If you’re not using AIV, why not?

Annual Investment Value (AIV) is very underused as a measurement term by pig farmers the world over. Pig producers have a vast range of options in how best to spend their hard-earned capital. There are at least 100 feed additives to choose from, more than 200 medicinal products and at least that number of pieces of pig equipment; all of these from the very cheap to the extremely expensive. AIV (I invented the term 25 years ago) narrows the choice to a considerable extent.

A simple AIV calculation measures how many times your investment is turned over in a year, the usual timescale which banks and other lenders use. The more times it’s turned over, with each use hopefully bringing in a return, the more efficiently your money is being used.

For example, take product A that, from the published evidence, returns four times its outlay each time it’s used in a pig’s growth cycle. This Return on Extra Outlay (REO) of four to one looks to be good value. Maybe it is, but that’s not the end of the story.

Suppose another option or idea in the same area of pig rearing, product B, that’s used only during the pre-weaning stage (a creep feed, an additive, a vaccine, or extra heating) gives an REO of two to one. A no-brainer, you say; A still looks to be twice as good.

But wait a minute, an AIV on both options needs to be established. Product A, used in a growing/finishing feed, is turned over 2.5 times a year – the time it takes for a growing pig to be shipped. Its AIV is 4 x 2.5= 10.

Product B, used only in the farrowing house, is turned over 10.4 times a year (28-day weaning with the usual down days). Its AIV is 2 x 10.4 = 20.8. Therefore, it promises to be twice as good a way of investing money than product A. 

Not only is product B likely to be a better use of money over a year with its much higher AIV, but a further investigation into the relative physical performance the two options can often reveal a better financial benefit at slaughter. This is because money invested in the pig when it is (very) young – warmth, feed, comfort, cleanliness, immune stimulation/health, freedom from stress/competition and especially skilled stockmanship and the time to do it well – all pay off at slaughter.

A quick AIV check really brings this home and can be done on any investment option. Investment in the several options in the replacement gilt introduction sphere is another area where AIV checks can help to make wise business decisions. Ventilation, nutritional alterations and genetic improvements are others.

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About The Author

John Gadd, who has spent 60 years' involvement in pig production, has had more than 2,800 articles about pigs published and has written three best-selling pig textbooks. With hands-on experience that includes managing a grow-out herd at 1,800ft in Banffshire, Scotland, and 20 years in the allied industries with Boots' Farm Department, RHM Agriculture and Taymix, he set up his own international pig management consultancy in the mid 1980s and has now visited more than 3,000 pig units in 33 countries as a pig management adviser. (Photo courtesy Bournemouth Daily Echo)