Managing Feed cost U.S. Producer Perspective

1. Managing Feed costU.S. Producer Perspective Chad Hagen, PhD

2. Feed Cost Represents 70% of Total Cost of Production Source: Agristats 2011

3. Presentation Outline • What is Best Cost Nutrition? • Importance of Feed Conversion • Importance of Throughput • Herd Health Effects • Genetic Effects • Feed Processing Effects • Feed Additives • Diet Design • Right Feed/Right Time • Risk Management

4. What is Best Cost Nutrition? • Best Cost ≠ Cheapest Diet • Best Cost ≠ Lowest Cost/kg Gain • Best Cost ≠ Highest Margin Over Feed Cost • Best Cost = Nutrition Solution that Maximizes Profit

5. Importance of Feed Conversion • Feed Conversion Ratio = Feed/Gain • Measure of efficiency of feed utilization • It is common to improve F/G while making feed cost worse • F/G improvements must be cost effective • Interpreting F/G results is not always clear cut

6. Finishing Closeout Comparison Gaines, 2011

7. Finishing Closeout ComparisonAdjusted for In and Out Weight Gaines, 2011

8. Sow Herd Productivity • Best Cost nutrition in the sow herd is affected not only by F/G and feed cost, but also productivity

9. Sow Herd Throughput and Efficiency • Sow herd productivity (Pigs/Sow/Year) • Pigs weaned/litter • Born alive • Pre-weaning mortality • Litters/sow/year • Farrowing rate • Non-productive days • Sow herd feed cost • Sow herd F/G • Sow diet costs

10. Importance of Throughput in Best Cost Nutrition • F/G is a measure of efficiency only • Cost/kg gain is a measure of efficiency only • Profitability is driven by efficiency AND throughput • Key is to optimize throughput at the lowest possible diet cost

11. What is the Best Way to Measure Feed Efficiency in the Sow Herd? • When examining whole herd feed efficiency the productivity of the sow herd directly determines the number of pigs that sow feed use and costs can be spread over • Whole herd feed efficiency for the sow can be measured using sow feed per pig marketed • Common practice for sow farms to measure sow feed per year or sow feed per weaned pig produced • Alternatively can measure sow feed per unit of market weight produced

12. Gilt Age at Mating is a Driver of Feed Cost and Throughput • Mating too soon adversely affects gilt performance • Waiting to mate is costly with high feed costs • Optimum timing of mating maximizes throughput at the best cost

13. Wean to Market Productivity • Best Cost nutrition is affected not only by F/G and feed cost, but also by throughput (ADG, livability)

14. What is the Value of ADG? • Depends on availability of space in a system • Space short = pigs pushed out by the next group resulting in market weight below optimum • Space long = adequate space to achieve optimum market weight • Technologies that increase ADG have more value in space short situations

15. Effects of Stafac in Space Long vs. Space Short • Go to Excel

16. Effects of Disease on F/G and Productivity • Direct Effect of Mortality • Dead pigs that eat feed but do not produce weight gain • Growth and Performance Effects • Impact on affected survivors • Chronic vs. acute

17. Chronic Immune Stimulation • Affects feed intake Reduced ADG • Lowers lysine requirement • Affects efficiency of gain • Mediated through changing composition of gain – reducing protein deposition in relation to lipid • Lean about 75% water • Lean more efficient to deposit than lipid • Maintenance requirement increased relative to overall requirements Dritz, 2011

18. Major Pathogens Have Changed with the Move to Multi-Site Production • Viral and Mycoplasma • PRRS • PCV-2 • SIV • H1N1 • H3N2 • Mycoplasma Hyopneumonia • Environmental • Lawsonia Intracellularis • Salmonella • Emerging/Reemerging • Swine Dysentary • TGE Pathogens that have placental transfer, poorly protective passive immunity, or can live for extended periods of time in the environment. Dritz, 2011

19. Effects of Bio-security and Sanitation on Finishing Performance and Cost Dritz, 2011

20. Genetic Affects • Productivity and feed cost are significantly affected by genetics, both between genetic lines and within genetic lines

21. Feed Processing • Feed processing techniques have major effects on F/G, feed cost and animal performance

22. To Pellet or not to Pellet? • Pelleted Feeds • Improve feed conversion • Improve ADG • Increase mortality • Increase feed processing cost • Improve profitability???

23. Pelleted Feed • Mortality • Genotype • Feed interruptions • Health and bio-security • Bottom line

24. To Pellet or not to Pellet? • System-specific decision • Ingredient cost • Mortality risk • Genotype • Herd health status • Location disease pressure • If you are going to pellet, make good ones

25. DDGS is the Best Alternative Ingredient Opportunity Shadow Prices

26. DDGS in Animal Feeds • Use will typically reduce diet cost • Variable nutrient content • Unpredictable animal performance • Limits use and savings • Knowledge of nutrient content is key • Consistent performance • Minimize feed costs

27. DDGS Variation Overview

28. ® VALUE OF ILLUMINATE BETWEEN PLANTS - Swine • Top 50% vs Bottom 50% • $318 vs $268 / ton DDGS • 20% Inclusion = $ 2.97 / pig • 30% Inclusion = $ 4.46/ pig • 40% Inclusion = $ 5.94 / pig • Top 25% vs Bottom 25% • $334 vs $257 / ton DDGS • 20% Inclusion = $ 4.57 / pig • 30% Inclusion = $ 6.86 / pig • 40% Inclusion = $ 9.14 / pig *Cost per pig is based on 100 kg gain and 2.7 Feed Conversion

29. DDGS Summary: • DDGS are a very good high quality feed ingredient for both pigs, poultry, and ruminants. • Variation is wide between plants, but understanding difference can be attained. • Changes in Ethanol plants will continue to drive variation of nutrient values. • Proper information can allow for accurate use and possible increased inclusion rates.

30. Feed Additives • Feed additives can be valuable tools in increasing productivity and reducing feed cost

31. Phytase • Widely used in U.S. swine diets • Releases phytate-bound phosphorus • Also releases energy and may improve amino acid digestibility • Not as valuable in high DDGS diets • Phosphorus bio-availability in DDGS is good • Takes knowledge to use it properly • Seeing soft bones in many U.S. herds

32. NSP Enzymes • Not widely used in U.S. diets • Ingredients used in U.S. not conducive NSP enzyme effectiveness • Response has been variable • Still promoted by many feed companies • Mannanase used in some systems to improve soybean meal digestibility

33. Impact of Stafac (10 g/ton) on Heat Stressed BarrowsADG (lbs.) • Heat stress significantly reduced ADG (P<.05) • Stafac improved ADG in both, thermoneutral and heat stress environments (P<.10) Within each period, treatment values with unlike superscripts differ at P<0.05

34. Impact of Stafac (10 g/ton) on Heat Stressed BarrowsFeed Efficiency (F/G) • Heat stress significantly increased F/G (P<.05) in both treatment groups • Stafac significantly improved F/G (P<.05) in both environments, dramatically more in the heat stress environment Within each period, treatment values with unlike superscripts differ at P<0.05

35. Risk Management • With recent volatility in commodity markets, risk management has become an important task for profitable swine producers

36. Summary • Feed cost is 70% of total cost of production • Successful producers will carefully manage all aspects of feeding and nutrition to maximize profitability • This is a complex task!