Tom Anton, Greg Traxler, Daryl Kuhlers, Walter Prevatt, Steve Jungst, and Joe Little

Breeding and genetic methods are important factors in the profitability of any livestock operation. Cross-breeding combines desirable traits from more than one breed, resulting in a marked boost in vigor commonly referred to as heterosis. Heterosis provides the producer with animals that have better growth qualities as a result of utilizing the benefits of each breed. An AAES study looked at the economics of different crossbreeding options and found that market prices and management preferences will influence the profitability of these systems.

Research has shown several biological advantages in the terminal crossbreeding system because of full heterosis compared to the rotational crossbreeding system. In a terminal system, all replacement gilts are purchased from outside supplies, while the rotational system produces its own replacement gilts. The purpose of this study was to measure whether the financial value of the production gains realized from the terminal system cover the additional costs of maintaining such a system.

A simulation model based on enterprise budgets provided by the Alabama Cooperative Extension System was used to study the effect of variations in market prices on the profitability of each breeding system. Some of the data utilized were from a swine experiment conducted at the Lower Coastal Plain Substation in Camden.

The study compared three terminal crossbreeding systems and two rotational crossbreeding systems. One terminal system crossed Duroc (D) boars with Yorkshire (Y)-Landrace (L) sows and gilts (DxYL). A second terminal system crossed Yorkshire boars with Duroc-Landrace sows and gilts (YxDL). The third terminal system mated Landrace boars with Duroc-Yorkshire sows and gilts (LxDY). The first rotational crossbreeding system consisted of 33% DxYLD, 33% YxDLY, and 33% LxDYL crosses, and the second rotational system was comprised of 80% DxYLD, 15% YxDLY, and 5% LxDYL crosses. After preliminary analysis, the LxDY terminal cross was dropped from the study because it provided significantly lower returns under all conditions.

Figure 1. Effect of replacement gilt price premiums on breakeven price.

The price of replacement gilts is an important factor affecting the profitability of the terminal crossbreeding systems. A breakeven price was derived for each crossbreeding system over a range of gilt prices based on information obtained from commercial producers of replacement gilts (Figure 1). The DxYL terminal cross system had the lowest breakeven price when the price premium on gilts was less than $83. For gilt prices above this, the 80% rotational breeding system had the lowest average cost of production. There was a 40-cent-per-hundredweight (cwt) difference in breakeven price between the DxYL and the YxDL terminal crosses and a 64-cent-per-cwt breakeven price difference between the two rotational crossbreeding systems at all gilt prices.

The effect of variations in slaughter hog market prices also was examined. This analysis focused on the range of slaughter hog market prices experienced from 1990 to 1996. The 80%, 15%, 5% rotational and the DxYL terminal crosses were the most profitable systems. At very high slaughter hog market prices, the 80%, 15%, 5% rotational cross became more profitable than the DxYL terminal cross (Figure 2). Conversely, the 33%, 33%, 33% rotational crossbreeding system provided the lowest returns at the low end of the market hog price range, but when the market hog price was above $54 per cwt, the YxDL terminal cross provided the lowest returns.

Figure 2. Effect of slaughter hog prices on profitability.

In the end, producers must examine their operations and their goals. It is not feasible for a producer to switch crossbreeding systems with each change in input and output market prices.There are also factors that were not addressed in this study, such as merit pricing and the time involved in managing the breeding system. The rotational crossbreeding system is more complex to manage correctly and producers must take into account the opportunity cost of their management time.