Early Adopters Reap Research Payback

Pork producers across the globe are scrambling to find technologies that offer a competitive advantage.

The trick is identifying those technologies that are relatively easy and inexpensive to adopt and offer a reasonable return.

Producers with the ability to successfully implement proven technologies and management strategies can lower cost of production or increase returns. However, the perceived financial risks and the potential for rewards often hinder early adoption.

Early adoption of research offers a significant opportunity. In order to provide more detail on the economic impact of research, Prairie Swine Centre, in conjunction with the George Morris Centre, developed an analytical tool to help provide a more detailed analysis of the economic benefit of research conducted at Prairie Swine Centre.

This financial model has the ability to simulate the economic impact and change in cost and revenue structures by applying Prairie Swine Centre research results to commercial farms of various sizes. This ability is very important in helping producers prioritize which research offers the quickest, and most substantial, payback opportunity. These can be two very different criteria.

Collaborators on the project analyzed a number of experiments conducted between 1999-2004 at the Prairie Swine Centre. Twenty-two projects were selected for a detailed financial analysis, which revealed the net benefit of specific research projects. Research projects were then prioritized in terms of net benefit per hog marketed and ease of adoption (Table 1).

Throughout the six-year period, specific research projects generated financial benefits ranging from $0.11 to $8.84/hog marketed. About 25% of the projects generated a net benefit of at least $2/market hog, while another 25% generated a return of at least $1/hog marketed.

The overall objective of the analytical tool — to assist pork producers in identifying ways to minimize costs and maximize revenues — is twofold:

• Assist producers in identifying those technologies that can be applied in their operation, and

• Assist in prioritizing their implementation in terms of ease of adoption.

Estimating the Impact

In order to estimate the impact of research on different types of operations, “default” farms of various sizes were developed using industry data.

It is very important to note that there tends to be greater variability in per-hog costs and revenues between similar-sized operations than across operations of different sizes. This is a function of different cost structures (i.e. age of facility), management styles and ability to adopt new technologies.

Table 1 provides a detailed economic evaluation for each research project, summarizing the range and average value (from default) on net income. Average net returns/hog marketed for all projects ranged from a low of $0.14 to $6.23 on the high end, while the minimum and maximum range in returns vary from $0.05 to $11.50/hog marketed, depending on specific research criteria.

Net benefit of each project was calculated independently; there was no attempt to look at the additive or competing effect of multiple projects implemented simultaneously.

Ease of Adoption

Canadian pork producers are recognized as innovative, and many could be classified as early adopters. With this in mind, the 22 research projects were evaluated for ease of adoption.

Ease of adoption is defined in terms of the time, labor and capital required to implement the new research information on a commercial farm. Three classifications were used — easy, moderate and difficult.

“Easy” projects are those that can be implemented within 1-3 months, require little labor and little or no capital.

“Moderate” projects can be implemented within 3-12 months, but still require little labor or capital.

“Difficult” projects require greater than 12 months to implement and are either labor and/or capital intensive.

Evaluating this list on the basis of ease of adoption may help to focus efforts on those that can provide immediate payback.

Impact on the Industry

Using this three-level description, we estimated the extent to which the industry would adopt the research results.

The “easy” projects show a broad range of returns per market hog, from $0.14 to the highest return of $6.23. It is estimated that 80% of the industry adopted easy projects, such as switching between wheat classes for starter diets or adjusting water nipples to reduce water wastage.

Moderate adoption projects, including changing energy levels in the diet, require the specialized services of a nutritionist and perhaps pen reconfiguration. These moderate projects were estimated to be adopted by 40% of the industry.

Very few projects were deemed “difficult” to adopt. Novel ingredients like mustard meal, for example, can be difficult to obtain on a regular basis. Moving to large-group sow housing systems requires extensive barn renovation or rebuilding. An estimated 10% of the industry is willing to tackle these difficult projects.

Table 2 summarizes the combination of improvement in net returns (over default) as described in Table 1, with the assumed levels of adoption for each research project. This provides an estimate of the value of Prairie Swine Centre research to the western Canadian pork industry.

For example, “Effect of Starter Feeding Regime on Variability in Body Weight and Performance in the Nursery,” is adopted on a “moderate” basis (by 40% of the industry), and provides a net return of $1.22/hog marketed. Assuming the annual marketing of 10 million hogs in western Canada, the annual benefit to the industry is estimated at $4.88 million.

Research Dividends

Whether conducted at Canadian or U.S. universities, research pays big dividends. Applied, near-market research conducted at Prairie Swine Centre continues to provide significant benefit to the entire pork industry.

All pork producers will not be able to apply all research results, nor are all research projects completely additive. Pork producers will still realize a significant improvement to their bottom line through the incorporation of any number of research results. If only 10% of the benefit was to be adopted, it would improve net return over $3/hog marketed.

Prairie Swine Centre plans to use the model to help prioritize future research projects, and to speed technology transfer to commercial pork production. Saskatchewan Agriculture and Food provided funding for the research impact study.

Editor's note: All dollar values are expressed in Canadian currency. Conversion rate is roughly US$1.00 = CAN$0.85.

Table 1. Economic Return for Selected Prairie Swine Centre Research Projects

Table 2. Total Annual Research Contribution to the Western Canadian Pork Industry