Designing poultry nutrition programs to optimize profitability

Designing nutrition programs to optimize profitability requires knowing and understanding goals and working with processing and sales to understand their needs.

Do your company’s poultry nutrition programs and goals match those of your processing and sales departments? Making sure all of these programs and goals are in alignment is important to every poultry company’s profitability.

All too often nutritional and sales goals are loosely defined, or not defined at all, and at times conflicting goals are present. An example of this is the goal of designing programs to minimize the cost per pound of meat or eggs produced. While this is logical, it does not take into account bottom-line profitability.

While most agree that the bottom-line return to an operation is desired and “the goal,” it is not always accomplished due to differing goals for live production, processing and sales. The bottom line is that meat and eggs are produced and sold. The input costs to produce product need to be determined and evaluated relative to the worth of the product sold.

An important part of this process involves the evaluation of feed ingredients and feed additives and utilizing them to meet the defined nutrient requirements/disease challenges of the bird. Typically, ingredients and additives are formulated in a least-cost feed package aimed at meeting the goals of the operation.

Live production objectives  

Feed ingredients – both standard and alternative – are constantly being evaluated and considered in the poultry industry. Included in the former are corn, soybean meal, fats and animal proteins, while the latter includes Distiller’s Dried Grains with Solubles (DDGS), improved soybean meals and organic ingredients.

Nutritional values are defined and then evaluated in meeting the bird’s requirements that are set via least-cost formulation. Implementation, however, depends not only on lowering the cost of the diet but considering other cost factors such as handling and effect on feed mill efficiency, which need to be documented and considered.

An example of this is feed conversion and corn quality this past year. The 2009 corn crop experienced extreme stress due to growing and harvesting conditions. Several companies have noted a decrease in protein and energy content. Some figures have been published indicating that corn metabolizable energy (ME) dropped below 1500 kcals/lb. At the same time, the energy markets have driven up the price of feed-grade fat.

New live-production goal needed  

Assuming the live production goal is to maintain feed conversion, the replacement of the missing calories from corn would require that the fat level be increased. However, this is not economical and erodes profitability.

Assuming “normal” corn ME is 1540 kcals/lb, a drop to 1490 kcals/lb would be a decrease in 50 kcals/lb, which would cost ~ 3 points in feed conversion (50kcals x 63% corn in feed = 31.5 kcal). Using a 3700 kcal/lb feed grade fat at $0.28/lb would roughly cost $4.76 per ton (31.5/3700 x 2000 lbs = 17 lbs fat needed x $0.28 = $4.76). Assuming a 1.73 feed conversion on a 4.25 pound bird, formulating to 31.5 less kcals would result in a feed cost per bird of ~$0.8602 ($230/ton feed cost). Replacing the corn calories with fat to keep the same conversion would result in a feed cost per bird of ~$0.8630, a difference of $0.0028 per bird or $2,800 per million birds.

The goal of feed conversion needs to be reevaluated and changed to feed cost per pound of meat or caloric conversion to maintain profitability.

Evaluating feed additives  

Feed additives are another area that is constantly being evaluated. In recent years, new products such as feed enzymes, organic minerals and additives to promote “gut health” have been utilized or promoted in the feed ingredient market. Claims are often made that a product can improve tangible responses such as improved feed conversion, increased white meat yield or replace existing products currently being used at a lower cost per ton of feed.

Other claims that are made are intangible, such as promoting “gut health” and reducing the load in the field of pathogenic bacteria. Regarding the former, while claims are made to improve feed conversion or yield, it does not automatically mean that a product benefits the bottom line. The following questions must also be asked:

• Are the feed conversions presented actual or adjusted? Adjusting feed conversion to a common body weight, which is recommended, can affect the data and decision making.
• Is the improvement in feed conversion enough to not only cover the cost of the product or replacement value in the diet but also improve the bottom line?
• What are the “hidden” costs of handling the product?
• Can a response in yield be captured in the plant under its conditions?
• What is the consistency of response within and between complexes or operations?

Gut health and food safety  

These questions pertain to claims about gut health, but just how to measure the economic response becomes more challenging. One must look past performance to other costs or benefits to the operation.

Lowering salmonella challenge is one example. Can the “field” load be easily measured? Are the benefits of a reduced field load and the increased cost to live production offset by reduced costs in the processing plant (less chemicals being used, etc.)? The addition of products to the feed to reduce pathogens may or may not affect performance and if there is no performance benefit to live production, the cost is absorbed and must be offset in other areas to maintain profitability.

Processing and sales objectives  

While the main objective of live production is to deliver product to the plant at the lowest cost, this may not always result in optimum profitability. Nutrition programs and use of feed additives need to be designed to consider live-production factors, while at the same time aligning with the goals/plans of the plant, markets and sales mix.

Firstly, what is the plant or complex responsible for producing? For example, are small or big birds being processed? If small birds, are they deli WOG/whole birds or birds for further processing and deboning. Yield and template size are critical in plants that are deboning small birds.

Alignment of nutritional programs and sales mix  

A nutrition program to maximize yield is more costly due to amino acid density, and the cost should be offset by producing and selling a value-added product. Designing a nutrition program to maximize yield for a plant that sells whole birds will decrease profitability, as the market or selling price most likely will not offset the increased feed cost.

Also, many times a plant is required to produce product that has been sold by sales at a particular point in time which may not be what they normally produce. Thus, it becomes critical that the nutritionist and live production department know what the plant will be selling. This can be challenging and easier said than done, as market/sales conditions can change rapidly. Good communication is critical between live production, plant and sales in order to maximize profitability. Companies that can be proactive in this area will be able to optimize profitability more consistently.

For those complexes producing bigger birds for tray pack or deboning, the impact of knowing the markets and sales mix is more critical. While it is well understood that processing costs are reduced by increasing bird size and yield, this may not be economical relative to market prices or what can be sold at a particular point in time.

Adjustment to changing markets  

Feeding a high plane of nutrition to maximize white meat yield when market prices are low or sales cannot sell at a profitable price will impact profitability negatively. Conversely, when market prices are up or sales can sell a mix at more profitable prices, the high plane of nutrition is warranted. However, this is where the overall goal of profitability must be realized by both live production and processing/sales.

As an example, feeding for an increase in white meat yield of 0.50% was shown to increase the feed cost $100,000 per week due to the increased amino acid density needed. The expected improvement in feed conversion of 4.5 points would not offset the increase in feed cost. However, the current market price of for white meat and sales potential indicated that this 0.50% increase in white meat yield would net the complex $60,000 over and above the increased feed costs.

This is where there must be a clear understanding between live production and plant/sales in the complex, as live production will be hit with an increased cost to the plant. The return, however, justifies designing the nutrition program for increased yield. It then becomes critical that the birds respond to the increased plane of nutrition, the plant captures the increased yield and the sales department is able to sell at the pricing criteria.

Any change in the assumptions such as feed cost, yield response and it being captured and market/sales price warrants a reevaluation of the nutritional program to be fed.

Economic evaluation of ingredients  

Designing nutritional programs to optimize profitability must take into account several things including knowing and understanding goals, removing conflicting goals and working with processing and sales to understand their needs as well knowing the market and sales prices for product sold out the “back door.”

Economic use of feed ingredients, feed additive and nutrient levels must then be evaluated accordingly. By doing this, properly designed programs and effective utilization of ingredients can and will result in optimal profitability.