Hog Feed is as Dear as Gold Dust

In Brief

In 2008 we held our whole herd feed efficiency constant while taking our hogs to heavier market weights for our expanded direct market business.  However, the higher price of soybean meal and premix resulted in our highest feed price and highest cost of production ever.

 

In Detail

            Several years ago we purchased a scale for our feed mix/mill.  This allowed us to formulate more accurate rations.  It also enabled us to get an accurate accounting of feed used.  This statistic, when divided by lbs. of pork produced gives us one of the most important measures of productivity:  Whole herd feed efficiency.  As you will see by the following data we have been remarkably consistent.

            Avg. market weight       Pork produced             Feed used        Feed efficiency

2006    280 lbs.                        278,034 lbs.                 1,125,100 lbs.  4.05 lbs.feed/lb. gain

2007    279 lbs.                        258,397 lbs.                 1,043,200 lbs. 4.04 lbs.feed/lb. gain

2008    290 lbs.                        248,494 lbs.                 1,006,800 lbs. 4.05 lbs.feed/lb. gain

 

            When we look at the price of feed a different picture emerges.  Market fluctuations have resulted in a roller-coaster ride.  Thankfully, we raise our own corn and oats and the price I use for these commodities is our cost of production.  Corn is priced at $.04 per lb. which is $2.24 per bushel.  Oats are $.06 per lb. which is $1.92 per 32 lb. bushel.  When oats are available and corn is scarce, oats are substituted for corn on a pound for pound basis at up to 20% of the ration.  We notice no reduction in gain at this level.  Oats are also included in the gestation ration most of the year.

Soybean meal, (SBM), has fluctuated greatly, especially in 2008.  When SBM approached $400 per ton, (.20 per lb.), we looked at ways to reduce our use.  Our salesman from JBS United, (Carl Walter, phone: 608 845 3344), helped us formulate rations with added lysine and threonine which are the first and second limiting amino acids in a corn/soy diet for swine.  Consequently, we used less of the expensive SBM.  SBM, as well as the rest of the markets came down dramatically this fall.  For these two reasons our price for SBM was actually the same for both 2007 and 2008 at $.18 per lb.

The amount and price of the vitamin/mineral/amino acid premix used from JBS United is where we see the greatest change.  There are probably a few reasons for this.  First, the price of everything was up in 2008 and premix was no exception.  Second, we added extra amino acids so we could cut down on the SBM.  And third, we started using a special order premix with no animal products to meet the demands of our direct market.

2007 Feed

Type                Amount            Price/lb.            Dollars

Corn                807,265 lbs.     $.04                 $32,290

Oats                   20,500 lbs.     $.06                 $  1,230

SBM                181,935 lbs.     $.18                 $32,748

Premix                33,500 lbs.     $.40                 $13,400

 

Total              1,043,200 lbs.    $.076               $79,668

 

 

2008 Feed

Type                Amount            Price/lb.            Dollars

Corn                774,775 lbs.     $.04                 $30,991

Oats                   34,850 lbs.     $.06                 $  2,091

SBM                159,545 lbs.     $.18                 $29,068

Premix                37,630 lbs.     $.55                 $20,796

 

Total              1,006,800 lbs.    $.082               $82,946

 

            Now we have everything we need to figure out our cost of feed per lb. of pork produced.  Multiply the whole herd feed efficiency, (4.05), by the average price per lb. of feed, ($.082), which gives us a feed cost per lb. of  pork of $.33.  We received $.40 for the first load of hogs we sold to Tyson in January, 2009.

            The overall average price per pound is up $.006, ($.082 – $.076).  This doesn’t seem like much, but on 1,000,000 lbs. of feed its $6,000.  Six thousand dollars out of my pocket.  Not good.  Lets me know, though, where I need to watch in 2009.  Check out my next post to see my feed budget for 2009.

            Some of you economist types are saying I should be pricing my corn at market price.  Ok, let’s do worst-case scenario for fun.  Let’s say for some reason we purchased all of our corn last summer at the market peak of $7 per bushel.  That gives us a price per lb. of $.125 for corn.  Multiply that times the lbs. of corn, (774,775lbs.), equals $96,847.  Add that with the oats, SBM, and premix equals $148,802.  Divide that by the total lbs. of feed, (1,006,800), and we have an average cost of feed of $.148.  Now multiply that by whole herd feed efficiency, (4.05), and we have an astounding feed cost per lb. of pork of $.60.  Last summer, we actually sold a few loads to Tyson over $.60 with a peak of $.66.  But for most of the year we would have lost our shirt. 

            My Dad was telling a joke last summer.  He said he needed to get his mix/mill fixed.  People would ask why.  He would say that he used to put in $2 corn, feed it to hogs, and get $3 for it.  Now he’s putting in $5 corn, feeding it to hogs, and getting $3 for it.  That’s a good example of Walter humor.

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