**Does cheap feed always mean more Money?**

What is the effect of 100 grams live weight or one point feed conversion (FC)?

Introduction

The South African broiler industry currently contains many exciting new opportunities. The demand for broiler meat is growing by the day and broiler operations are expanding rapidly to meet the increased demand. It is a very profitable industry and growers tend to cash in on the positive economic situation.

Unfortunately, some producers do not do their calculations correctly when they consider using cheap feed. A higher-density (HD) feed will obviously cost more than a lower-density (LD) feed, but the main aim when comparing feed prices is to evaluate production results accordingly. You will obviously get a poorer feed conversion (FC) or lighter bird on a less dense diet, but how much does this cost you?

Let us assume you have two houses of 20 000 birds each, with each house being fed a feed with a different density. If we assume that you slaughter both houses at exactly the same age (38 days) and with approximately the same mortality (5%), the following calculations could be done:

1. The FCR scenario

Question:

If we assume that the live bodyweight of the two houses is exactly the same but the FC differs by five points (i.e. 1.77 vs. 1.82), and the weighted average feed price differs as shown below (R112/ton), then the following are applicable:

Therefore, for the HD feed to have the same cost of gain as the LD feed, the HD feed price must be reduced or the FCR must be improved, to break at least even. By how much?

Cost of gain = (w/avg feed price per kg) X (FC)

The HD feed price has to be reduced from R1 927 to R1 864 (i.e. R63/ton) to be competitive with an FC that is five points better, and to break at least even. We can also conclude that one FC point is worth R9.80 per ton of feed (R1 864 – R1 815 = R49 ÷ 5 points). This applies to the specific feed prices and performance criteria listed in the table above and would obviously change as the feed prices change.

Alternatively, we can speculate that a more expensive feed price of R112/ton is justified if the FC is substantially better than the less expensive feed, assuming that the body weights obtained are exactly the same. Therefore, how much does the FC need to improve to result in a similar cost of gain?

As before, cost of gain = (w/ave feed price per kg) X (FCR)

Therefore, the FC needs to be a further six points better (1.77 to 1.71) than the LD feed to break even.

2. The WEIGHT scenario

Question:

What should the average live body weight be to justify the difference in feed price (R112/ton), if we assume that the FC of the two houses is exactly the same?

We can therefore say that, under the above conditions, one ton of feed will feed 313.87 birds (1 000kg ÷ feed intake). Therefore, at a producer’s price of R6.50/kg, the birds fed on the HD feed should weigh 54.90 grams (R112 † 313.87 birds ÷ R 6.50 X 1 000) more than the birds fed on the LD feed to justify the R112.00 price difference. This can be calculated as follows:

Calculation a

Grams = (feed price difference) ÷ (number of birds fed X produce price) X 1 000

For a producer that slaughters his own birds, the weight scenario should be calculated further. If we assume that the average slaughter percentage is 72%, then the heavier bird would result in a bigger return. How much is this worth at the same age?

Assumption:

Average price per slaughtered bird = R9.50 per kg

This calculation should be adjusted to accommodate the slaughter weight and advantage of the higher return on a heavier bird.

Calculation b

Grams = (feed price difference) ÷ (number of birds fed X produce price X 72%) X 1 000

Therefore, the birds fed with HD feed now only needsto be 52.20grams heavier than the birds fed with LD feed to justify the difference in feed price. This is applicable only to a producer who slaughters his own birds.

Under the above conditions and feed prices, we can conclude that one gram of live body weight is worth R2.04 per ton of feed and one gram of slaughtered weight is worth R2.15 per ton of feed

Conclusion

Although the poultry industry is in a positive economic phase, we all know what could happen if the economy should take a downward turn. The maize price could increase and the rand could weaken, resulting in more expensive imported protein sources and higher feed prices. Those higher production costs would inevitably result in lower margins or higher selling prices, which could cause increased consumer resistance.

Adjusting feed prices through density changes could be to your benefit, but then you have to play it right. These calculations are a very good management tool for both the farmer and the feed company. For more information, phone Attie Venter on 082 779 8335.

Date published: 2007-01-03

Author:

Attie Venter

Publication:

N/A