The Value of a General Increase in Slaughter Weight for Pigs

The pig industry is an important part of Danish economy with an export value in 2006 of more than DKK 28 billions [Danish Meat Association (2007)]. The competition is hard and increased feeding costs are affecting the farmer’s profitability. Therefore it is important to optimize all aspects of Danish pig production, slaughtering processes and delivery. There have been varying opinions within the industry concerning an improved profit for the slaughterhouses and the farmers when increasing the slaughter weight. The argument for an increased slaughter weight is based on the fact that some of the costs at the slaughterhouses and at the farmers are unit costs variable to the number of pigs produced and for that reason it would be interesting if the slaughter weight was increased. If the slaughter weight was increased and the number of items produced almost unchanged, the costs per kg produced meat would decrease. The savings in costs should be compared to the possible decrease in the average sales price. These considerations are continuously taking place in the industry, but some more accurate tools to find the economic consequences are desired. This paper concerns the aspects of optimization at the slaughterhouses and farmers, especially regarding estimation of the economic consequences of an increased slaughter weight. Operations Research methods are used to solve this important practical problem for the industry. The model is a Mixed Integer Programming (MIP) model applied on four different weight scenarios, namely the current slaughter weight as well as increases in the slaughter weight of 5, 10 and 15 kg respectively. The model set up in this paper consists of 17 different products and four alternative uses of each pig, but the model can easily be changed to include more products and alternative uses. The model is illustrated in this paper using test data consisting of slaughtering data for 43,949 pigs slaughtered at one of the Danish slaughterhouses. Increased slaughter weight results in an increased turnover, but also in a decrease in the average price per kg. For a weight increase of 5 kg the average price per kg decreases by DKK 0.241. The similar decrease in average prices for weight increases of 10 and 15 kg is DKK 0.492 and DKK 0.706 respectively. This should be compared to savings at the slaughterhouses as well at the farmers, which previously have been estimated to approximately DKK 0.25 for each increase in slaughter weight of 5 kg. The main conclusion is that even relatively simple optimization models can be used to improve the basis of the slaughterhouses considerably for making decisions regarding the value of increased slaughter weight. Prices may vary over time as the market situation changes continuously. In order to make the results trustworthy and reliable for decision making, it is essential that prices, costs and product yields for different products are estimated carefully. Even though the computations are made for illustrative purposes, the figures indicate that other options than increased slaughter weight may be more profitable to pursue.