Transcript Management of Heavy Hogs

Maximizing Return
Marketing At The Right Weight
Phil Rincker
What weight should I market at?
• Not a one size fits all answer
• Too many variables at play
• Disclaimer:
– All data and grids contained in this presentation are
completely fictional. The actual numbers presented here
will not apply to your situation.
2
How Heavy Can I Go…?
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Genetics
Stocking Density
Marketing Strategy
Space Needs
Seasonal impacts
Feed Cost
Carcass Price
Packer
Transportation
Risk
– Will not include discussion on risk management
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Genetics
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Commercial vs. Maternal vs. Specialty
What is the growth potential?
What is the FC at different weights?
What happens from a lean perspective?
4
Genetics
• What does a 200 lb carcass look like? 230lb?
• What is your animal depositing at these weights?
5
Stocking Density
• Initial stocking density will influence late
finishing performance
– K-value or K-factor
– Caused by declining amount of space available
• This is also responsible for the increase in
growth and feed efficiency after first cuts are
removed
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Stocking Density
• K-Values (Gonyou, et. al.; 2006)
– Performance declines when pigs reach a given weight per unit of space
– 0.033 meters2/kg metabolic body weight (aproximately 26-28 lbs/ ft2)
– Pigs stocked at 6.5 ft2 will hit this at a lighter weight than pigs stocked at
7.5ft2
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Stocking Density
Estimated weight at 27 lbs per ft2 and different initial stocking densities
Stocking Density (ft2/pig)
Average Pig Weight (lbs)
Top 20% Aveerage Weight (lbs)
7.9
231
269
7.6
218
254
7.3
205
239
7.0
193
224
6.7
181
210
6.4
169
196
6.1
157
183
• Initial stocking density and the subsequent decrease in
performance may dictate when to take first cuts
• In order to take pigs heavier, initial stocking density
may need to be adjusted
• Need to balance stocking density, target weight, and
performance
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Marketing Strategy
• # of cuts / site visits
– Precision vs. Simplicity
– Biosecurity
• Acceptable Variation
– How narrow is the target on my grid?
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Space Needs
• When do I need to empty this barn so other
pigs can enter?
• Do I have enough time to hit my desired
weights?
• Managing pig flow with today’s health
challenges…
10
Seasonal Impacts
• Cool season
– Maximum intake
– Maximum growth rate
– Easier to hit target weight
• Hot season
– Reduced intake and growth
– Space needs may dictate marketing weight
rather than an optimal weight
11
Transportation
• Bigger pigs will require more trucks to empty
a site
– Should try to keep lbs/ft2 constant
1
Effects of loading density on transport losses at the plant .
Measurement
67.9
Loading Density (lbs/ft2)
64.8
61.5
58.2
55.0
51.7
Dead on arrival at plant, %
1.37a
0.81ab
0.11c
0.09c
0.00c
0.32bc
Non-ambulatory at plant, %
1.46ab
1.08abc
1.76a
0.89bc
0.13c
0.66c
Total Losses at plant, %
2.84
1
a
ab
1.88
1.87
ab
bc
0.98
0.13
c
0.98
c
Means within a row with different superscripts differ (P < 0.05)
Adapted from Ritter et. al. 2007
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Transportation
• Bigger pigs also show a tendency for
increased chance of DOA or fatigued animals
– May need to modify handling and loading SOP’s
– Follow TQA guidelines for ventilation, showering,
etc.
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Risks
• Markets could change
• Morbidity and Mortality
• Wear and tear on facilities and equipment
14
What is the goal?
• Minimize sort loss/discounts
– Packers grids are pretty stable
• Maximize revenue
– Heavier pigs will bring a bigger check
• Maximize return (profit)
– Targets will fluctuate depending on different
economic scenarios
– Carcass price, fixed and variable costs, other
influences
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Minimize Sort Loss
• Typical Weight and Lean Grid
• No sort loss area highlighted in green and white
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Maximize Revenue
• Biggest check is highlighted in green
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Maximizing Return
• Fixed Costs – hard to influence short term
• Variable Costs (feed, labor, utilities, vetmed…)
– Largest contributor is Feed Cost
– Where is the animal on its growth curve?
– What is the Feed Conversion
• Carcass Price
– Open market, contracts, formulas…
• Packer Grids
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Maximizing Return
• Need to understand how all of these fit
together…Can be complicated
• Simplified
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Is there positive return on additional pounds of gain
Is Carcass Price > Additional Feed Cost
What is my maximum achievable return?
Every profitable lb of gain increases return
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Simplified Examples
Feed Cost/lb
Carcass Price
($/lb)
Feed Cost
($/ton)
Feed:Gain
Carcass Gain1
Return
$1.00
$1.00
$1.00
$1.00
$0.70
$0.70
$0.70
$0.70
$220.00
$220.00
$320.00
$320.00
$220.00
$220.00
$320.00
$320.00
3
3.5
3
3.5
3
3.5
3
3.5
$0.44
$0.51
$0.64
$0.75
$0.44
$0.51
$0.64
$0.75
$0.56
$0.49
$0.36
$0.25
$0.26
$0.19
$0.06
-$0.05
1
Assumes a 75% carcass yield
• Additional considerations
– Facility, labor, etc.
– Packer discounts at heavier weights/fatter pigs
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What drives the decision?
• 18 months ago…
– Higher feed cost, Lower carcass prices
– Driven primarily by feed cost and feed conversion
• Today…
– Lower feed cost, Higher carcass prices
– Additional gain is profitable…to a point
– Driven primarily by packer grids
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If I feed to a heavier weight, where do I land on the grid
and how will I handle the discounts?
Feed Cost/lb
Carcass Price
($/lb)
Feed Cost
($/ton)
Feed:Gain
Carcass Gain1
Return
$1.00
$1.00
$1.00
$1.00
$0.70
$0.70
$0.70
$0.70
$220.00
$220.00
$320.00
$320.00
$220.00
$220.00
$320.00
$320.00
3
3.5
3
3.5
3
3.5
3
3.5
$0.44
$0.51
$0.64
$0.75
$0.44
$0.51
$0.64
$0.75
$0.56
$0.49
$0.36
$0.25
$0.26
$0.19
$0.06
-$0.05
1
Assumes a 75% carcass yield
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Margin Over Feed Cost (MOFC)
• Revenue – Input Costs = Return
– hopefully profit
• Feed costs can account for nearly 73% of wean-finish
production costs1
• Revenue – Feed Cost = MOFC
– Pretty good indicator of return
1
Iowa State University Cooperative Extension Service. 2014. “Estimated returns for
farrowing and finishing hogs or producing weaned pigs in Iowa.” Addendum to M-1284c.
Accessed 5/2/14. < http://www.econ.iastate.edu/estimated-returns/files/FWF/FWF14.pdf >.
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Margin Over Feed Cost
• Assumed
– $220/ton ave diet cost
– $1.00/lb carcass price
• Excludes fixed costs
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How does Sort Loss compare to MOFC?
Sort Loss Grid
MOFC Grid
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Targeting Maximum MOFC
• My pigs average 54% lean, not 58% lean
• So I should target 240 – 250 lb carcasses (320-333
lb pigs)?
• Only if you sell one pig at a time
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Single Pig vs. Population Model
• Really dealing with a distribution of weights, so
where should I center that distribution?
• To far in either direction is sub-optimal
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Margin Over Feed Cost Curve
Margin Over Feed Cost
Distribution of individual carcasses
At some point, return starts to decrease due to
poor feed efficiency, packer discounts, or both.
The goal is to minimize the damage done by the
tails of the distribution and maximize the return
where the majority of the pigs land on the grid.
160
170
180
190
200
HCW
210
220
230
240
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A distribution of carcasses
12000
10000
8000
6000
4000
2000
0
Ave HCW = 205.5 lbs; Std Dev = 19.6 lbs
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A distribution of carcasses
Most profitable weight category
at 54% lean
Carcass Weight (lbs) <149 150-159 160-169 170-179 180-189 190-199 200-209 210-219 220-229 230-239 240-249 250-259 260+ Total Count
48%
1
7
22
53
45
35
18
3
2
186
49%
1
3
14
52
31
14
8
3
126
50%
3
8
46
61
89
102
121
99
66
15
13
4
627
51%
6
17
39
42
156
202
289
301
217
151
35
22
8
1485
52%
12
180
300
223
486
652
721
932
712
213
108
56
29
4624
53%
9
153
189
607
1193
1896
2012
2568
2312
705
305
108
44
12101
54%
51
308
286
702
2286
3213
4483
3153
2861
805
275
115
39
18577
55%
23
283
189
302
1236
1536
2243
1583
1463
403
159
75
24
9519
56%
13
98
75
189
831
1069
1492
793
689
201
86
35
12
5583
57%
9
32
8
23
54
42
8
3
179
58%
0
Total Count
115 1043
1105
2179
6362
8756
11445
9519
8367
2549
983
424
160
53007
Ave HCW = 205.5 lbs; Std Dev = 19.6 lbs
•How far to the right can I afford to shift this distribution of pigs?
•5 – 10 lbs?
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A new distribution
16000
14000
12000
10000
8000
6000
4000
2000
0
Ave HCW = 205.5 lbs; Std Dev = 15.2 lbs
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The same new distribution
Most profitable weight category
At 54% lean
Carcass Weight (lbs) <149 150-159 160-169 170-179 180-189 190-199 200-209 210-219 220-229 230-239 240-249 250-259 260+ Total Count
48%
0
49%
0
50%
61
89
102
121
99
66
538
51%
156
202
765
301
217
151
3
1795
52%
120
280
670
700
1045
1234
870
133
37
5089
53%
189
306
1193
1896
2976
2568
2312
348
45
11833
54%
286
489
2286
3213
4867
3153
2861
647
74
17876
55%
189
407
1236
2238
2876
2234
645
445
34
10304
56%
189
831
1069
1553
953
723
128
26
5472
57%
23
54
18
5
100
58%
0
Total Count
0
0
784
1671
6433
9430 14238 10582
7732
1918
219
0
0
53007
Ave HCW = 205.5 lbs; Std Dev = 15.2 lbs
•How about this distribution?
•15-20 lbs?
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What Causes Variation at Marketing?
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Fill Time vs Marketing Period
Health Status/Challenges
Marketing Strategy and Timing (tops)
Short Space
Pig Selection and Loading
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Margin Over Feed Cost
Reducing variation allows us to target a more
profitable weight for the entire population
HCW
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How much more weight?
As much as is profitable for the entire population
135
125
120
115
110
105
100
95
90
85
80
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Margin Over Feed Cost
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What weight to market at?
• Understand your playing field
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Prices (feed, pigs, etc.)
Packer grid
Marketing strategy
Expected HCW variation
• Identify the correct weight for your system
– Maximize MOFC for the entire group, not the
individual pig
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Measure and Review
• Important to review these decisions and
evaluate execution
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System and site level
Immediate and longer term
Did we have the appropriate target weight?
Did we execute our marketing strategy and get the
right pigs on the right truck?
– What should we do differently?
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Thank You
Questions?
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