Do you want to know how much money pig farms make yearly? If YES, here are 6 factors that determine the income & profit margin of pig farm business owners.
There are two general ways to enter the pig farming industry. You either enter as an independent operator or as a contract grower raising pigs for another farmer or producer. However, a third of players in the industry are large corporations or contractors that employ other contractors and producers to raise some, or all their pigs.
New commercial pig farmers looking to contract to a large integrator, have options including breeding females to produce piglets and growing them to age and size, receiving and growing weanlings to finishing weights or a combination of these choices.
Note that most large contractors use company or industry standards to specify the size, shape, design and ventilation specifics potential farmers will need to base their new barns on and while farmers can arrange the independent building of these barns, they should keep in mind that while most construction loans run 10 to 15 years, the life of the barn should be 30 to 40 years.
Long-term vision is very important as barns should be solidly built, providing enough comfortable and stress-free space to deliver proper animal welfare.
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How Much Does It Cost to Raise Pigs?
Have it in mind that each barn is different, but costs for a 2500-head wean-to-finish tunnel barn are roughly $300 to $310/pig space, meaning approximately $730 to 800 thousand dollars. Beyond this, a land base and a good supply of quality water are important.
A solid roadway that is accessible for large trucks in all weather conditions is also necessary. According to reports, approximately half of the pigs raised by US farmers were on family farms under contract as part of an integration system.
In most contracts, farmers are responsible for the building, ownership and upkeep of the barn, the farm utilities and associated costs, daily labour and hands on care of the pigs including unloading and loading, while the company or contract owner supplies the feed, medicine, vaccines and arranges the sale of the pigs.
Also note that some contracts are paid on a pound of weight gain or as a set price for acceptable pigs produced in a farrows to weaned pig contract. Others include incentive payment schedules for higher feed efficiency and productivity, lower death losses, or above level pigs produced per sow in the farm.
Still, others are paid a set amount on a per day basis, whether they have 2500 or zero pigs at any given time, giving farmers a consistent and timely payment. This type of contract holds large contract operations to a standard of keeping the pigs moving, and the farmers’ barns at full capacity as is possible.
Nonetheless, there are a number of factors that go into determining the profitability of any pig farm. The farm profit will be based on these factors outlined below:
6 Factors That Determine How Much Pig Farm Owners Make
1. Farm Productivity
Production in this scenario is the process of rearing pigs from farrowing to finishing stages
as well as transporting and marketing of live pigs, pork and other pig products and by-products. Note that pig farm productivity is expressed in terms of yield per unit of input.
Productivity shows the amount of output realized per unit of input achieved by a farm. Productivity is the rate of output in relation to the work, time and money needed to produce them. Productivity per worker can be increased by longer hours, more effort, improved technology or better management.
Pig farms productivity indirectly entails the amount of income the farm can generate and the amount of profit it can make annually.
2. Farm Physical Products
Physical products in animal production include live animals, meat, milk, wool, hides and skin, eggs, horns, hooves, bristles and manure. In pig production, physical products include live piglets, adult pigs, pork, lard, bristles, pig skin, manure and hooves.
Physical products in a pig farm are measured in terms of the number of piglets produced by a sow per litter per year, number of piglets born alive, weight gain per month, number of piglets weaned and average adult body weight. Note that the quantity of live pigs, pork and pig products and by-products produced in a piggery per year are clear indication of physical productivity of that pig farm.
The physical productivity of a pig farm can be affected by stockman-ship, capital investment, pig production technologies adopted, feeds and feeding system, housing, diseases and parasites, type of pig breeds used and management practices used in the farm.
These factors can affect physical productivity either positively or negatively in the production process. In addition, the sale of physical products will lead to the monetary or financial aspect of productivity which will go a long way in measuring the profitability of pig farms.
3. Variable Costs
Variable costs in pig production include: cost of feeds, fuel, water, electricity, amount spent for part-time workers and Miscellaneous costs. The sum of the fixed costs and variable costs will give the total production costs (costs of inputs).
The products (output) will be sold and revenue obtained and the difference between them will give either profit or loss. Note that the economics of pig production deals with the complex subject of spending money wisely in terms of spending the right amount on the right areas at the right time to make meaningful profit in pig business.
4. Breed Selection
The selection of breeding stock of pigs is a vital operation in the pig farming industry. Selection means choosing from many alternatives based on a standard, guideline or criteria set up by the people involved in the selection. Note that the selection of breeding stock of pigs will focus on those traits, characteristics or qualities possessed by different breeds which help to promote increased productivity and profitability in pig business.
However, the basis for selection of breeding stock include growth rate, reproductive qualities, physical and genetic defects, general character, adaptation, overall farm performance, conformation, health condition and consumers’ preference.
Other basis of selection include; feed conversion ratio, back fat thickness, milk production, quality of meat, colour, carcass quality, mothering ability, temperament, litter size, weaning age, weaning weight, piglet mortality rate and slaughter weight.
5. Pig Keeping Practices and Farm Scale
The system of pig keeping chosen by a farmer will depend on many factors which include: the choice of the farmer, the prevailing weather condition, financial capability, availability of pig feeds and the type of breeding stock. Some farmers embark on small scale pig farming, others on medium scale or large scale pig farming.
Peasant farmers usually due to shortage of capital and inadequate vocational skills and basic knowledge keep pigs under small scale. One the other hand, commercial pig farmers who have enough financial backing and huge capital outlay, adopt large scale system of pig farming. All these and the scale of the farm will dictate the profitability of the farm.
6. Farm Management
Making and keeping of a farm budget increases profits. A budget ensures that money is properly planned for and allocated on the farm so as to avoid wastage. Also the manager is able to easily follow up his spending expenses and this keeps him from making unnecessary losses.
Keeping of farm records increases farm profits, especially since farm records help the farm manager to follow up activities that are going on. For example, how many animals have been produced, how many have been sold, how much feed is in stock and this deals with careless management hence better results are realized on the farm.
Conversely, the use of hired labour on the farm may lead to decrease in profits. This is because the manager has to spend extra money to house, feed and also pay off workers on the farm. Availability of extension services is another factor that affects profitability.
Most of the farmers lack knowledge on important management practices that would help them increase on their production.
This was because extension services were not available to most of the farmers. Most of the farmers depended on knowledge from their own experiences which was not sufficient. The few farmers that had a chance to interact with extension officers gained better skills on how to manage their piggeries for better results.
In Conclusion, in the US from 1 pig, you can get a net profit of $100 – $500 after half a year of farming depending on how the farm sell the pig’s meat. 1 pound pork is usually sold for $2 – $4. Most often the price is around $3.5 per pound. After butchering and processing market pig yield about 55% (+/- 10%) meat.
In the worst cases, pigs can have as little as 40% meats in carcass. So with an average pig that weighs around 265 pounds, the yield will be around 146 pounds of meat. So, average pig meat without processing will be worth around $ 511.
Note that pig farm can also earn in other ways than selling pork (raw, frozen or processed). Pig farmers can also make money through selling newborn pigs and selling pig manure which is used for fertilizing. Although it all depends on the product a farm makes its main source of income, most often you can earn on them simultaneously. But definitely the main element of income is meat.
Estimated Profit Margin for a Pig Farm
While the forecasted profit has improved by $25 per pig, the business profit margin averages are still only at a break-even level for the typical producer. There is optimism that feed costs will remain low in coming years to help grow the business profit margins.
However, in addition to raising livestock and selling goods, many farms have grown their margin by holding farm tours, “family” dinners, and classes that include everything from cheese making to butchering and cooking.
Nonetheless, aside executing operational tasks like managing diets, ventilation and biosecurity, and any entrepreneur going into this business is advised to keep an eye on margin management. Stay connected with risk management adviser to determine ideal strategies that capitalize on potential rallies and to responsibly protect the health of their balance sheet.