Feed manufacturing costs in Ireland

Brendan Lynch and Michael Martin, Teagasc

IGFA feed Forum 2007

Feed cost per kg pigmeat, c

90 80
80

70 60 50 40 DK
FEFAC

72 65 66 63 64 DK NETH FRA GER UK IRL

NETH

FRA

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GER

UK

IRL

Composite feed price, /tonne

220 200 180
173 177 169 164 187 DK NETH FRA GER UK IRL 212

160 140 120 DK

FEFAC

NETH

FRA

IGFA feed Forum 2007

GER

UK

IRL

Feed price increase past 12 months, /tonne

100 80 60 40
36 33 38 32 68 67 50 87 71 Price inc % increase

63

20 0 DK
FEFAC

NETH

IGFA feed Forum 2007

FRA

GER

IRL

Why are Irish feed costs so high ? Ingredient costs Scale of mills Location of mills Seasonality of production Delivery cost Labour Energy Diet specification
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The Irish feed industry (1)

Seasonal 30 to 35% in Q1 17-20% in Q3 Pig (17%) and poultry (14%) only 31% of output Low density of feed use High transport costs

The Irish feed industry (2)

High import content Ingredients dearer than Europe Direct shipment v. trans-shipped Small market limits ship size

Density of animal feed production, tonnes

800 700 600 500 400 300 200 100 0 Per km2
FEFAC IGFA feed Forum 2007
50 56 142 102 80 365 345 519

772

225

IRE UK Brittany NE DK

Per km2 UAA

Pig and poultry feed as % of total (2004)

80
63

71 64 63

75

60
57
38 39 30 41

40

46
26 24 31 12

20
18

12

0 Pigs
FEFAC

13

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Poultry

P+P

Feed production by quarter, Ireland 2005-2006

23

20 Q1 Q2 Q3 Q4

28

28

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P+P as % of total by quarter, Ireland 2005-2006

40 41 Q1 Q2 Q3 Q4 28 23

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Diet as % of total pig feed, Ireland (2006)

70 60 50 40 30 20 10 0 Quantity
FEFAC

62 56

20 13 5

Start-Link Weaner Sow Finisher 18

11

13

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Cost

12

Finisher feed as % total feed

Country Denmark France Germany Great Britain Ireland Netherlands
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Finisher Feed % 67 70 72 60 62 75
13

Percentage of each diet fed

FR Starter / Link Weaner Grower Finisher 1 Finisher 2 Sow Composite price, /t 169 IRE 5 11 64 20 212 Ire 2 2 9 29 21 18 20 203

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PigSys 2005

Feed manufacturing costs in Ireland Little information in public domain Anecdotal evidence Need to benchmark the individual company against Irish and UK plants

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Elements of cost
Ingredients Transport Sales / admin / debt collection Repairs and maintenance Depreciation Power Miscellaneous Profit

Manufacturing margins in Ireland 2002

Euro/t Sow Weaner Finisher

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PigSys 2005

Estimating delivery costs Truck depreciation Tax, insurance Labour Fuel Tyres / repairs / service Tonnage per vehicle per year

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Annual cost of a truck (2)

110,000 - 150,000 Delivers 8 - 12,000t Cost per tonne
10 - 18 Occasionally over 20

Factors affecting delivery costs Load size No feeds in consignment Loading time Time per delivery No drops Discharge time

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Effect of distance and no feeds on delivery cost per tonne

25 20 15
13.6 18.5 16.7 15.4 12.1 10.2 9 11.5 14.5 17.9

20.9

10 5 0 1F / 1D
7.2

20 km 50 km 80 km 110 km

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3F / 1D

3F / 3D

21

Effect of distance and load size on delivery cost per tonne (1 feed)
25 20 15
13.6 16.7 13.5 10 7.2 7.3 9.6

16.2 12.8

15

10
10.2

20 km 50 km 80 km 110 km

5 0

7.2

18 T

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22 T

28 T

22

Effect of under load on delivery cost per tonne (1 feed)

25 20 15
14

10 5 0

11.2 10.2 9.8 10.7 10 9.9

12.9 9.6 9.6 9.6

12.2

-4 -2 0 **

20 T

IGFA feed Forum 2007

24 T

30 T

23

Reducing delivery costs ?

Full loads / bigger deliveries Planned schedules Orders well ahead More storage on pig farms Easy access for larger vehicles Round the clock delivery ? Show cost of delivery ?

Feed use on 400 sow unit, t

T/yr. Pregnant sow Lactating sow Weaner Finisher 318 176 227 1428 T/mth 26 15 19 119

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PigSys 2005

Sales / office costs

Financing of stocks Ingredient storage Sales (debt collection) Technical advice Office admin Credit 7, 30, 60, 90 day Total = 8.00 to ??

High cost of sales in Ireland Salesperson Salary Car Office How many tonnes / year ? Do you need to collect cheque ? Other countries direct debit ? Discount for direct debit
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What does feed medication cost ? Cost of medication Extra administration Reduced output Handling of flushing material Storage of medicated feed Risk of cross contamination

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How many formulations ? Fewer formulations will improve plant throughput including storage bin utilisation Specials blends disrupt flow in mill

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How many pig feed formulations ? Pregnant sow Lactating sow / GP sow Weaner Finisher High Density Finisher Medium Density Finisher stage 2 (60kg +)

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Energy use
UK survey - average 81 kwh/t Irish figures ? Grinding Pelleting Steam Light Conveyers

Grinding
Hammers and screens
0.25

Power
1.75

Pelleting
Dies and rolls 1 Power 3 Fuel 2 Total 6 Reduced throughput ?

Miscellaneous costs (1)

Shrinkage
0.75% to 1.25%

Labour
8,000 t/man 40,000 /yr 5.00/t

Shrinkage in the feed mill Ingredients damaged or destroyed Feed DM over spec Vitamin-mineral mixes out of date Reworked materials Spillages Rodent/insect damage Errors in metering Write-off of faulty feed
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Miscellaneous costs (2)

Repairs and maintenance 2.00 Insurance
Fire, product liability, employee

1.00 Quality control 0.80

Role of QC QC programme protects the mill against disputes NIRS is fast and cheap for estimation of ingredient composition Allows more precise formulation with smaller safety margins Requires identification and segregation of consignments
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R & D in the Irish feed industry (1) Minimal investment Teagasc sow project 2004 Farm trials usually a waste of time and money Bad information is worse than no information !

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R & D in the Irish feed industry (2) Serious lack of information on ingredients Diet specifications are high compared with continent. Can we reduce ? A fund of 20c per tonne is needed

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Magic potions in feed ! Feed formulation should be stripped to the proven

nutrient levels ingredients additives

Magic ingredients and additives must be backed up with solid proof

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Total cost of manufacturing pelleted feed

Haulage inwards Grinding Pelleting Labour Sales and admin Misc. Total 6.00 2.00 6.00 5.00 8.00 6.00 33.00

Add depreciation, delivery, profit

Can we lower diet specs at present time ?

Animal performance will be poorer on low nutrient diets MJ energy per unit gain is constant Manufacturing cost per unit nutrient is higher Little savings from low spec pig feeds

Coping with high pig feed prices and negative margins

Critical factors
Composite feed price Feed conversion efficiency Accurate records Benchmarking of production costs on the unit Effective buying and selling

Can mills compete with home compounding (1)

Home compounder saves on
Haulage Sales / admin QA Pig performance

Home compounder loses on

Ingredient prices Shrinkage Limited range of ingredients Financing Capital cost

Can mills compete with home compounding (2) Supply balancers ? Contract milling

Conclusions (1)
Pig industry needs a strong and efficient feed sector Feed industry needs profitable pig production Pig feed manufacture is not a very profitable business Competition is keen Pig industry struggles with high feed prices

Conclusions (2) Irish pig industry cannot sustain present difference between continental and Irish prices Industry needs a benchmarking service to improve efficiencies

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