Finding the costs to cut

Once you know your cost per kg, the next question is how to bring it down. There are two ways: spend less, or produce more kilograms from the same costs. Often the second is worth more.

Start with the biggest lines

Rank your costs from biggest to smallest. Then work out each one per kg. A 5% saving on a big line is worth far more than a 50% saving on a small one.

In a piggery, feed is nearly always the biggest line. Australian Pork Limited has put grain at about 60% of the total cost of production. In cattle and sheep, look hard at feed, labour, replacement stock and pasture costs.

Look at output as well as cost

Cost per kg has two parts: the cost on top, and the kilograms underneath. You can lower it by lifting the kilograms. For example:

• more pigs weaned per sow, or fewer deaths
• a higher weaning rate in cattle or sheep, meaning more calves or lambs weaned for every female joined
• better growth, so stock reach sale weight sooner
• running more stock over the same overheads, if the feed is there.

In a piggery, feed conversion is a big lever. It's how many kilograms of feed it takes to grow a kilogram of pig. A small gain, spread over thousands of pigs, adds up fast.

Be careful what you cut

Some costs drive output. Cutting drench, vaccines or feed can save money this month and cost you more in deaths or slower growth. Before you cut a cost, ask what it does to the kilograms. If output falls more than the cost, cost per kg goes up, not down.

Compare with others

Benchmarks help you see where you're out of line. Compare your figures with published budgets, industry reports and your own past years. Look for the lines where you're well above others, then ask why. Your vet, nutritionist or agronomist can help with the production side.

Keep a simple routine

Work out cost per kg once a year at least, at the same time each year. Use the same method each time, so the trend means something. Then pick two or three changes, put a figure on each, and check the result next year.

Try the free piggery feed margin calculator to see what feed price and conversion do to your margin. Our guide to grain prices and piggery cashflow shows how to test a grain spike.