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Advisor

Re: Yes and no

Yes, it is about how the cost is defined. That's the reason why one should do an in-depth study to determine what those costs are.  Far too many times we producers are flying by the seat of our pants and haven't a clue what those costs are.  Our gut instinct might tell give us a sense where that might be, but without taking an ocassional look at the data, we haven't a clue.  Just because the impact of these costs vary from farm to farm is not good enough to ignore them altogether.

 

I suspect you have more than a gut instinct about what your costs are.  I'm not telling you anything new here.  There's the feed conversion data, rate of gain, lean percentage, turnover rate of the barns, health costs to total volume, death loss, cash flow coverage and other financial ratios that tells the operator how well he/she is doing, One can determine which barns are more efficient and which pieces of equipment in each barn contributes to the bottom line or whether it is taking money away.

 

From my experience as a custom operator, I was able to prove to a customer that my costs gave me a realistic picture of my custom operations and justified the price I was charging.   Another farmer (non-customer/competitor) thought I was not charging engough to make a reasonable profit.  The numbers I had in black and white gave me the confidence to address their questions, head-on.  I didn't merely estimate my costs, but used personal data, including depreciation and operating costs to back it up.

 

As for researchers, if they don't control all of the variables in their research, I wouldn't have any confidence at all in their results.  They're spitting in the wind, just like anybody else.  That's exactly what is going on with the local foods/organic foods movement.  When they do rely on research, when it is scrutinized, it cannot hold up to peer review, often because the methods used to collect the data is flawed.

 

However, my point remains; one can easily come up with a protocol that would minimize the time delay in crucial operations when searching for meaningful data on the cost structure on the farm. 

 

 

Advisor

Re: Yes and no

Our buildings are identical, all 12 of them.  Equipment, ditto. 

 

We did once wonder if one or another "performed" better, due to its spot in the site configuration or some other variable, because some consistently closed out higher figures for years.  It turned out to be more of a function of which sow group was filling each one.,,that was the only other constant.  This was confirmed when the farrowing farm that sources us changed, and performance moved to new high spots in our cycle along with it. 

Sometimes, too, it is the seasonal fluctuation, such as stocking in hot weather and when a building is filled determining when the pigs get bigger in that space. We cycle off-kilter with the calendar a bit, filling the same buildings at precisely the same time each year. 

We can pretty much see which groups have more gilts inserted, and could always tell which "side" of a dual farrower was shipping pigs to us that week.  Who manages and how makes all the difference, for sure. 

SImilar issues in uncontrollable variables can really affect a hay crop's costs, if we have to ted one cutting three  times, and another one only once, for example.  Typically, the more trips you have to make -  if it's gotten rain on it, for instance - the lesser quality the hay, so the lower the asking price for it, too. 

Our real problem as far as controlling costs is that we spend as much to turn a sorry bunch of pigs as we do a sound one, and earn nowhere near as much.  No way around it, and none of which is of our doing, by the way...nothing much we can do to prevent a disease break or really clear it up during our short production interval.  You just sort of have to wade through that river of red ink for a while, and hope the farrower gets tired of losing his money and yours, too. 

Overall, you can control some costs, but not all of them.  Fuel is getting ready to take our breath away...again! 

I try to hold the line on insurance and taxes, but those are affected by losses the company takes for other people's coverage and how much revenue does not show up with every new mandate from Raleigh and DC, respectively. 

Labor costs either rise, as loyal employees are rewarded for their choice to stick around, or you have issues and expenses with training someone new.  Take your pick. 

Some maintenance can be delayed, but it will probably cost more when you finally get around to it. Any problem delayed is not really a problem solved, is it?

I think some people really cheat themselves into thinking that they have one cost really well-controlled, but it comes back to bite them in the long run.  That is why I say the overall picture is the key...you can't let yourself lose sight of the forest by looking only at each tree. 

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Senior Contributor

Re: Yes and no

One other thing to consider is if you are going to use the tractor, in the prior example, to plant corn and they are only going to use it for a few hours is it really appropriate to charge it by the hour?  Its not like anyone in their right mind would rent you a tractor for a week and if you didn't have the livestock you'd still require a planting tractor for those few hours a year.

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