Consider All of Your Costs When Contract Finishing

How do you evaluate an offer for contract finishing of hogs? If the contract includes supply of feed, vet services, transport and marketing, and so on, it may be very tempting to think that one could do it for quite a low price. But how can anyone determine what is a fair price? The first step is to be sure that all of the real costs of the contracting endeavour are accounted for. Otherwise, there is a danger that although you seem to be making reasonable returns in the short term, over the long term you may really be losing equity.

The items under variable and fixed costs for finishing that may be relevant to a contract finisher are listed in the table below.

Now, for a particular finishing operation some of these costs may not be included in a listing of costs, or the actual costs may be lower (or higher for that matter) than the estimates used in the Swine Enterprise Budgets. The point is these costs need to be considered when determining the cost of finishing hogs. Some of the costs can be difficult to estimate, but a reasonable estimate is better than assuming it's zero. You can use the Table provided to tally up your own costs.

In the current budget, these costs add up to $20.81 per hog finished. Finishing hogs for less than that, given the assumptions in the budget, would represent a losing proposition. Know your own position and bargain accordingly. We all value a fair contract, and it's worth the effort it takes to get one.

Table 1. Swine Enterprise Budget Costs Relevant to Contract Finishing ($ per Pig)

 

Finishing Budget

Your Cost

Utilities (Hydro, Gas, Telephone)

$1.25

$

Barn Supplies, Office, Vehicle, Professional, Misc.

$1.25

$

Custom Manure Disposal @ $0.01/gallon

$1.25

$

Repairs & Maintenance (1/2% of Building Value)

$0.53

$

Labour Cost

$4.50

$

Depreciation (15 Years)

$5.66

$

Interest (5% of Building Value)

$5.31

$

Taxes and Insurance (1% of Building Value)

$1.06

$

Total

$20.81

$

For more information:
Toll Free: 1-877-424-1300
E-mail: ag.info.omafra@ontario.ca
Author: Ed Barrie - Swine Sow, Nursery Specialist/OMAFRA; Jaydee Smith - Swine Production Systems Program Lead/OMAFRA
Creation Date: 01 August 2002
Last Reviewed: 01 August 2002