Industry Cost of Production Benchmarking

Access to cost of production records for benchmarking purposes is difficult in the swine industry. As the industry has consolidated and specialized there is less sharing of cost data. In the 80’s and 90’s both Iowa State University and the University of Nebraska conducted swine enterprise records programs to assist traditional producers in identifying their costs of production and opportunities for improvements.

Today most producers use computer accounting software that can be set up to allocate expenses to the various farm enterprises. While the correct allocation of expenses is always a challenge, when done correctly producers have an on-going look at their cost of production and have become very good at using the information for risk management and management decisions. In many cases the cost of production record system is linked to the production record system allowing detailed examination of expenses per unit of production (pig weaned or lb of gain).

For the past 10 years Latta, Harris, Hanon & Penningroth, an accounting and management advisory firm with offices in eastern Iowa has done peer group comparisons for a sub-set of their clients with pork production enterprises. They have made the information available for public usage at an annual summer event with the producer participants. This year they shared the 2012 data and their estimate of the 2013 numbers at the FBS Systems annual users conference.

They also shared crop benchmarking data at the same conference. The material they presented is available at: http://www.fbssystems.com/archives/presentations/2013-fbs-user-conference/ and I want to thank them for their willingness to make this information available.

For 2012 they estimated that the average producer in the US with a breed-wean unit produced a wean pig for $41.06. The 90th percentile estimate was $34.41. The big difference in cost of production for weaned pigs is still the reproductive performance of the sow herd, with a smaller difference in cost due to the status of the facility debt. They also had almost no difference in cost of production for units with less than 2000 sows versus larger units.

For wean-finish flows, the cost of gain (cost to add 100 lb of weight not including weaned pig cost) for the 505h percentile in the US was estimated at $53.40/cwt while the 90th percentile was $48.49. Feed cost only accounted for $1.10 of this difference when the same corn price and soybean meal prices were used. Use of labor and facility expense were the other big difference in cost. Note that this cost of gain was based on corn at $6.92/bu and bean meal at $425/ton.

Of interest to me was the cost to contract/lease new wean-finish space. This ranged from $38-42.50/space. The majority of the producers reported a $40-42 cost per pig space. Most likely a majority of this difference in wean-finish facility cost is associated with how propane expense is handled. Does the contractor pay all of the expense or does the pig owner share in the expense?

Vet/med expense on wean-finish can vary quite a bit, depending on when vaccines are administered. If they are given at the sow unit, this expense shows up in weaned pig cost. If they are administered after weaning it shows up as wean-finish vet/med expense.

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