How to forecast profits and expenses in your piggery
Keep control of your costs and forecast your return on investment to monitor the potential success of your piggery.
Profit indicators in a piggery
In the pork industry, the 2 main indicators of net returns to help you forecast financial outcomes are:
1. The margin over feed cost
Feed represents about 65% of overall costs in pig farming, so for small businesses the margin between revenue and feed cost is a fair measure of performance. This is called the margin over feed cost (MOFC).
The MOFC is obtained by deducting the cost of feed to produce 1kg of hot standard carcase weight (HSCW) pork from the average pig price. A higher MOFC indicates a higher profit margin. This figure can vary greatly due to fluctuating feed prices, so take care when forecasting.
2. Cost of production or operating costs
For larger businesses, you can use financial packages and spreadsheets to keep track of and update the cost of production on a daily basis. Cost of production includes all the costs of producing 1kg of dressed carcass. Some businesses and benchmarking groups record all the costs of producing 1kg of dressed carcass weight except for interest on capital and depreciation.
You can calculate the profit or operating margin by deducting the cost of production or the operating cost from the average price you received (per kg dressed carcass weight) for all pigs leaving the property.
The pig profit cycle
Pork production operates in a volatile economic climate with feed costs influenced by grain supply, and pork price responding to supply and demand. The pig-meat price to feed-price ratio illustrates the volatility of pork production.
The price of pig meat, in cents/kg of HSCW, is divided by the price of feed, in cents/kg, to find the ratio. A higher ratio than the long-term average generally indicates a profitable industry.
To increase your pig margin, you can:
- improve sow reproductive performance
- increase the number of piglets born alive per litter
- decrease non-productive days in the breeder herd
- time pig mating correctly
- manage pig ovulation and fertilisation rate
- decrease embryonic and foetal mortality
- monitor the health status of your herd
- reduce sudden stresses (e.g. high air temperature, mixing with other pigs)
- minimise feed wastage
- minimise human-animal interaction.
Find out how to manage the environmental impact of piggeries.