-2. Production Inventory $425,775 Market Inventory $344,021 Land $3,817,939 This operation is assumed to occupy a site consisting of 16 acres. The assumed value of land is $1400 per acre, for a total of $22,400. However, this cost was not used in the cost of production calculation. Instead, the lost profit opportunity from not having the land in corn production was used to approximate the annual land ownership charge. It is assumed that land with 113 bushel corn yields would be used for the hog facility site. The cost of production information for 113 bushel corn is derived from 1994 Purdue Crop Guide (ID-166). 1 The price of corn used in the analysis is the mean of the season average prices for the period 1984 through As shown in Table 3-3, the estimated annual opportunity cost from not having the land in corn production was $ per acre, or $1, for the entire 16 acres. Building and Equipment Building and equipment costs represent the largest group of capital requirements. The costs involved in the construction of the operational site are derived from a variety of sources. The largest portion of building and equipment costs are those for construction and inside equipment. The figures used for those costs, outlined in the Cost column of Table 3-4, were compiled from consultations with industry sources. More detailed information regarding building capacities can be found in the specification section under the title of PIGFLOW Output Specifications (Table 3-17). Table 3-3: Land Opportunity Cost Analysis Production Cost (per bushel) $1.36 Selling Price (per bushel) $2.26 Net Profit[loss] (per bushel) $.90 Production Per Acre (bushels) 113 Net Profit[loss] per acre $ Total Opportunity Cost (16 acres) $1, Table 3-4: Construction Costs Cost Per Unit Capacity Breed/Gest $440 Female 1221 Farrowing $1,950 Crate 240 Nursery $80 Head 4560 Finishing $125 Head Doster, Parsons, Christmas, Griffith, Hawkins, and Nielsen Purdue Crop Guide. ID-166. Purdue University Cooperative Extension Service Indiana Historical Price Chart. EC-661. Purdue University Cooperative Extension Service

3 Table 3-5 shows the specific building and equipment costs. All construction costs were increased by a contingency charge of 5% for equipment and 10% for buildings. This contingency provides a buffer against unforeseen cost overruns. Table 3-5: Building and Equipment Costs Equipment Cost Cont. Invest. Building Cost Cont. Invest. Breed/Gest. 295, ,256 Breed/Gest. 241, ,934 Farrowing 257, ,270 Farrowing 210, ,660 Nursery 200, ,672 Nursery 164, ,576 Finishing 509, ,909 Finishing 416, ,494 Water Supply 12, ,600 Electrical 7, ,875 Tractor 24, ,200 Site Prep. 32, ,200 Feed System 115, ,750 Driveway 10, ,550 AI Lab 4, ,932 Lagoon 268, ,147 Mortality Disposal 44, ,788 Boar Isolate Total 1,536,377 Total 1,489,366 Five other main groups of equipment costs are required: water supply, tractor, feed system, AI lab, and mortality disposal. The first group is a system for supplying water. The system modeled, at a cost of $12,000, provides for the purchase and installation of: two-200 foot deep wells, at $3,000 each; two pumps; a pumphouse; a surge tank; and pipe. A tractor is required on the operation to perform such tasks as pig trailer moving and general duties. The cost reflects the purchase of a used tractor. All feed, with the exception of some bagged starter feed, is assumed to be produced onfarm. A technical expert representing a large producer and distributor of commercial feed production systems was consulted to aid in the determination of the appropriate size and type of mill required. A modular feed grinding/mixing system was selected. The system requires that feed delivery be completed pneumatically. The system is designed with an auxiliary system of feed production. This redundancy is included as a safety margin. Included in the charge for the feed system is the cost for the grinding and mixing system, the pneumatic delivery system, an auxiliary system, and the necessary feed storage tanks and bins. Table 3-6: AI Lab Equipment Boar Collection Dummy $250 Microscope $290 Spectrophotometer $2,314 Electronic Balance $195 Water Bath $965 Semen Storage Unit $333 Miscellaneous Laboratory Equipment $350 Total $4,697 Source: Gall, T.J. The Advantages of AI in Commercial Swine Production

4 Artificial insemination is one of the technologies employed in this operation. The cost in the model includes all the equipment required to process and prepare semen for delivery to the sow. Table 3-6 provides a detailed look at the equipment required in an AI lab. The total cost before the contingency charge is $4,697. Mortality disposal is based on a composting system. Three items, in addition to a suitable site, are required: a concrete slab; hay bales; and a perimeter fence. The cost of these was found from local suppliers and is shown in Table 3-7. Table 3-7 Composting Establishment Concrete Slab $40,000 Hay Bales $1,920 Perimeter Fence $2,640 Total $44,560 In addition to the basic construction costs involved with putting up the buildings, four additional groups of items are required: electrical hook-up; site preparation; a driveway; and a new boar isolation facility. These items are shown in Table 3-5, on the lower right side. The electrical hook-up charge consists of the link from the power company s service lines to the main breaker at the production site. This work is generally done by a professional contractor. A local contractor estimated a fee of $7,500. The 16-acre site on which the operation is established must be prepared with respect to slope, drainage, etc., prior to the start of construction. Additionally, after the buildings are up, final grading and fencing work is required. A local contractor was consulted for a per-acre fee for this type of work. The fee provided by the contractor includes the costs of all earth moving and preparation. The fee for ground preparation and installing a perimeter is $2,000 per acre, or $32,000 before the contingency charge. The site requires a 700-foot long by 10-foot wide access driveway. A cost of $1.50 per square foot for preparing and laying gravel on the drive was used to calculate the $10,500 total charge for the drive. New boars entering the operation must first pass through an isolation facility in order to maintain bio-security. This operation requires a pen with the capacity to hold two boars with 15 square feet of space for each. The construction cost used in this analysis is $20 per square foot, or $600 for the total cost of the pen. Waste is disposed of through the use of a three-stage lagoon. To calculate the required size of the lagoon, the number of head in each stage of production was multiplied by an engineering specification. 3 3 From a table of calculations by Don Jones, Department of Agricultural Engineering, Purdue University

5 Table 3-8: Lagoon Size Calculation Head Type 1st Stage(ft 3 ) 2nd Stage (ft 3 ) 3rd Stage (ft 3 ) 240 Farrowing 164,400 16,800 67,200 Total ft 3 1,221 Breed/Gest 244,200 36, ,520 3,940,140 4,560 Nursery 228,000 31, ,800 Total yd 3 7,410 Finishing 1,704, , , ,931 The specification table used is based on a flow rate of 3.5 pounds of volatile solids per day. The total capacity required is 145,931 cubic yards (Table 3-8). This capacity was multiplied by a cost of about $1.75 per cubic yard. In addition to the construction of the lagoon, a traveling irrigation gun is required to irrigate the fluid waste. The cost of the gun is estimated at $15,000. Total lagoon and gun cost before a contingency charge is $268,315 (Table 3-5). Production Inventory The operation is assumed to use high lean gain genetics. Complete specifications on the performance and characteristics of the production inventory are located in the Specification section of this chapter. The assumed annual replacement rate in this analysis is 50% for both sows and boars. The average breeding animal is assumed to have a productive life of two years, with a mortality rate of 5%. The breeding plan is two services per sow. The first service is natural; the second is artificial insemination (AI). The semen used in AI is collected on-farm. Therefore, the number of boars required is adjusted in comparison to a completely natural breeding system. Market Inventory Investment is required in the production of the market inventory prior to birth and during all stages of production. However, for budgeting, the investment on an average day is needed to determine the interest, tax, and insurance charges. Table 3-10 shows how the investment in the market inventory is calculated. Additional details concerning how the number of pigs on hand at each stage of production is determined can be found in the Specifications section under PIGFLOW Output. Table 3-10: Investment In Market Herd Number Cost Unit Weight Investment All Pigs 14,250 $6.50 Head $92,625 Baby Pigs 2,280 $.19 Pound 4 $1,771 Nursery 4,560 $.19 Pound 30 $26,568 Finishing 7,410 $.19 Pound 155 $233,057 Total $344,021 In Table 3-10, the All Pigs category is the production investment in breeding, gestation, and farrowing for each pig in inventory. After the roughly 3.5 pounds of birth weight, each pound Table 3-9: Production Inventory Requirements Number Cost Unit Mortality Investment Sows 1,412 $250 Head.05 $370,650 Boars 35 $1,500 Head.05 $55,125 27

6 of gain is assumed to cost $.19. This value covers all direct costs involved with a pound of gain, from Table The Weight column represents the average size animal at each stage of production and is multiplied by the cost per pound and the number of head to derive the value invested per stage. Cost of Production The compiled cost of production analysis is shown in Table The results are presented with respect to litter, hundred weight produced, and head of market hogs sold. Feed Costs The cost of feed is based on a series of phased diets and the historical average prices of corn and soybean meal. The direct charge for feed is subdivided into three sections: corn, bean meal, and other feed. As shown in Table 3-11, a whole herd feed conversion of three pounds of feed for every pound of gain is assumed. To market the expected 23.4 hundred-weight of pork per litter, bushels of corn, 0.72 tons of 44% soybean meal, and 2.5 hundred-weight of other feed are required. The price of corn at $2.26 per bushel was calculated by averaging the season average prices for Indiana from 1984 through The price of 44% soybean meal at $ per ton was calculated by averaging the season Table 3-11: Feed Analysis Percent Amount Factor Quantity Corn Meal Other average prices for Illinois from 1984 through The price of $36.00 for a hundred-weight of combined other feed ingredients includes pre-mix, other inputs, and other costs. 6 4 Indiana Historical Price Chart. EC-66. Purdue University Cooperative Extension Service Good, D. Grain Price Outlook. University of Illinois. January, 1993 and April, Adapted from Foster, K., W. Dillon, K. Hendrix, V. Mayrose, and M. Neary. Livestock Production Budgets. ID Purdue University Cooperative Extension Service

7 Table 3-12: Cost of Production Budget Item Unit Quantity Price Value/ltr Value/cwt Value/hd Direct Charges: Corn bu Soybean Meal ton Other Feed cwt TOTAL FEED Herd Health dol Fuel & Utilities dol Marketing dol Miscellaneous dol Mortality Disposal dol AI Costs dol TOTAL DIRECT Indirect Costs: Investment Charge Market Inventory dol % Breeding Inventory dol % Equipment dol % Buildings dol % Land dol Labor dol. 154, Management dol. 103, TOTAL INDIRECT TOTAL COST Other Direct Charges The assumed AI strategy for breeding a sow or gilt includes a natural service and then a second service using AI. Table 3-13 presents a breakout of the direct costs for single-service AI. The total, $.86, is the direct costs for collecting, processing, and delivering the semen. The quantity of 1.15 AI services per litter (shown on Cost of Production budget, Table 3-12) includes one service for that specific litter and services for those sows that do not settle. 29

8 The charge for herd health in Table 3-12 is for veterinary services and medicine. 7 It comes from Livestock Production Budgets (ID-200) and is modified to reflect conditions modeled in this operation. The charge for fuel and utilities was taken from ID-200 and updated to reflect current conditions. The charge for marketing is $1.00 per total hundred weight produced. This charge incorporates all transportation and marketing expenses. The cost of $5.00 for miscellaneous items is designed to cover unforeseen direct expenses which tend to occur in every operation. A direct charge for mortality disposal is included in the budget. This cost reflects the regular replacement of some items in the composting system and the repair of others. The general composting system was modified to coincide with the particular production system used in this analysis. 8 involved with the composting system are shown in Table Indirect Charges Table 3-13: Disposable AI Supplies Per Collection Collection Glove $.19 Collection Bag & Filter $.37 Semen Extender (BTS) $.79 Plastic Bottles & Caps $3.52 Breeding Spirettes $5.31 Lubricant & Towel $.10 Total (12 doses) $10.28 Direct cost per dose $.86 Source: Gall, T.J. The Advantages of AI in Commercial Swine Production The direct costs Table 3-14: Direct Composting Charges Replacement Tarps $400 Annual Fence Repair $160 Replacement Hay Bales $240 Fuel and Utilities $800 Sawdust $800 Annual Total $2400 Direct Cost Per Litter $.75 The investments in market inventory, production inventory, equipment, buildings, and land are shown in the section of this chapter entitled Capitalization. The capitalized value calculated earlier shows up in the cost of production budget, Table 3-12, under the column Investment. The numbers found in Table 3-12 were calculated by taking the capitalized value and dividing by the number of litters produced. For example, the market inventory is capitalized at a value of $344,021 (Table 3-10), and 3,197 litters are produced each year. Therefore, the investment shown in Table 3-12 is $344,021/3,197 = $ This same type of calculation is done on each of the capital components. Each of the investments per litter in capital items is multiplied by a fixed percent charge to determine the per litter charge for capital items. The charge on the market inventory of 8.63% assumes a 9.5% nominal interest rate for.75 years and 1.5% for taxes and insurance. A nominal interest rate was used in the charge for the market inventory due to the short life of these animals. It is assumed that the effects of inflation will be so small during the time that these animals are part of the operation that adjustment is not required. 7 Foster, K., W. Dillon, K. Hendrix, V. Mayrose, and M. Neary. Livestock Production Budgets. ID-200. Purdue University Cooperative Extension Service Foster, K., Department of Agricultural Economics, Purdue University. October

9 The charge on the production inventory assumes a 6% real interest rate and 1.5% for taxes and insurance. The charge on equipment assumes a 6% real interest rate; 3.5% for taxes, insurance, and repairs; and an eight-year useful life. The charge on buildings assumes a 6% real interest rate; 3.5% for taxes, insurance, and repairs; and a 16-year useful life. All charges were determined with the use of an amortization schedule based on the parameters outlined above. The opportunity cost calculation on the land required for the operation was discussed in the Capitalization section, Table 3-3, and is $1,627. Labor for the operation requires one manager, one assistant manager, and four employees. The manager and assistant manager are paid a salary. The benefits paid to these two are calculated as 15% of their gross salary. The employees are paid an hourly wage based on a two-tier system. The first tier, or lower experienced employees, are paid $6.50 an hour. The more experienced second-tier employees are paid $8.50 an hour. Employee benefits are considered to be 25% of gross pay. Salary Benefits Total Cost Manager $40,500 $6,075 $46,575 Assistant Manager $20,250 $3,037 $23,287 Production Assistant I $19,125 $4,781 $23,906 Production Assistant I $19,125 $4,781 $23,906 Production Assistant II $14,625 $3,656 $18,281 Production Assistant II $14,625 $3,656 $18,281 $154,236 In addition to the labor, a fee was charged to compensate the management team. The purpose of this fee is to provide a return to the management personnel who make the decisions that guide the operation through the longrange horizon. It is likely that these decisions are made by the owner(s) of the operation. However, if this service was contracted out a fee would have to be paid. The management charge, presented Table 3-16: Management Fee Number of head sold 28,853 Cwt. per head 2.45 Price per cwt. $42 Total management 3.5% $103,913 in Table 3-16, is calculated as 3.5% of gross market hog sales, or $103,913 per year, assuming the price of market hogs is $42 per hundredweight. 9 Salary and benefit rates from industry sources. 31

10 Specifications Health Program 10 Facilities 1. Perimeter fence 2. Entry facility 3. Dead animal disposal 4. Load-out facility 5. All buildings screened and rat-proofed 6. Isolation facility Management 1. Weaned in less than 21 days 2. All-In/All-Out production (one week grouping preferred) 3. Separation of buildings for bio-security 4. Segregated early weaning procedures employed Medications 1. Medication for H. parasuis 2. Penicillin + Azium for S. suis 3. Antibiotic fed to #75 (Apralan & Mecadox) Vaccination program 1) Gilts: a) Porcine Parvovirus, Erysipelas, 5-way Leptospirosis b) Vaccination to occur at 5 and 2 weeks before breeding 2) Sows: a) Porcine Parvovirus, Erysipelas, 5-way Leptospirosis b) Vaccination to occur after each weaning 3) Other vaccinations (herd dependent) 10 Kirk Clark, DVM, School of Veterinary Medicine, Purdue University

11 Genetics Program 11 Terminal crossbreeding system with F1 or 3-breed cross gilts (both with 100% hetereosis) High lean gain genotypes - low to medium feed intake - more uniformly lean Barrows Gilts Feed Conversion lb. fat-free lean gain potential.72 in. backfat at 245 pounds % lean (fat-free).80 in. backfat at 260 pounds % lean (fat-free).65 in. backfat at 245 pounds % lean (fat-free).70 in. backfat at 260 pounds % lean (fat-free) 2.60 from 60 to 245 pounds meal diets 2.64 from 60 to 260 pounds meal diets AI high indexing maternal and terminal sires are used in this analysis. Three options are available for procuring replacement gilts. A manager of an operation of this size may choose option 1 or 2. However, for this budgeting process, option 3 is used. 1. On-farm grandparent program, % of the sow herd are grandparents mated to produce replacement gilts. Grandparent gilt cost is $550-$ Cooperative multiplier, i.e., seven 1200 sow herds become partners in a 1200 sow multiplier herd. This herd produces parent gilts for the seven commercial herds. Advantages Multiplier herd can be produced or built some distances from high disease pig production areas. One person manages the gilt production instead of each producer. The option provides the ability to repopulate herds. All maternal line barrows can be grown together, as opposed to a few within each commercial herd. The very highest maternal sires are utilized via AI. Disadvantages Multiplier production can increase parent gilt transportation cost. 3. Parent gilts are purchased at $250 each with quantity discount. 11 Allan Schinckel, Department of Animal Sciences, Purdue University

12 Nutrition Program 12 Nursery 1. Four to five diets, sequencing rapidly in order to decrease cost. 2. Diets based on health status and genotype. Will usually feed a specified amount of each diet, or feed for a specified amount of time. Grow-Finish 1. Minimum of three diets for each sex, decreasing in lysine content with time (weight). 2. Split-sex feeding after 70 pounds. The first two (or three) diets will be fed at a fixed amount per pig based on liveweight growth. Diets after 150 pounds will be based on liveweight. Sow feed Gestation: 15-16% crude protein corn-soy plus a laxative. Feeding level increased last 2-3 weeks. Lactation: 17% crude protein corn-soy with 5% added fat. Boar feed Gestation feed used. 12 T. R. Cline, Department of Animal Sciences, Purdue University

13 Production Assumptions and PIGFLOW 13 Several assumptions were made concerning production which directly affect costs. Those production assumptions are described in this section. Nine point five pigs are assumed to be weaned from each litter farrowed. After deducting a 5% death loss, pigs are marketed per litter. Based on the number of sows, the length of the weaning period, and settling rates, 3,197 litters are assumed to be produced each year. Annual market hog production is estimated at 28,853 pigs. A flow and space requirement planning software tool entitled PIGFLOW 14 was used to determine various aspects of herd size and building design. Based on these assumption, PIGFLOW provided the following results: Farrowing unit consists of four rooms with 60 crates each. One group is farrowed every 7 days. Rooms are empty 3.4 days for cleaning, and sows enter 3 days prior to farrowing. Weaning age: Average 18 days Maximum 21 day. Sow herd consists of 1,412 females in 20 groups of 71 sows. Conception rates: 85% average 65% seasonal Breeding on first heat after weaning. Table 3-17: Building Capacities Gestation 1129 sows Breeding 92 sows and 24 boars Nursery 8 groups for a total of 4,560 hogs (maximum age = 76 days) 13 Don Jones, Department of Agricultural Engineering, Purdue University Jones, D. and V. Mayrose. PIGFLOW Version 1.6. Purdue Research Foundation

14 Manure Management Three-stage lagoon with irrigation. IDEM Guidelines 140# N/acre 422 acres of spreading area. Table 3-18: Estimated Manure Analysis lbs./100 yard. lbs./year Available N ,996 P 2 O ,945 K 2 O ,365 Table 3-19: Acreage Requirements for 113 bu/acre Corn Production Crop Requirement Application Rate Area Required (lbs./acre) (gal/acre) (acres) N , (N-basis) P 2 O , (P-basis) K 2 O 170 7, (K-basis) Site and Building Drawings The drawings for the site and individual buildings are presented on the next several pages. 36

15 300 Sow High Technology System GROW-FINISH BUILDINGS 1820 Head in 7 Rooms of 260 N 300' FARROWING BUILDING Four Rooms of 14 Crates/Room 300' NURSERY BUILDING Four 260-Head Rooms BREEDING/GESTATION 315 Crate 7.5 Acre Site 37

16 300 Sow High Technology System FARROWING BUIDING Four Rooms of 14 Crates/Room BREEDING/ GESTATION

17 300 Sow High Technology System 80' 46' NURSERY BUILDING Four 260-Head Rooms 39

18 300 Sow High Technology System 36' 50' 264' GROW-FINISH BUILDINGS 1820 Head in 7 Rooms 40