The Value of Food Additives: An Economic Analysis

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Feed costs are the biggest cost on a pig farm, which is why feed additives are a welcome method of doing more with less feed. Is it possible to economically quantify the effect of food additives on a farm?

The economic drivers of pig production may be common to all systems or individually unique to a single farm. The common rule of thumb is that feed costs are equivalent to 60% of a producer’s cost of production. Thus, the main economic drivers are feed costs and cost of gain. But other production parameters may play a role in these articles for nutritionists. Production systems often focus on purchasing bulk ingredients, energy and / or amino acid composition of diets to make the most cost-effective adjustments to their nutritional strategies, but rarely focus on additives food.

Consider a simple example of corn priced at US $ 4.00 / bushel (25.4 kg, ed.), Which equates to about $ 28.00 of feed cost for a fattener-finisher hog (25 to 127 kg of body weight), while phytase can cost around $ 0.20 for the same period of time. It’s easy to see why nutritionists would spend the majority of their time focusing on bigger items of food costs and less on food additives. However, when researchers start to evaluate other parameters, it is possible to find hidden value in food additives. Enzymes are the best example of this, as nutritionists typically apply a nutrient matrix to the formulation, which helps reduce feed costs when enzymes are used. Depending on regional markets, these savings may be marginal or extremely valuable to producers.

Finisher pigs enjoying a meal on a farm in Minnesota, USA.  -Photo: Vincent ter Beek

Finisher pigs enjoying a meal on a farm in Minnesota, USA. -Photo: Vincent ter Beek

Xylanase in corn-based diets

Over the past five years, the xylanase in corn-based diets has become a shining example of how to use a food additive beyond the cost of formulating food. In the United States, producers rarely used xylanase in pig feed, because – while the effects on digestibility were apparent in the literature – the growth performance benefits were not consistent enough to justify their use. use.

However, research conducted over the past decade by Dr Dean Boyd within the Hanor System and others has found a consistent reduction in finisher mortality when xylanase was added to rations, especially those containing Higher by-products of distillers’ grains and solubles (DDGS) and / or wheat middlings. Even in difficult market conditions, such as in August 2020, a reduction of 1% (5% vs. 6%) is more than $ 1.00 per pork value, but in peak market conditions it could be greater than $ 1.50 / pork value.

But evaluating food additives within a system requires careful review and evaluation of both the literature and research on the system or field trials. A system that experiences 6% mortality versus a system with 2% mortality in finishing are two very different value propositions; the value to the low-mortality producer is only about a third of the value of the other producer. The same can be said with the wording changes. For example, cheaper feed may not always be available regionally or fit into a producer’s plant management at an economic value.

Common economic drivers in pig systems

The easiest items to put on the list are mean daily gain (ADG), final body weight (BW), feed conversion ratio (FCR), feed costs, mortality / morbidity, and d costs. installation for a growing pig. For a sow system, the most common include non-productive days, number of pigs / sow / year (PSY), and mortality and / or cull rate. The success of a system or manager is usually tied to some of these elements, but sometimes a deeper dive into management can reveal other economic drivers. Biosecurity is a prime example. Applying and enforcing strict biosecurity practices, both on the farm and in the feed mill, to potentially eliminate disease in the system is a huge cost saving opportunity, which improves animal performance and reduces waste. mortality in the system. Recent research reported by Dr. Lee Schulz, agricultural economist at Iowa State University, suggests that depending on what opportunity producers are willing to consider, they can pay as little as $ 0.36 / pig or as much as $ 2. , $ 62 / pig for better market access, for example (ASAS National Meetings 2020).

But Dr Caleb Shull (Maschhoffs System, National ASAS Meeting 2020) estimated that overall mortality, from sow to finish, costs US hog producers around $ 2.88 billion, suggesting a reassessment by most producers. to take into account other key factors to reduce mortality.

Other factors that are not often factored into the value equation for nutritional changes within a system might include ease of implementation, stock management, water consumption, characteristics manure, etc. Producers and nutritionists often focus only on stool consistency during the first two weeks of weaning. But it takes little thought to understand the value of the manure we create and the impacts we have on the environment. The evolution of LCA models helps us better understand the environmental impacts of waste, but these models are still limited for many food additives.

As it is clear, the main economic drivers can be complex for nutritionists to navigate their formulations. Here are two examples to understand the opportunities: A lower cost, performance-oriented formulation for reducing mortality.

Changing feed formulation by eliminating the most expensive diets results in little overall savings.  - Photo: Erik van der Burgt (Verbeeld)

Changing feed formulation by eliminating the most expensive diets results in little overall savings. – Photo: Erik van der Burgt (Verbeeld)

Low cost formulation example

Nursery diets are the easiest diets to reduce formulation costs, ultimately using cheaper ingredients versus highly digestible proteins. In nursery feeds, lactose or dairy products, fishmeal, spray-dried porcine plasma (SDPP), zinc oxide, and other expensive feed ingredients can have widely varying costs. A recent trial at the University of Arkansas focused on a food additive to replace fishmeal or SDPP. The results suggest at least equal to better performance.

  • Positive control (PC, with additional ingredient) vs negative control (NC): 3% SDPP / 6% fishmeal – additive 0% / 3% – reduction of 0.13% SID lysine;
  • PH1: $ 450.87 versus $ 438.53; PH2: $ 354.04 versus $ 341.70;
  • ADFI: Commercial system, first three weeks = gain of 1.40 FCR / 4.25 kg. Phase 1: 2.3 kg; Phase 2: 3.65;
  • Food cost: $ 0.073 / economy pork; $ 9,800 / 5,000 sows.

As can be seen under current market conditions, even in traditionally expensive diets, changing feed formulation by removing more expensive diets results in little overall savings. But when evaluating the producer-finisher period, if the lysine SID is lowered by only 0.1%, the estimated costs of feeding the diet would be lowered by 1.5%. If an overall FCR of 2.85 is used, that would translate to a savings of around $ 1.00 / pig, a value proposition that most producers would consider implementing. Thus, aiming for savings in feed costs or even FCR, the finishing period and especially the last 40kg of gain is the most advantageous opportunity on the current market, in the USA at least.

Example of optimal performance

It’s time to focus on the least expensive formulation example and add a 10% improvement in body weight / gain and a 10% improvement in FCR in the first 21 days after weaning.

  • Phase 1: $ 450.87 versus $ 438.53; Phase 2: $ 354.04 versus $ 341.70;
  • FCR: PC = 1.40; NC = 1.26
  • Total gain: PC = 5.95 kg; NC = 6.55; assume the additional gain is $ 0.50 / kg
  • Food cost: PC = $ 3.17; NC = $ 3.04

Based on these general figures, the additive would be worth $ 0.42 / pork, which includes the cost of the feed additive. This new value with the additional performance benefits now creates a return on investment (ROI) of 4: 1 for this example; it is therefore an implementable technology.

But how can a producer turn the tide to understand what a technology is worth? By first calculating the value of the research and then determining the return on investment, it is possible to justify the perceived risk of implementing a new technology. Assume a value of $ 1.00 / pig, similar to a mortality benefit or savings in finishing feed costs, a return on investment of 3: 1, and feed intake of 290 kg / pig. This equates to about $ 0.86 / tonne of whole feed cost, and if the inclusion is 0.5 kg / tonne, a producer should not pay more than $ 1.72 / kg for this feed additive.

Conclusion

In conclusion, a system must assess all economic drivers and understand their value to that system. Then the technologies should be evaluated only for the main drivers of that system, which have the greatest opportunity to improve profitability. In addition, it is essential to understand what the values ​​of different technologies are for a system by not just looking at a dataset that has promising results, but by understanding whether the changes fit into the system’s value proposition, beyond dollars, but taking into account manageability and ease of implementation.

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