10 May 2002

Costs comparisons on-line

By Wendy Owen

North-east correspondent

AN on-line program – Defining the Cost of Pig Production – was launched in February and can be accessed via the MLC web-site, but a pilot project* allowing comparisons between farms could prove even more useful.

On the existing program, individual producers fill in a table which asks a series of questions about their business. The programme then produces a standard set of costings.

But the British Pig Executive (BPEX) has also developed an interactive, web-based program which allows producers to compare costings with other, similar businesses. News of whether extra funding has been obtained for this next stage should be available soon.

"The source of the data that producers put in can differ," says BPEX strategy co-ordinator Andrew Knowles. "Formal accounts, management accounts or farm business survey results can all provide information which is more detailed than anything used previously.

"This project has come at the right time. There is a growing interest in cost plus contracts, but many producers are not sure exactly what their costs are."

Assuming the interactive program gets underway, Mr Knowles hopes benchmarking clubs will be formed. "Ideally, a producer with good feed conversion ratios, for example, would be able to share information with others keen to achieve similar results. At the same time, he could learn how to improve other areas of his farm management."

So far, the interactive project has only been tested on a group of 15 pig producers in Yorks. They have all given a positive response and their comments have been used to fine-tune the computer program.

Chris Clark, who sells 800 pigs a week from his farm near Scarborough, North Yorks, is wholeheartedly behind the idea. "There is a temptation among us all to come up with costings which make us feel good.

"But we need an element of reality, so we can see where we really are. Many people have relied on gross margins to evaluate their business, but that does not give a true picture.

"Using the MLC formula may make producers realise their cost of production is higher than they previously thought. But that can only be a good thing."

Mr Clark says there had been some scepticism among other pilot users, who expressed the view that perhaps not everyone would be prepared to give a true account of personal costings. But he is undaunted and is looking forward to using the program once it is up and running.

Comparing production cost figures accurately is only one part of the equation. Knowing how top 10% producers are achieving results is an important element if UK pig farms are to become more competitive, says MLC pig technical manager Pinder Gill.

For producers with rearing and feeding herds, he says it is obvious that pig wasting diseases are the biggest threat to economic viability. But he stresses that other factors should not be ignored.

"With a cost impact of about 15p/kg deadweight, many units are focused on management strategies to control PMWS. Under these circumstances, it is understandably difficult for staff to concentrate on other factors in reducing costs. But in the medium to long term, there must be a continuing drive to reduce costs by improving growth rates and reducing days to slaughter."

The top handful of producers manage a 14% higher growth rate during the rearing stage. At the finishing stage, top farms achieve growth rates 11% better than average.

"One element of the BPEX strategy for cost reduction centres on cutting days to slaughter. The four-year target is to get down from a current average of 180 days to just 155 days. That would mean a saving of about 7p/kg deadweight."

Strategic feeding to meet growth stage requirements is another element of cost cutting. Dr Gill is hoping MLC research on the development of liquid feeding technology will provide more opportunities for the future.

For breeding herds, Dr Gill says the key target should be to cut the number of empty days a sow. "This is done by improving the rate of successful services. Our records show that the top 10% have half the empty days of average herds."

"Better performing herds also use more feed a sow a year, but had higher levels of productivity. Feed costs a pig reared are 6% lower than average."

*The project is the result of a collaboration between BPEX, the National Pig Association, DEFRA, the Scottish Executive and private businesses, including banks and agricultural consultants. &#42

To enter cost plus contracts, producers must know what their costs are, says Andrew Knowles.

&#8226 Calculate true costs.

&#8226 Useful to compare them.

&#8226 Share knowledge.