Economics
Understanding the value-added benefits of soybean meal for the swine industry.
Based on extensive research and decades of real-world commercial application, seven swine-industry leaders developed an extensive FAQ document to help the industry understand the impacts of soybean meal.
Section Four
1. What is the preferred method to assess the financial aspects of a swine feeding program?
Each system varies slightly in the methods used to assess the financial impact of their feeding program. Many times, income over feed costs is used, but the full analysis of all costs and revenue is crucial. For example, housing costs may be impacted by a more rapid growth rate (space shortages) so must be included. Various aspects of revenue will be impacted if the variation and percentage of full value pigs is considered. A complete evaluation of all feeding and production costs, including all sources of revenue, is suggested. The preferred method is calculating the net-profit-per-pig of a swine feeding program.
2. What are the shortcomings of using “income over feed costs” or “feed cost per lb of gain” when making financial decisions?
Often, nutritionists will use “income over feed costs” and “feed costs per lb of gain” as their financial measure of success. These methods typically overlook packer pricing factors — e.g., sort losses, lean premiums, group uniformity and leverage effects of heavier market weights. The shortcoming of using either one is knowing whether a particular system is fixed-time or fixed-weight, as the economics are different for each. In addition, neither metric alone fully accounts for the profit achieved on a per-pig basis.
3. What is the additional economic value of using minimum soybean meal (SBM) levels rather than least-cost formulas using maximum levels of crystalline amino acids?
The primary benefit of using a minimum SBM level in formulations occurs during the summer, when it minimizes or eliminates the summer carcass weight dip. Extreme displacement of SBM by a higher fiber ingredient such as distillers’ dried grains with solubles (DDGS) or corn germ meal reduces carcass weight gain. The second benefit tends to be in the winter months when barns are closed and respiratory diseases become a problem. When target carcass weight can be achieved with the typical diet, the analysis depends on ingredient costs and when SBM is used at higher levels. Under this scenario, maximum synthetic lysine levels are set only by dietary phase.
A recent comparison of costs and revenue for two different feeding programs aimed at optimizing carcass weight gain during the summer months — where one held a minimum SBM content and the other purely least-cost-formulated — indicated that after feed costs, carcass weight and mortality income were incorporated, the return per head was $2.99 greater when SBM minimums were enforced. The cost assumptions used were $5.96/bu corn, $400/ton SBM and $220/ton DDGS (derived from a three-year pricing history for a composite sampling of nine Midwest feed mills) and a carcass weight value of $1.00/lb. The challenge is capturing the anticipated tendencies of consistently better performance, especially in health-challenged flows or during summer months, compared to the higher feed costs.
SBM Economic Value: $ Return/Head
