Fatvalue - A computer program for calculating the value of fat

D.M. Forsyth

Department of Animal Sciences, Purdue University

There are two main ways that feeding fat to pigs can be profitable:

There are two ways that feeding fat to pigs can cause you to lose money:

There may be other reasons for feeding fat, such as for dust control or palatability, but they are difficult to assign economic values.

In order to assess whether feeding fat is profitable, the price and level of each feed ingredient, the feed conversion and rate of gain, and carcass value of pigs with and without extra fat in the diet all must be taken into account. These considerations are made easier with a computer program to account for all the variables and compare the alternatives. FATVALUE is a computer program developed for this purpose.

Feed Efficiency

If one knows the price of each feed, the ration composition, and the feed efficiency of pigs without fat, then (assuming no change in rate of gain) one can calculate the feed efficiency necessary with extra fat to break even. Any feed efficiency better than that value would make extra money.

In order for feed efficiency to be improved when fat is added, it is necessary to reformulate the diet to maintain a constant calorie to lysine ratio. Otherwise, when the pig consumed less of the high density ration it would receive less protein (and lysine) than it needs.

Rate of Gain

"Time is money", but only if the extra time saved is utilized. If the total non-feed costs remain the same (interest, insurance, labor, etc.) regardless of a savings of several days to market, and no extra pigs are raised or the space utilized to improve the performance of pigs being raised, then there may be no economic advantage of increased rate of gain. If one fully utilizes the increased rate of gain, given the feed composition and prices and feed efficiency of non-fat fed pigs, the break-even feed efficiency for fat-fed pigs can be calculated for every potential rate of gain (ignoring carcass considerations for the present). Similarly, given the foregoing and the rate of gain and feed efficiency of fat-fed pigs, one could calculate the price to pay for fat that would produce equal costs for fat-fed and non-fat fed pigs (the break-even cost of fat).

Carcass Considerations

Pigs fed fat may have fatter carcasses if the increased energy is used for fat and not for lean, and therefore bring less money when sold on a carcass merit basis. This would be a penalty against feeding fat which should be taken into account.

The break-even point can be calculated when all but one of the variables are known, for price of fat, feed efficiency, rate of gain, and carcass value. Because not all packers use the same carcass merit system, one may have to adapt the information available in order to use the format used here. The method employed here uses all the information discussed previously, along with live weight, dressing percent, percent lean, and live price (of non-fat pigs), and calculates the break-even feed/gain and break-even fat price. The computer program allows easily changing input values and evaluates the effects of their changes on break-even feed/gain and fat value.

Specifically, in the program FATVALUE, the profit of non-fat fed pigs is set equal to that of fat-fed pigs. The profit is equal to the carcass value minus the total feed and non-feed costs. The carcass value of the non-fat fed pigs is taken as the pig's live weight times the live market price. The value per pound of lean is then calculated, using both dressing percent and percent lean. For the fat-fed pig, the value per pound of lean is given as the same as that calculated for the non-fat fed pig. The effects on break-even feed/gain and/or break-even fat price (fat value) are calculated according to the values entered for dressing percent and percent lean of the fat-fed pigs.

Effects of Temperature

Seasonal effects of feeding fat occur because fat has a lower heat increment. Therefore, feeding fat in summer when it is hot provides the animal with less burden from extra heat, and allows greater efficiency. In addition, animals may perform better when fed fat in hot weather because they are reluctant to eat, so when they do eat they get more energy in every mouthful. These considerations do not affect the calculations concerning performance needed for break-even, however, but only the likelihood of obtaining that performance.

SUMMARY

Feeding fat to growing-finishing pigs will increase feed efficiency and may increase rate of gain, but will increase feed costs and may decrease carcass value. Whether feeding fat makes money depends on a number of variables, including the composition and price of all the feeds used, the feed efficiency and gain attained and the carcass value of the pigs. A computer program, FATVALUE, has been developed to help in determining the effect of these variables and calculating the break-even feed efficiency necessary and the break-even price of fat.

The following pages contain samples of the Input and Output from FATVALUE. Input values are in italics; the remaining numbers are output from the program.

**DATA ENTRY AND RESULTS AREA** 
 
Feed		Cost	Energy	C.P.  Lysine 
		$/Lb	Kcal/Lb	 %	 % 
Corn		0.048	1600	8.6     0.24 
Soybean meal	0.090	1580	44	3.0 
Fat		0.180	3600	0	0 
 
Percent of protein in the ration =			16 
Lbs of fat exchanged for corn in 100 lbs of ration =	 6 
			
						Breakeven 
Current Feed Efficiency,    F/G =	3.000	F/G 
Expected Feed Efficiency, F/G =	2.700
						2.579 
 
	--------------Cost/ 1000 lb gain ---------------------- 
	Fat but	Fat with 
No Fat	Lys. unadjusted	Lys. adjusted 
165.7220	170.4991	173.5161 
	---------------- Cost of 100 lbs ration ----------------- 
5.524		6.315		6.427 
 
 
 EFFECTS OF VARIOUS RATES OF GAIN ON BREAKEVEN VALUES 
 
Beginning pig weight:		25	Average daily gain is not 
Final pig weight:		220	always increased with more 
Avg Daily Gain WITHOUT fat	2.00	fat.  Use this portion to 
Non-feed cost per pig daily:($) 0.24	evaluate different F/G 
					breakevens at various 
Pounds of gain:			195	gains (full utilization of 
Days (without fat) to Final wt:	97.5	time saved assumed). 
Total Cost (without fat):  ($)	55.619 
 
	ADG with	Days to		Breakeven 
	Fat added	Final wt        F/G 
	2		97.5		2.57 
Scroll	2.05		95.12		2.62 
down	2.1		92.86		2.66 
for	2.15		90.70		2.70 
more	2.2		88.64		2.74 
 
Value of fat ($/CWT) at various combinations of F/G and ADG 
	Feed efficiency without fat:	3.000 
	Avg daily gain without fat:	2.00 
	% utilization of extra time gained 
	   for increased pig production	100 
		------------F/G----------------- 
ADG	3	2.9	2.8	2.7	2.6	2.5 
Lb/day	--------------- Value of fat ($/CWT) ------------------ 
2	$2.73	$5.90	$9.29	$12.93	$16.85	$21.09 
2.05	$4.36	$7.58	$11.03	$14.74	$18.73	$23.04 
2.1	$5.91	$9.18	$12.69	$16.46	$20.52	$24.90 
2.15	$7.38	$10.71	$14.27	$18.10	$22.22	$26.67 
2.2	$8.79	$12.17	$15.78	$19.67	$23.85	$28.36 
2.25	$10.14	$13.56	$17.23	$21.16	$25.40	$29.98 
 
Fill in the data below for specific values (so you don't need 
to interpolate from the table above).  (Previous data is used). 
WITH FAT:	Standard ration, 
no fat 
Avg Daily Gain:	2.15	ADG	2 
Feed/Gain	2.8	F/G	3 
% utilization of time	100	Days	110 
		# of gain	220 
Value of fat ($):	$14.2736 
 
CONSIDERATIONS OF CARCASS VALUE - What-If Section 
		Without	Optional		Optional 
		Fat	Entry	With Fat	Entry 
Days to market	110		102.3255	0 
ADG		2		2.15		0 
F/G		3	0	2.8		0 
%util of gain	100		100		0 
%Corn (decimal)	0.767231			0.6777710 
PCorn,$/lb	0.048		0.048		0 
%SBM (decimal)	0.202768			0.232289 
PSBM,$/lb	0.09		0.09		0 
%Fat (decimal)	0		0.06 
Pfat,$/lb	0.18				0 
Daily nonfeed $	0.24		0.24 
Livewt		220		220 
Dress%		74		74 
%Lean		50		50 
PriceLive($/cwt)45		45 
$/LbLean	1.216216	1.216216 
fatvalue (don't pay more) = $14.2736  $/CWT  BrkEvnF/G	2.703