Lynchmanufacturing Cost

7/28/2019 Lynchmanufacturing Cost

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Feed manufacturing costs inIreland

IGFA feed Forum 2007 1

Brendan Lynch and Michael Martin,Teagasc


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Feed cost per kg pigmeat, cFeed cost per kg pigmeat, c

80

80

90


72

6466

6365

40

50

60

70

DK NETH FRA GER UK IRL

DK

NETH

FRA

GERUK

IRL

FEFAC


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Composite feed price,Composite feed price,/tonne/tonne

212200

220


187

164169

177173

120

140

160

180

DK NETH FRA GER UK IRL

DK

NETH

FRA

GERUK

IRL

FEFAC


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Feed price increase past 12 months,Feed price increase past 12 months,

/tonne/tonne

8780

100

Price inc


71676863

32

50

38

3336

0

20

40

60

DK NETH FRA GER IRL

% increase

FEFAC


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Why are Irish feed costs so high ?

Ingredient costs

Scale of mills Location of mills


Delivery cost Labour

Energy Diet specification


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The Irish feed industry (1)The Irish feed industry (1)Seasonal 30 to 35% in Q1

17-20% in Q3

Pig (17%) and poultry (14%) only 31%

o ou puLow density of feed use

High transport costs


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The Irish feed industry (2)The Irish feed industry (2)High import content

Ingredients dearer than Europe

Direct shi ment v. trans-shi ed

Small market limits ship size


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Density of animal feed production, tonnesDensity of animal feed production, tonnes

519

772

600

700800


225

102

50

80

56

345

365

142

0

100

200

300

400

500

Per km2 Per km2 UAA

UK

Brittany

NE

DK

FEFAC


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Pig and poultry feed as % of total (2004)Pig and poultry feed as % of total (2004)

71

64 6363

75

60

80


30

4138

26

39

24

12

31

18

13

57

46

12

0

20

40

Pigs Poultry P + PFEFAC


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Feed production by quarter, Ireland

2005-2006

2023


2828

Q2

Q3

Q4


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P+P as % of total by quarter, Ireland

2005-2006

40

41


28

23

Q2

Q3

Q4


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

62

56

50

60

70


5

13

2018

1311

0

10

20

30

40

Quantity Cost

Start-LinkWeaner

Sow

Finisher

FEFAC


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Finisher feed as % total feed

Country Finisher Feed %

Denmark 67

France 70


Germany 72

Great Britain 60

Ireland 62

Netherlands 75


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Percentage of each diet fed

FR IRE Ire 2

Starter / Link 5 2

Weaner 11 9

Grower - 29


n s er

Finisher 2 - 18

Sow 20 20

Composite price,/t 169 212 203

PigSys 2005


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Feed manufacturing costs in Ireland

Little information in public domain

Anecdotal evidence Need to benchmark the individual


company aga ns r s an p an s


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Elements of costElements of costIngredients

TransportSales / admin / debt collection

DepreciationPower

MiscellaneousProfit


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Manufacturing margins in Ireland

2002

Euro/tSow


eanerFinisher

PigSys 2005


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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 er tonne10 - 18

Occasionally over 20


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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 deliveryEffect of distance and no feeds on delivery

cost per tonnecost per tonne

20.920

25


11.5

7.2 9

14.5

12.1

10.2

17.9

15.4

13.6

.

16.7

0

5

10

15

1F / 1D 3F / 1D 3F / 3D

20 km50 km

80 km

110 km


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Effect of distance and load size on deliveryEffect of distance and load size on delivery

cost per tonne (1 feed)cost per tonne (1 feed)

20

25


7.37.2 7.2

9.61010.2

12.813.513.6

1516.216.7

0

5

10

15

18 T 22 T 28 T

20 km50 km

80 km

110 km


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Effect of under load on delivery cost per tonneEffect of under load on delivery cost per tonne

(1 feed)(1 feed)

20

25


9.6

11.210.7 9.61010.2 9.69.9

9.8

12.212.914

0

5

10

15

20 T 24 T 30 T

-4-2

0

**


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Reducing delivery costs ?Reducing delivery costs ?Full loads / bigger deliveries

Planned schedulesOrders well ahead

ore s orage o g ar sEasy access for larger vehicles

Round the clock delivery ?

Show cost of delivery ?


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Feed use on 400 sow unit, t

T/yr. T/mth

Pregnant sow 318 26

1 1


Weaner 227 19

Finisher 1428 119

PigSys 2005


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Sales / office costsSales / office costs

Financing of stocksIngredient storage

Sa es e t co ectionTechnical advice

Office admin

Credit 7, 30, 60, 90 day

Total = 8.00 to ??


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High cost of sales in Ireland

Salesperson

Salary Car


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 Medium Density

Finisher stage 2 (60kg +)


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Energy useEnergy useUK survey - average 81 kwh/t

Irish figures ?Grinding

PelletingSteam

LightConveyers


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GrindingHammers and screens0.25

1.75


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PelletingDies and rolls 1

Power 3

Total 6Reduced throughput ?


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Miscellaneous costs (1)Miscellaneous costs (1)Shrinkage0.75% to 1.25%

8,000 t/man

40,000 /yr

5.00/t


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Shrinkage in the feed mill

Ingredients damaged or destroyed

Feed DM over spec Vitamin-mineral mixes out of date


Spillages Rodent/insect damage

Errors in metering Write-off of faulty feed


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Miscellaneous costs (2)Miscellaneous costs (2)Repairs and maintenance

2.00

InsuranceFire, product liability, employee

1.00

Quality control0.80


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Role of QC

QC programme protects the mill

against disputes NIRS is fast and cheap for estimation


Allows more precise formulation withsmaller safety margins

Requires identification and segregationof 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


an money Bad information is worse than noinformation !


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R & D in the Irish feed industry (2)

Serious lack of information on

ingredients Diet specifications are high compared


.

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


additives

Magic ingredients and additives must

be backed up with solid proof

T l f f iT l f f i


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Total cost of manufacturingTotal cost of manufacturing

pelleted feedpelleted feedHaulage inwards 6.00

Grinding 2.00Pelleting 6.00Labour 5.00

Sales and admin 8.00Misc. 6.00Total 33.00

Add depreciation, delivery, profit


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Can we lower diet specs at present timeCan we lower diet specs at present time

??Animal performance will be poorer on low

nutrient dietsMJ energy per unit gain is constant

higherLittle savings from low spec pig feeds


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C ill t ith hC ill t ith h


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Can mills compete with homeCan mills compete with home

compounding (2)compounding (2)

Supply balancers ?

Contract milling


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Conclusions (1)Conclusions (1)Pig industry needs a strong and

efficient feed sectorFeed industry needs profitable pig

roduction

Pig feed manufacture is not a veryprofitable businessCompetition is keenPig industry struggles with high feedprices


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Conclusions (2)

Irish pig industry cannot sustain

present difference betweencontinental and Irish prices


service to improve efficiencies

Lynchmanufacturing Cost

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