Herd Health Upgrades Require Homework

One of the biggest, most difficult stumbling blocks on the road to stable, profitable pork production is often herd health.

Addressing the “Genetics of Pig Health” Symposium held in Des Moines, Luc Dufresne, DVM with PIC Inc., says there is no room for generalizations when analyzing the merits and payback potential of most health improvement programs.

“In our mature industry, few producers are currently starting from scratch, so most health improvement programs incur direct and indirect costs that need to be recovered by increased efficiency (such as) lower cost of production and increased throughput and/or increased product value (through) higher premiums,” he states.

Of course, herd health status does not fully explain the huge variation in production performance seen across the industry, he says. “As same health-status systems also vary in their performance, it would be naïve to believe that health improvement will have the same impact in all production schemes,” he adds.

Before tackling a health improvement project, Dufresne says to document data from your farm, then support it with literature and data from similar production systems.

Is It Worth It?

The first step in analyzing the merit of (re)populating a system with high-health animals, or initiating disease elimination strategies, is thoroughly understanding the system and effectively estimating the cost of disease within that system.

“Do not forget, profitability is a dynamic equation with independent production parameters that can work for you — or against you,” he adds.

To determine profitability, the economic value of each production parameter must be evaluated against how it affects throughput and margin. He offers this simple formula:

Throughput × Margin = Profitability.

Dufresne calls this “redneck economics” and explains that “throughput” is a measure of the number of product made per unit of production and unit of time (i.e. pigs marketed/sow/year or pounds sold/1,000 sows/week). “Margin” is simply the revenue made when the product is sold minus cost of production.

“An enterprise can increase profitability by either increasing throughput or by increasing margin,” he continues. Margin can be improved by reducing costs or increasing revenue per unit.

Each component of the equation is not independent — they can work synergistically or antagonistically. “For this reason, it is necessary to look at the impact a health improvement (or any other change in production) can have on the throughput and the margin components of the formula,” he says.

Health improvement strategies can improve profitability by increasing throughput (i.e. pigs sold/sow/year) and margin (i.e. lower cost/lb. marketed; increased premium/hog marketed).

Evaluating the economic impact of health improvement is especially challenging because the estimate is based on the change in performance parameters and their impact on profitability. “A sound evaluation must combine historic data from the production system involved, combined with data from literature and/or data from other very similar systems,” he explains.

Even then, it is important to consider the risk of a partial or total failure of the health improvement project. And, if the project is successful, one must consider the risk of recontamination by the same or a new disease agent, he reminds.

Next Step

Once performance improvements have been estimated, the next step is to evaluate how it will affect profitability. Dufresne reviewed the impact of key performance parameters on either throughput or margin, as follows:

Average Daily Gain (ADG): The economic impact varies depending upon space availability. If growing pig space is limited and time dictates marketing, ADG improvement will be the most important factor to improve profitability. Selling at heavier weights increases throughput and also increases margin by reducing costs — spreading feeder pig and facility costs over more pounds sold. “But don't forget, selling heavier hogs could affect carcass premiums or discounts,” he adds.

Feed Efficiency (FE): Improved FE increases margins by reducing feed cost per pound produced.

Number Born Alive (NBA), Pre- and Postweaning Mortality: An increase in NBA or a reduction in pre-weaning mortalities will have a significant impact on costs and throughput. Reducing postweaning mortalities has a bigger impact on costs simply because the animal is worth more. However, while looking at mortality, be sure to consider whether the surviving animals are good, marketable hogs or culls. Look for the percentage of animals sold to the primary market — rather than mortality and livability — on closeout reports, he suggests.

Sow Mortality: This is both an important animal welfare issue and an employee morale issue. The major economic impact of sow mortality is loss of cull value and the value of the litter, if she is pregnant.

Litters/Sow/Year (L/S/Y) and Farrowing Rate (FR): L/S/Y is a measure of sow herd efficiency, including non-productive days. Farrowing rate, a component of L/S/Y, reacts in the same way.

If the sow inventory is fixed, increasing L/S/Y increases weekly throughput, profitability rises and the “per unit” costs decline. However, if L/S/Y increases but sow inventory is adjusted to maintain a constant throughput, the impact on profitability will be much smaller, Dufresne points out. “Be careful when trying to maximize L/S/Y, especially if it is done at the expense of lactation length or gilt acclimation. The gain in L/S/Y can be more than lost in litter size and poor piglet performance,” he adds.

Dufresne uses Table 1 (p. 34) to illustrate the impact production improvement can have on profitability. He looks at cost and throughput using average production and cost parameters from several large production systems. His assumptions for Table 1 include a system with limited finisher space (fixed market age), with breeding targets and inventory adjusted to farrowing rate. Current cost of production is set at $38/cwt. and market price is $40/cwt., live weight.

In this case, ADG has the largest impact on both cost reduction and throughput. Improvement in sow mortality and farrowing rate has a limited impact on cost and throughput.

Do Your Homework

Before undertaking a health improvement program, Luc Dufresne, DVM with PIC, Inc. suggests a thorough evaluation of your system.

“Putting a value on health improvement is not an easy task. You must resist generalizations to avoid creating false expectations.” His checklist includes:

• Final product: Weaned pigs, market hogs, replacement animals, etc.

• Performance data: Identify traits that need attention.

• System capacity: Sell by fixed weight or fixed time; where are the bottlenecks?

• Cost of production: Consider fixed and variable costs to identify areas of cost savings.

• Health status/history: Document all diseases and outbreaks and their impact on cost of production.

• Pathogens: It is critical to understand the host, environmental characteristics, pathogenesis of the agent, duration of shedding, latency and viability of the agent. Answer this question: “Do we know enough about the disease agent to eliminate it and keep it out?”

• Facility design: Plan pig flow during the health upgrade. Facility design will influence downtime and the need for extra facilities during the project.

• Impact on genetic potential: If a new genetic supplier is necessary to reach a new health status, it is also important to evaluate the impact the change will have on overall production performance.

• Biosecurity assessment: Assuming an improved health status can be attained, it is important to assess the risk of reintroducing any pathogens over time. Consider all traffic patterns, hog density, prevailing winds/aerial spread, etc.

• Facility costs and interest rates: “Cost of facilities and interest rates on loans to finance buildings and equipment will impact the cost of a project where depopulation and/or downtime of facilities are required,” Dufresne notes. The table below illustrates the cost/week of leaving growing pig facilities sit empty, using various facility costs and interest rates.

  In addition, Dufresne suggests calculating the costs associated with the health improvement program:

• Medication costs: Vaccines, antibiotics, disinfectants, insecticides, etc.

• Diagnostic tests: Serology, bacteriology, virology, necropsy; ask your veterinarian for estimates.

• Inventory adjustments: Costs associated with changes in inventory, loss of throughput and revenue.

• Facility rental: Costs of off-site breeding, partial depopulation, segregated early weaning, etc.

• Personnel: Extra full-time or part-time help.

• Downtime: Calculate all added costs and revenue loss associated with the project.