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Reducing Cost of Production

Simon Grey is an independent adviser of pig grams management, director of consulting company Checkfarm Consulting Ltd

The production cycle of a pig is about 11 months (from insemination to sale). When the process is started you do not know how much product you will sell and what will be the price for it. That is why producing for the lowest cost is important as it gives us the highest chance of making a profit!

To control cost firstly we have to really understand what cost really is. For example it is easy to reduce the cost of production on any farm by 60% . All we have to do is to simply stop feeding the pigs!!! Clearly however this is not possible as the pigs will die and the business will have nothing to sell and go bankrupt!

Understanding the business

In pig production we sell only one thing it is kg of pigmeat. This is either liveweight or deadweight depending upon the local market. We are paid for each kg (UAH / kg). When we look at cost of production this must be measured in the same way – cost per kg (UAH / kg).

Maximising sales (kg of pig meat) not only maximises profit but also reduces cost!

Maximising sales has to be the first target of the business. It explains the world-wide trend for heavier and heavier pigs at slaughter.

We have to have cost or we have no business! What is really meant by controlling cost is controlling waste!

Staff numbers

There are much more workers at the farms of post-Soviet countries than in Western Europe and other well developed parts of the world. In Europe if we produced pigs with the same number of staff as in post-Soviet countries we would become bankrupt very quickly.

On every farm there are the production workers that feed and care for the pigs. Without production workers there is no business. But the owner should control their effectiveness.

1) How to differentiate fixed and variable costs?

2) How not to waste the money?

3) What do we need to calculate ROI (return on investment) for?

4) What is the formula of the profitable business?

5) Is it possible to reduce the stuff without negative impact on production?

You can find answers for these and other questions in the full version of the article in the Profitable Pig Production magazine, №4 (16) 2013.

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