Improve bottom line results with internal benchmarking
If you work in the pork industry, you are well aware of the economic challenges it faces. Some industry analysts have made comments on the current market conditions that bring back echoes of 1998.
As someone involved in the feed and nutrition industry, a common question I hear during tough times is, “How can I lower production costs?”
I understand that thought process. We need to critically review inputs and the cost-to-return ratio associated with them. However, I don’t believe that is the only question to ask during these challenging times.
We should also ask, “How can I improve performance to improve bottom line results?”
Some of the answers to that question can be found right in your own backyard.
One of the tools Vita Plus has developed the last couple of years is a process to analyze closeout data. The Economic Value Analysis TM (EVA) combines economic results with animal performance measures. By linking dollars and cents to performance measures, like average daily gain (ADG), feed-to-gain ratio (F:G), percent marketed, optimum market weight and others, closeouts can be ranked by their impact on the bottom line. These closeouts can then be “rolled-up” and compared by site, feed mill, sire line and other parameters. The resulting magnitude of difference in economic performance within the same system is often surprising.
One popular way to look at the data is by comparing sites within a system. The graph below illustrates data from one system with 33 wean-to-finish sites. The data was rolled-up for the previous four years. In this system, the best site had an EVA that was $6 per pig better than the farm average, while the worst site had an EVA that was $8 per pig worse than the farm average – a difference of $14 per pig between the best and worst sites.
In theory, the worst site had the same opportunity to perform as well as the best site in the last four years. What happened? What changes can you make to bring up your bottom end sites? During tough times, answering those questions isn’t simply an interesting exercise. It could mean the difference between success and failure.
If you are interested in having an EVA done on your operation, your Vita Plus consultant would be happy to assist you.
About the author: Nate Brown is the swine sales manager for Vita Plus and has been involved in the feed industry for more than 20 years. He received his bachelor of science from St. John’s University in 1991. His area of interest is nutrition and growth and its influence on the profits made for the producer. Brown has served as an executive board member for the Minnesota Pork Producers Association, a board member for the Martin County Pork Producers Association, and a Minnesota Pork Congress committee member. He lives in Minnesota with his wife, Sarah, and has four children: Hank, Ben, Zach, and Gabby.
Markets and economics