Comments on the Feasibility of Rosan-Capital Refurbishing and Operating an Unused Swine Facility

FOCUS of My Remarks

This position paper is being written from the viewpoint of Rosan-Capital (as if I were employed by them) and is offered for their consideration as they debate the economic feasibility of refurbishing a large unused and "pirated" swine operation southeast of L'viv. Hopefully the following comments will be helpful in considering some of the economic data that need to be accumulated for the making of a "go" or "no-go" decision by Rosan-Capital before investing in a swine production operation including feed, slaughter and meat plants. Rosan-Capital is working with the L'viv Consulting Group (Richard Shriver, James Hemphill and associates) as they consider the economic feasibility of putting together this agricultural conglomerate.

INTRODUCTION

The existing swine facilities being considered by Rosan-Capital for remodeling include 14 large barns built for a farrow to finish swine operation on a collective farm SE of L'viv. It is logical for Rosan-Capital to start with the existing facilities and then do enough remodeling to support efficient and economical production. This facility has a one-time capacity of 10,000 pigs on feed. If Western production criteria are met, this facility could market 20 to 25 thousand finished pigs per year. Hogs should reach market weight (115 to 125 kg) at less than six months of age, which is about twice as fast as is common for pigs raised in Ukraine by old methods that produce a carcass high in fat and short on lean. Substantial improvement in feed efficiency (unit of feed per unit of gain) over the typical (but mostly unknown) Ukrainian swine operation can also be expected. In general, the rations presently fed in Ukraine are low in protein, contain little or now supplemental vitamin and minerals and commonly contain low energy feedstuffs such as wheat mill run (wheat bran and other screenings) and beet pulp. Hog rations are sometimes cooked and/or fed wet, which is not recommended, as will be discussed later.

There is every reason to expect world-class performance of pigs in Ukraine if the genetics, feed, housing, health care and management are brought up to presently know state-of-the-art levels. Last December I visited the Kyiv-Atlantic swine raising operation outside of Kyiv. There were over 400 pigs on feed that were performing very well (near 1000 grams gain per day with good feed efficiency), so we know it is possible to feed pigs for high performance in Ukraine. There are other examples of efficient swine operations in Ukraine. Adaptation of known methods that have proven to be successful is the challenge, not the discovery of new methods, for efficient swine production. This of course involves mass education among Ukrainian farmers. This is more of a challenge than in the USA as Ukraine has no Agricultural Extension Service. The Ag Extension Service, Land Grant Colleges (present in every state of the union) and the U.S. Department of Agriculture (with offices in every county of every state) have helped make U.S. agriculture the most productive in the world. Availability of credit (along with knowledge) is also a major component for modernization. Credit is of course a particular challenge in Ukraine, so it is encouraging to see Rosan-Capital show interest in helping to establish a vertically integrated modern swine operation in the L'viv Oblast.

A basic manure handling system is in place at the proposed swine facility although scraper chains have been pirated. A new feeding system would need to be installed.

This swine raising operation would be part of a larger agribusiness complex financed by Rosan-Capital that would include the Khodoriv slaughter and meat packing complex. Since feed costs are 80% of the cost of raising pigs and since quality feeds are not readily available in L'viv, having control of a feed facility that can supply state-of-the-art rations to this swine operation is considered essential for its economic success.

I cannot make a recommendation to Rosan-Capital concerning the feasibility of this investment until I have the benefit of studying economic data for the costs of inputs and operations compared to the anticipated revenue. Without seeing the actual revenue and expense data, my bias would be that it should be profitable to raise pigs in Western Ukraine given the abundance of inexpensive grain and some protein sources such as canola meal that are available. Feeding the grain to pigs would be a good way to process and add value to it. Also, labor here is inexpensive and in our study the basic buildings are in place.

The challenge to formulate high performance rations would be to find and combine

1. Protein sources (soybean meal, animal protein by-products, etc. in addition to locally produced and inexpensive canola meal) that would supply adequate amino acids to promote rapid growth of a meat type carcass (low fat - high lean)
2. Vitamin-mineral supplements specially formulated for this operation whose quality could be guaranteed
3. Grains of good quality grown locally

into rations formulated to support the specific life-stages of the pig to support economical and efficient swine production.

There is a local demand for meat that is not being met by local production, indicating that if efficient swine (and beef) production, slaughter and meat processing were done locally, there should be a domestic market for meat at a price that would be profitable for Rosan-Capital to raise, slaughter, process and market. I am interested in seeing actual cost and revenue data to see if raising pigs in Ukraine can be profitable.

The local economic significance to all those involved in the supply, production and processing for an integrated agribusiness facility of this scale would be significant. Each pig marketed would represent about 500 kg of feed (farrow to finish). A facility of this size would use about a thousand metric tons of feed per month with most of the ingredients (grain and canola meal) grown locally. Depending upon yield (of course), it could take approximately five thousand hectares of land to produce the grain and canola meal to supply this facility.

Producing a thousand tons of feed a month would require a feed mill of substantial size. Slaughtering approximately 2000 pigs per month weighing 120 kg each with an 80% dressing percentage would mean almost 200 tons of meat per month for cutting, processing and marketing.

The employees running the feed mill, swine production operation, slaughter house and meat processing facility would earn a very significant payroll, most of which would be spent in the local area. Ukraine needs this type of agribusiness.

To date, Ukraine has not been able to complete with the West in the production of meat. The number of animals on feed in Russia and Ukraine has been going down for almost a decade while the amount of imported animal products has been going up. I think that a modern swine facility that solves the problems discussed in this position paper could compete with foreign imports and increase the amount of value adding that is done in Ukraine. This would be good for Ukraine's creation of wealth (Gross Domestic Product) and help to improve the standard of living of its people. It is much better for society in general for a country to become globally competitive than to impose import restrictions for the benefit of special interest groups. I predict that a well managed feed, swine, slaughter and meet processing agribusiness conglomerate would return attractive dividends to investors and allow Ukraine to become competitive in supplying pork to Ukrainians and perhaps even to export into foreign markets. This would certainly be a change from the present situation. We'll need to see the business plan data to make a final prediction.

TOPICS TO BE DISCUSSED related to this Proposed Agribusiness Enterprise:

1. Housing
2. Manure Handling System
3. Feeding and Watering System
4. Ration Formulation
5. Feed Manufacture
6. Genetics
7. Animal Health
8. Labor Management
9. Khodoriv Slaughter and Meat Processing Plant

The discussion that follows may seem rudimentary to those that are experienced in vertically integrated pork production but I want to be sure that the "obvious" is understood before delving into more specifics. I don't want to find that we forgot the simple details of how we are going to feed, water and dispose of the manure while we expound on the parts per million of selenium that should be in the ration. My concerns are based in large part on what I have seen while visiting feed mills and swine production facilities in Ukraine.

Once we are sure that the following general topics have been addressed, before proceeding to invest money, we can call in experts on each topic for specific details that we will need to understand in order to be profitable. Since my specialty is animal nutrition, I'd be pleased to be involved with the formulation of customized swine rations that will optimize profit. We would formulate these rations using local feedstuffs (after taking into account their nutrient contribution and cost) to the extent that local feedstuffs are price competitive. As relative prices change, it would be anticipated that the rations should be changed in order to optimize profitability. One ration or set of rations will not fit all economic conditions so an animal nutritionist's work is never finished. After formulating the rations (using a least cost computer program), overseeing their mixing and feeding and then observing the resultant animal performance would fall under the auspices of the consulting animal nutritionist involved with the specific swine operation.

1. HOUSING

Good ventilation is necessary without creating drafts on pigs. It will be important to repair air exhaust systems to remove moisture and ammonia laden air from the building through the ceiling vents. Outside air should enter through the windows and exit through the roof vents. Fans adequate to exchange the correct amount of air should be in place. The windows need to be re-glassed and made adjustable to regulate the amount of air inflow. A wooden or metal reflector installed on the inside of the window would direct the incoming air so that it won't blow on the pigs. Do not seal the barn, as that would prevent the entry of fresh air and the removal of ammonia and moisture. Adequate air circulation (good air in and bad air out) becomes more important as the animal numbers go up.

Pigs will choose to stay clean if given a chance. Having feed and water available at or near the grates in the floor over the gutter will help keep the bedding area dry. The non-grated areas of the pen should be re-sealed with concrete or some other surface sealer so that the pen can be cleaned and sanitized with a minimum of manure and microbial build-up.

Ease of moving pigs should be considered in the upgrading of the barns including the final walk of the pigs to the truck to take them to market. Loading chutes should be secure for the pig (and the owner against outsiders) and placed so that it is convenient for a truck to back up to them. This includes having a good roadbed. Reducing the stress of loading pigs will reduce the shrink and cut the death rate due to overly stressed pigs. Carcass damage that will show up in the packing plant and reduce the value of the carcass would also be reduced.

The perimeter of the facilities should be secured and anyone and any vehicle entering the facility should be challenged to be sure they have an honorable reason to be there and are free of transportable swine diseases.

2. MANURE HANDLING SYSTEM

The existing manure handling facility will require extensive repair including the installation of new drag chains. Before putting it into use be sure the manure handling pipes are of good integrity, gutters sealed, pits in each hog house and the large outdoor lagoon cleaned, and all moving equipment in good repair including motors, chains with scrapers, sprockets, etc. Work out a preventive maintenance program to minimize downtime problems. I can't think of a bigger headache than a broken down manure handling system being flooded by the wastes from ten thousand pigs.

Upgrade the manure lagoon area with agitators, etc. Some attention to ration formulation as it affects the lagoon and manure quality should be done. For example, feeding high levels of copper (200 ppm) in the ration for antibacterial activity in the pigs can also kill off desirable lagoon microorganisms. Good management of the lagoon is a science and should be done to minimize odors and to maximize the nutrient benefits of the hog waste.

There should be a plan in place for moving the material in the lagoon to the fields for fertilization. This plant nutrient asset should be managed for optimum utilization in the growing of crops (grain that will probably be fed back to the pigs). Is there enough storage capacity in the lagoon to contain the hog effluent between applications? Is it possible to apply manure to the fields in the wintertime? You want manure to enter the soil and not run off it. When the soil is completely saturated with water then there is no room for manure and it will run off and possibly pollute other areas. The same is true if the soil is covered by a sheet of ice. My observation in the L'viv area during last winter was that the soil was fairly dry (It was being plowed easily) and that if the soil surface is not frozen, there is manure handling capacity. This can be calculated and the appropriate amount of manure can be applied, based on the absorption capacity. Will the lagoon effluent be pumped or hauled to the fields? Will it be drilled into the soil or applied to the surface. Do people live nearby that will be offended by the odors? Is there enough land available for the anticipated manure or will the fields of others be needed? For what price can the lagoon contents be sold to neighbors? Soil tests need to be run periodically to monitor soil nutrient content to optimize nutrient use by growing plants. Use this asset wisely.

Most of the hog wastes should fall through the grates of the pen. Once a day an attendant may need to scrape manure from the solid floor area onto and through the grates. If the surface area remains dry, scraping may not be necessary at all. Since the floor is sloped, liquid will run towards to grates and the manure gutter. Normal foot traffic may facilitate the movement of solids towards the gutter and negate the need for periodic scraping.

The manure gutter should be scraped and washed often enough to minimize the amount of ammonia that escapes into the air. Water could be used to clean the floors and the gutter but this will fill up the lagoon and increase the weight of material that will need to be transported to the fields so water usage should be kept to a minimum as mentioned. A balance between necessary and excessive water use will be a continuing challenge. Leaking water sources (Lixit type waterers) can also add unnecessary water to the manure system.

3. FEEDING AND WATERING SYSTEM

A. WATER SUPPLY

I'd suggest two "Lixit" type water nozzles per pen. These should be positioned over the grates above the manure gutter so that any leakage goes into the pit and not on to the floor where the pigs will rest. This will encourage the pigs to keep the flat surfaces of the pen clean and dry by not defecating and urinating except over the grated surfaces. Taking precautions for keeping the water pipes from freezing is of course important. A valve appropriately located in the water system should be in place so that water can be shut off if a nozzle needs to be replaced. Nozzles should be checked routinely to be sure there is water available to the pigs at all time. When water is not available, pigs will stop eating and growing.

(With humans the first symptom of dehydration is often fatigue. Thirst is not a good indicator of water need when under extremes of water requirements, such as working in hot humid weather or climbing Mt. Everest. In fact, some of the credit for the first successful climb of Mt. Everest was given to having enough water to drink. In previous attempts, climbers hadn't carried enough fuel to melt the amount of snow needed to meet the physiological requirement for water and climbers got too tired to make the summit.)

It is best to have two water nozzles per pen to increase the probability of at least one working. I'm not sure how cold this water will be but a temperature substantially above freezing will encourage water consumption and therefore increase free-choice feed intake, resulting in more rapid and efficient gain. The drinking water should be evaluated for mineral content and of course be free of toxic or biological contaminants.

B. FEEDING SYSTEM

Since feed costs represent 80% of the cost of raising pigs, particular attention should be paid to the formulation, mixing and delivery of nutritionally adequate rations for each stage in the life of the pig.

All feed should be fed dry rather than mixing it with water. I have seen some swine raising facilities in Ukraine where the only water source was from wet feed. This is not a good management technique as it is likely to reduce animal rate and efficiency of gain. Pigs should not have to eat in order to intake water as they may consume less of both than they need. Wet feed not consumed can deteriorate quickly, particularly in warm weather, causing an animal health concern. Feeding feed wet significantly complicates the feeding process.

Cooking the feed is not cost-effective. Cooking is being done on some small hog operations that I have seen. It should not be considered for any size of operation and particularly one feeding 10,000 pigs.

I imagine feed will be fed in the meal form rather than as a pellet, except for creep and pre-starter rations. The higher the fiber level of the ration the more benefit from pelleting swine feeds. I anticipate that corn and wheat (low fiber) will be the principle grains fed rather than barley and oats (high fiber) and that pellet mills will not be available, making the option of feeding pellets made locally a mute question. Creep and pre-starter rations will need to be purchased from facilities with pellet making capability. A company like Kyiv-Atlantic could make these special pellets based on our formulations.

Grain should be bought based on quality. Paying suppliers more for quality will encourage them to pay more attention to it. Money premiums will make suppliers want to grow and supply you with what you need. Quality would include having grain that is cleaned to remove the trash, grain with a high weight per unit of volume (bushel weight in the USA), freedom from unpalatable and toxic materials and attention paid to the protein (the higher the better) and fiber levels (the lower the better).

The feed should arrive in front of the pig in a sanitary state with a minimum of feed wastage. Feed troughs should be rebuilt with curbs high enough to prevent feed wastage and outside contamination and smooth enough so as not to harbor microorganisms from feed spoilage. The metal racks now in place should be removed. Fencing should be installed so that pigs can stick only their heads into the feed trough and not their feet. It should also be constructed to discourage a pig from backing up to the trough and urinating or defecating into the feeding area. This could be accomplished by the strategic placement of a horizontal board that allowed the pig to stick in it's "eating end" and not its "defecating end."

The feed trough should have steel rods perpendicular to the pig's head (running across the feed trough from one side to the other) that would prevent the pig from routing out feed and wasting it. Since one feeding trough feeds two pens that are opposite each other, a triangular structure ("roof-like" made by nailing two boards at right angles to each other) that runs the length of the feeding trough should be installed. This would limit the volume of feed in front of the pigs without "dead" spaces and help keep the feed fresh. The curb over which the pig sticks its head should angle into the feed trough so that dead feed spaces are avoided that would accumulate moist and putrefying feed.

A COMPLICATED BUT EFFECTIVE FEEDING SYSTEM. The feeding trough can be filled by horizontal augers with down spouts as follows: (See Sergei's computer drawing)

Feed from the feed mill formulated for the specific barn of pigs to be fed is augered from the feed truck into a feed bin outside the hog barn. With an operation this big I'm assuming that all pigs in one barn are at the same stage of growth and thus on the same ration. If this is not the case, then a separate feed tank and feeding system should be in place for pigs at each physiological stage of growth. The feed in the outside tank is moved via an auger into a smaller feeding "surge" tank inside the barn that is located over each feeding trough near the center of the barn (or near the center of the amount of feed trough to be fed from this feeder). With the length of the existing barns, it is anticipated that more than one such external feed tank and inside surge tank with associated feeding augers will be needed. From the inside surge tank, an auger runs in both directions the length of the feeding trough. On the bottom of this auger, telescoping pipes are attached that run down to the feed trough. The height at which the downspout pipe empties into the feed trough allowing feed to escape into the feeding area can be adjusted. Enough of these down-pipes are in place to cover the entire feed trough with feed. I image that one downspout would be needed every meter depending upon the angle of repose of the feed and the height (adjustable) of the opening of the feed downspout above the feed trough. The auger and downspout must not be accessible by the pig. The downspouts must be secured so that they don't fall off the overhead auger.

The feed auger would turn on at regular times and refill the feed trough. At the end of the auger over the feed trough there would be a pressure plate that activates an "off" switch. When all feed downspouts were filled, feed would flow to the end of the auger, apply pressure to the pressure plate and "off" switch, turning off the auger automatically. The bigger the downspouts the more feed would be held in storage to fall into the feed trough as the feed was consumed and the less often the feed auger would need to run. It would be important to have pigs consuming feed from the downspouts at the end of the auger so that when the feed auger started, it wouldn't push feed against the pressure plate until all pipes, starting from the feed bin first, were filled.

It would be advisable to have slides near the top of each downspout and at the exit of the surge tank that could cut off the feed supply to pens without hogs in them. The whole system should be constructed to minimize the amount of feed dust.

When the feed level of the inside surge tank reached a low level, the auger filling it from the external feed tank would be activated automatically to refill the inside surge tank. The outside feed tank should be of adequate capacity to accept enough feed so that the system is never without feed between deliveries from the feed mill. An engineer working with a nutritionist who predicts feed requirements will need to determine the size of the outside and inside feed tanks, the size of the associated augers, the size of the downspouts from the inside feed augers to the feed trough, motor requirements to run the augers, etc. Plastic windows in the outside feed tanks would facilitate knowing when they need to be filled. Without such windows, a worker can hammer on the outside of the bin to determine the feed level or crawl up a ladder and look into the bin.

A SIMPLIFIED FEEDING SYSTEM. The above mechanical feeding system could be simplified by not using telescoping downspouts from the inside feed auger and instead placing the auger lower and just above the feed trough so that feed fell from it directly into the feed trough. This would be a cheaper installation that would still get the pigs fed. There would not be the reservoir of feed held in the telescoping downspouts so the feed auger would need to run more often to keep feed in front of the pigs. Also, there would be less adjustment as to the amount of feed allowed to flow into the feed trough at one time. Openings in the auger that allowed feed to fall into the feed trough could be closed with a slide to keep feed from being dropped into pens without pigs.

Pigs should NEVER be without feed or they may resort to cannibalism such as tail and ear biting. They of course won't grow if they don't eat feed. Adequate clean fresh water also must be available at all times as pigs won't eat if there is no water.

Some way of cleaning the feeding trough area should be considered. If there isn't a lot of feed in the trough at one time and neither manure nor urine nor external water can gain entry, cleaning the feed trough shouldn't be much of a problem. It may be necessary to wash and sanitize the feed trough between groups of pigs and if so, the liquid in the troughs should flow naturally to one end where the water can run into the gutter system.

In theory, the feed system should work automatically with the only need being to have feed in the bulk tank outside the barn. In actuality of course, the feed supply system would need to be monitored, just like the water system, to be sure feed is always available to the pigs. You don't want pigs ever running out of feed or water for the reasons mentioned above.

The above system doesn't allow for feed usage measurements except for the entire population of pigs serviced by one external feed tank that is filled by the feed delivery truck. The barns are long enough so that multiple feeding systems (outside and inside tanks and augers with down spouts over the feed bunk) would be needed per barn. There is a limit as to how long the auger from the surge tank over the feed bunk should be.

The kind and amount of feed delivered into each outside feed tank should be recorded so that feed intake can be determined. Comparing feed intake with animal growth will show the rate and efficiency of gain (kg of feed per kg of gain). These measurements are important to determine ration adequacy, to do cost accounting and to guard against unexpected allocation of feed to animals other than those owned by Rosan-Capital. Stealing of feed and other supplies is endemic on collective farms and must end when this facility is privatized. Each barn should have a scale for weighing pigs to determine the growth rate and to identify problems early before bigger problems develop.

4. FEED FORMULATION

Proper feed formulation is critical so as to supply adequate nutrients to support optimum growth while not wasting expensive nutrients. After determining the age/weight groupings, feeds should be formulated to meet the nutrient requirements of each group. The minimum number of separate rations suggested are: 1. Boar and Gestation, 2. Lactation, 3. Baby pig creep (probably a purchased pellet), 4. Pre-starter, 5. Starter, 6. Grower and 7. Finisher. It is be desirable to feed barrows and gilts separately, particularly for boars and gilts being saved for the breeding herd. With a large operation like the one anticipated, a number of different and specific feed rations (including more than one grower and one finisher ration with more than one level of protein) should be used to optimize animal and economic performance.

The objective is to meet the animal's nutrient requirements without wasting nutrients. As barrows and gilts mature, their requirement for protein decreases. Feeding rations of ever lower protein levels (and lower levels of some other nutrients) as the animals mature will save money without sacrificing animal performance. Keeping the protein level higher than that needed for maximum growth will produce a carcass with a higher percentage of lean in relation to fat. Since these hog carcasses will be processed and sold by a Rosan-Capital meat plant, there may be an economic advantage to keeping the protein levels (particularly the amino acid lysine) higher than that needed for maximum growth rate. Measuring the carcass quality and relating it to the feeding regime should be standard operating procedure if economical improvements in carcass quality are to be obtained.

Close coordination with the feed mill operator, the delivery truck driver and the individual barn manager would be critical to get the right feed to the right barn on time so that pigs were fed properly. A human control system would need to be in place. Since some of the starter and grower feeds may contain drugs with withdrawal requirements, it would be particularly important not to mix up the rations and not feed pigs the wrong feed.

Farrowing and weaning are particularly critical times in the life of a pig. Formulating rations and using management techniques that reduce pig loss and allow early weaning with a minimum of set-back or time of slow growth for the weaner pig is important. Early weaning reduces weight loss of the sow, helping to get her bred and farrowing sooner.

As I understand it, there has been some discussion on the formulation of the feeds to be fed. My first job would be to analyze what has been suggested for each group of pigs and to note any improvements I think are needed. I have done this to the extent that I know the suggested rations in a supplemental writing.

The bigger but more important job would be for me to design and formulate a complete feeding program de novo (from scratch). I have a computer program to assist me in this effort and have done it numerous times before.

I'd prefer to use as many local ingredients as possible that are price competitive and find the price and availability of other ingredients.

To do this, the nutritionist needs to know the:

1. Feedstuffs (ingredients) available,
2. Nutrient levels in each ingredient
3. Ingredient costs.

I would like to formulate the vitamin-mineral premix packages. In other words, I'd use a computer program to formulate a least-cost ration from scratch for each of the above seven or more (probably 13) animal groups (starter etc.) including vitamins and minerals. Any medications included in the feed would be done in coordination with a veterinarian. This is a major effort and one that is continuing as the relative price of the available feedstuffs can be expected to change necessitating new ration formulations in order to realize least cost rations.

To the extent possible, local ingredients would be used based on a least cost computer formulation. Grains are available locally, as is canola meal. Soybean meal would need to be imported, as would vitamins and minerals. Ukrainian suppliers, such as Kyiv-Atlantic, could supply soybean meal and vitamin-mineral premixes. With the large size of this operation, a separate premix could be formulated and mixed for each ration type or at least each major ration type.

While it has been suggested that a premix will be supplied by a Polish or German supplier, I think it would be smart to present various premix manufacturers with our own premix formula, let them bid on it and feed the premix that will make us the most money. One such supplier could be Kyiv-Atlantic. With premixes, it is particularly critical that what we formulate for them to contain is actually in them. No cheating!

While proteins could be added to the premixes, with an operation of this size, I think the Rosan-Capital feed plant should buy full cargoes of canola meal, soybean meal, etc. so that the premixers mix and ship a minimum of weight. The local feed mill should keep the cost down by mixing the maximum percentage of the ration possible.

It might be possible to mix the vitamin-mineral premixes locally but this should be attempted only after the other feed manufacturing requirements have been satisfied. It is too easy to be out of one micro ingredient, mixing requirements are precise and improper mixing could result in feeds that don't support optimum growth or that could be toxic to animals or even to the final consumers of the meat.

I would recommend that some ration experimentation be done on a continual basis to search for economic improvements. While canola meal is expected to be the cheapest protein source available, there are limits to how much of it can be fed, particularly during some early life-stages of the animal. This means soybean meal will be required. Carcass quality is affected by the feed ration. I understand we're going for a lean-type pig so we'll want to be sure the protein and more specifically the amino acid levels are adequate to produce meaty hams and bacon, maximum loin eye area and minimum back fat.

Lysine is usually the first limiting amino acid. If the lysine level (or any other amino acid for that matter) is inadequate, pig performance will be compromised. Some of these nutrients are expensive so feed suppliers may try to cheat and reduce the requested inclusion rate to keep feed costs down. The hog raiser often would be benefited from paying more for a nutritionally adequate ration than feeding a cheaper inadequate ration. By having an independent animal nutritionist working for the benefit of the swine operation, formulation motivations are properly placed. It also tends to keep the premix priced like a commodity (cheaper) rather than as a specialty product (more expensive).

With an operation this large, a nutritionist working specifically for this farm should be retained. It wouldn't need to be a full-time job after the program was set up but it should be continual. Ten thousand pigs on feed at one time are a lot of "units" so making just a little improvement per unit can have a significant effect on the bottom line. A lot of controls need to be put in place to be sure adequate nutrition reaches the pig so that it can perform at its economic optimum.

Swine feeds generally contain some medications. Keeping up to date on these would be the job of the nutritionist and veterinarian working on this project. All pigs should be given iron shots soon after birth, have their eye teeth clipped, boars not to be saved for breeding should be castrated, all pigs should be wormed at weaning and fed the appropriate medications such as Tylan, Mecadox, etc.

Some feeds commonly fed in Ukraine should be reduced or eliminated from the diet. I'm thinking particularly of beet pulp, wheat mill run and other low energy feeds. The concept of "energy density" is important. A pig has a finite ability to eat feed. When a feed is low in energy, the pig usually cannot eat enough more of it to compensate in order to obtain adequate calories for high production.

Particular care must be taken if wheat mill run is fed as it contains ten times as much phosphorus as calcium. If there is not enough supplemental calcium fed so that ration calcium levels equal or surpass the phosphorus level of the diet, animal bone growth and animal growth in general will be impaired. This can be a real serious health concern to humans that don't drink milk and don't consume adequate calcium to balance the phosphorus consumed in grain and meat.

The calories in feed are used to satisfy the maintenance requirement of the pig first. Only energy consumed above the maintenance requirement is available for productive energy (in our case weight gain). When the energy density of the ration is low (due to the inclusion of low energy ingredients such as beet pulp and wheat bran), the pig can't eat an adequate weight or volume of feed to supply enough calories for optimum gain. With caloric intake limited, weight gain is also limited to the amount of calories consumed above the maintenance requirement. It is therefore important to feed high energy-dense feeds such as wheat and corn rather than beet pulp, wheat bran and even much barley and oats if rapid rates of gain and high feed efficiency are desired.

For even higher energy density you can add animal fat to the feed. This usually is not cost effective. Oils (fats with low melting point temperatures) should not be fed to swine, as the characteristics of the fat consumed become the characteristics of the stored body fat. When such oils are consumed (such as from acorns, potato chips, fish oil, etc.) the body fat becomes soft and greasy when the meat is cooked and besides being unattractive, may have unpleasant odors and flavors. Essential fatty acids (linoleic, linolenic and arachidonic) containing the proper balance of omega-3 and omega-6 fatty acids are required but feeding vegetable oils to pigs should be avoided, particularly during the finishing period.

Knowing when a hog is finished and ready to market is economically important because it takes more feed to put on fat than muscle. Here are the numbers. A gram of carbohydrate or protein contains 4 kilocalories of energy while a gram of fat contains 9 kilocalories. (Alcohol contains 7 kilocalories). Also to be considered is that muscle (protein) on a hog contains about 25% dry matter and the rest is water. With fat, the opposite occurs. Hog fat is about 80% dry matter. Therefore, when a pig begins to finish and put on fat, the fat being deposited is much higher in both energy and dry matter than if muscle were being grown. It therefore takes over twice as much feed to put weight gain on a pig as fat rather than as muscle.

Therefore, when a hog begins to finish, it costs much more per kilogram of weight gain than during the growth phase. To optimize profit, a pig should be marketed when it stops (or significantly reduces) growing muscle and begins to deposit a much higher percentage of fat. The eye of the experienced hog raiser can determine easily when this physiological change-over from growing to fattening is taking place. Pigs will differ at what weight and age this takes place so you have to "eyeball" each pig and market them when they are at the end of their muscle growing phase if profit is to be maximized. The person responsible for marketing pigs should walk the pens regularly and pick out those pigs that are ready for market based on their appearance and not on their weight or age.

In the Western market there is usually a price penalty for overly fat hogs so that an over-finished animal costs the hog raiser in both increased feed costs and decreased revenue. This price penalty is probably not present in the Ukrainian market but the higher cost of weight gain when a pig begins to fatten must be considered and pigs laying down a high percentage of fat should be marketed.

Increasing the efficiency of gain is obviously important as this reduces the cost of feed per unit of gain. Increasing the rate of gain is also important as you can sell the faster growing pig sooner and get your money earlier plus you can increase the number of pigs fed per year in the facility. Rate and efficiency of gain are highly positively correlated.

Since these pigs will be converted into pork by a facility owned by Rosan-Capital, it may be profitable to feed more vitamin E during the finishing period than is needed for growth. It has been shown that feeding extra dietary vitamin E to pigs and beef animals during the finishing phase will increase the shelf life of the pork and beef. It is particularly apparent with beef where the cut meat will retain its bright read color longer before turning dark. The increased shelf life of the pork and beef will usually justify the cost of adding extra vitamin E supplementation during the finishing period but there must be some way for the cost of the extra vitamin E to be returned to the feeder. Since this integrated enterprise is to be owned by Rosan-Capital, they may find it advantageous to feed for customer satisfaction at the meat counter rather than just raising pigs.

I think an animal nutritionist along with a swine veterinarian should be part of the permanent staff of this large operation.

5. FEED MANUFACTURING

I haven't seen the feed mill for this operation yet but have some general comments. Most of the feed mills I've seen in Russia and Ukraine use continuous mixers. I don't like these, particularly for pigs, as there are too many chances for mixing errors. I've seen continuous mixers continue to run after the bin containing a critical (which is any) ingredient such as the premix was empty. I suggest a batch ribbon mixing system that can mix a couple of tons at a time.

The fineness of grind of grains is important for pigs. A finer grind will increase feed utilization and reduce the amount of feed required. There is some concern about stomach ulcers with really fine ground feed but feeding a few ground oats will usually prevent this problem.

Some medications have withdrawal times so that care must be taken to avoid drug contamination and the feeding of the wrong ration. A drug inventory control system should be in place.

Since there will be a number of different rations with different pre-mixes, good internal control must be present to be sure the rations are mixed properly and delivered to the feed bin at the proper hog house. Inventory control is critical so that all ingredients are present when needed. We need specific feeds for specific feeding needs so one sack of feed won't fit all. We don't want any improvising in the mixing of feeds because the feed plant ran out of an ingredient. Feeding pigs for profit is a scientific operation.

One of the important jobs of the animal nutritionist is to work with ingredient buyers at the mill to buy the most economical ingredients and to formulate them accordingly. It would be logical that there could be some ration formulation changes as the price of grains (corn, barley, wheat, oats) and protein sources varied in relationship to each other. Various by-products may be economically attractive, such as corn gluten meal, meat and bone meal, etc.

If the mill does runs out of one ingredient, a nutritionist would be needed to reformulate the feed to the best option until the missing ingredient became available. Inventory control is very important and more difficult in Ukraine than in most Western countries.

I want to emphasize that formulating, mixing and delivering specific computer formulated least cost rations for specific groups of pigs is critical if a profit is expected from raising pigs. This takes a really coordinated effort among the ingredient buyers, feed mill operators, truck drivers and the hog operation managers that can be coordinated by the nutritionist if he/she is readily available. None of this should be left to chance as there are many places where errors can develop that will cost the hog operation money.

6. GENETICS

The genetic potential of the breeding stock and thus the entire hog operation will influence the animal health, carcass quality and rate and efficiency of gain. Hybrid pigs are preferable to purebreds for growing market hogs. This means the selection of herd sows of a specific hybrid breeding and the use of boars of another hybrid breeding is recommended so that the resultant offspring that will be finished and marketed have the genetic potential to grow efficiently and to supply the market with the type of carcass desired. Pure blood lines are established by the suppliers of breeding stock (particularly boars) to realize the benefits of heterosis (hybrid vigor). The genetic quality of the purchased boars eventually becomes the genetic quality of the herd if gilts are saved to enter the swine herd. I anticipate buying outside males but not females after the breeding herd is established.

7. ANIMAL HEALTH

Maintaining good herd health is probably the greatest challenge for a swine operation of this size to be profitable. I don't know about the expertise of local veterinarians but someone trained in maintaining good health of the swine herd should be on site regularly and play an active role. Nutrition plays an influence and the addition of medication to the feed can be helpful but a trained swine veterinarian should be involved to help maintain good animal health. Definite procedures for preventing disease should be part of the operating procedure. The chance for the introduction of swine diseases must be minimized by limiting visitors and isolating any off-premise pigs. New boars should be isolated for a specific period of time to determine if they are free of diseases. Any vehicles, including feed trucks, entering the hog premises should drive through a disinfectant bath. This should also be true for foot traffic.

Steam cleaning and/or chemically disinfecting the facilities should be standard operating procedures. It is helpful to have the facilities de-populated and sanitized between groups of pigs but this isn't always possible in a large operation where a continual supply of pigs are needed to keep the slaughter house running.

Hog raising facilities in the U.S. have gotten huge so this animal health expertise is available and should be accessed. We shouldn't wait until there is an outbreak of some disease before getting serious about animal health or we may find ourselves out of business. I think it is Armenia where a major disease outbreak of erysipelas has required the voluntary destruction of many pigs.

8. LABOR MANAGEMENT

At present the cost of labor in Ukraine is low. There can be some trade-offs between labor and equipment. It won't be as profitable to be fully mechanized in Ukraine as in the USA. However, I recommend that we focus on the desired level of labor efficiency and be a little ahead of the curve so as to maximize profit and thus be able to pay workers well and on time in order to attract and retain good employees. People (employees) are a "pain in the butt" and the fewer of them that it takes to get the job done, the better. Employees should be terminated for drinking on the job, theft or excessive absences. Paying a better than average wage on time is conducive to keeping good employees and thus allows you to increase your employee selection pressure to weed out the bad and retain the real productive workers. Bartering pork, feed and other items for some of their wages would be logical. Tax advantages to both the employer and the employees should be considered.

It may be advantageous to have a profit sharing plan or even an ESOP (Employee Stock Option (ownership) Plan) to take advantage of the powerful wealth creation potential of having motivated employees. Private ownership and employees sharing in the profitable results can unleash this motivation. This could be a profound change for most employers and employees in Ukraine.

A training program for employees should be in place to teach them what needs to be done and why. This could include both swine management and financial management. Employees should be empowered to think and to make decisions with a focus on helping to make a profit for the owners that will be shared with the employees. With an operation this big, modern employee management techniques should be used. It will be a challenge to meld two cultures - command and market economies - together.

While the main focus for Rosan-Capital will be to earn a profit, there can be some fringe benefits to society if the employees learn market economy principles. Some companies (Remington Steel for example) actually train their employees in financial management and share the company's financial data (income statement, balance sheet, cash flow projections etc.) with the employees so that all can think and work like management.

9. KHODORIV SLAUGHTER AND MEAT PROCESSING PLANT

The agribusiness infastructure in Ukraine is not well developed. There is therefore a greater need here than in the West to be vertically integrated in order to obtain supplies, do production, value add and market and to stay in business. (Striving for economic efficiency encourages vertical integration in the USA. In Ukraine vertical integration may be necessary to survive at all.) With what has been discussed previously, Rosan-Capital would have good control of the input (feed) and production phases of their swine production. By owning their own meat slaughtering and processing plants, they can gain control of the value-added processing and marketing. It therefore makes sense for them to have some involvement with the Khodoriv slaughter and meat processing facility.

The tastes of the consumer should be considered. Westerners generally prefer a leaner carcass with less fat than Ukrainians. It is also more profitable to grow lean (muscle) than fat tissue. Labeling the meat products and differentiating the product in the market place may allow for a premium price to be charged if a premium product is being produced and marketed.

The meat processing and sausage making capabilities at Khodoriv may not be adequate. Dr. Stepan Kurylas (DVM), a retired USDA meat inspector of Ukrainian origin, suggests that the Khodoriv plant should concentrate on slaughtering only and consider a new meat processing and sausage plant. There is a partially constructed building designed to process meat and make sausage in Chortkiv that Rosan-Capital might want to consider acquiring from the Chortkiv regional administration for use to process meat and to make sausage from animals slaughtered in Khodoriv. The building in Chortkiv is about two-thirds finished and is now sitting idle due to a conflict with a Western investor. The building is large with tiled walls but needs floors and equipment. Details are in Dr. Kurylas's report.

CONCLUSION

It is my impression that enough economic opportunity exists for Rosan-Capital to investigate seriously the integration of a feed plant, hog raising facility and slaughter and meat processing plant in Western Ukraine. A detailed business plan would facilitate the making of a good business decision. I have written about some of the general topics that should be considered in making this decision and in running the actual operation. Each section needs more details before implementation.

I would welcome the chance to be involved on a continuing basis as Rosan-Capital's animal nutritionist to be sure that the rations are formulated correctly, mixed as formulated and fed as specified. Close coordination with a veterinarian is also recommended. The animal nutrition and health issues should not be left to chance.

Roy Chapin, Ph.D., Animal Nutritionist
Land O'Lakes Farmer to Farmer Program, L'viv, Ukraine.

11145 Chapin Lane, Amity, Oregon 97101
Phone: 503-835-7317
Fax: 503-835-3333
E-mail: <[email protected]>