Value-added ventures where pork producers own a processing plant have been in vogue in recent years, but the success of such activities is hit-and-miss. Soon, producers looking at ownership in a processing plant may have another tool to determine the viability of such an operation.
The Whole-Hog-Value Calculator, a new modeling program developed by Curt Lacy, agricultural economist, University of Georgia, helps you determine the value of the whole hog carcass, considering many variables.
“You need to know the number of hogs marketed, percentage of barrows and gilts, average weight of the hogs, minimum and maximum weights in the load, whether the carcass yields are above or below 75 percent, and finally the backfat and loineye depths, if available,” says Lacy.
To use the Microsoft Excel program, you will need to collect carcass information from either the Fat-O-Meater or a ruler. Lacy suggests that you enter in a wide range of prices for wholesale cuts, to develop an understanding of what price levels you would need to be profitable.
The program uses meat prices for the Institution Meat Purchase Specification wholesale cuts for 1/4-inch trim loins, skinless square bellies, bone-in hams, picnics, Boston butts and jowls. The program will include some of the wholesale cut prices, but if you need additional price information, Lacy suggests you go to the Agricultural Marketing Service Web site at http://www.ams.usda.gov. Lacy uses the third page of the Weekly National Carlot Meat report for the model’s prices. The web address for this page is http://www.ams.usda.gov/mnreports/NW_LS500.TXT. You also can use USDA’s byproduct drop-value report found on the AMS Web site .
The Whole-Hog-Value Calculator can be useful for producer groups to stage feasibility studies or business plans in pursuit of developing a pork packing or processing plant. This modeling program could help eliminate the guesswork that some groups have had to do in the past.
“The program can predict the number of various wholesale cuts that you would get from a load of hogs,” says Lacy. “It allows you to input different prices for the various cuts as well as for byproducts. It gives you a better idea of the product amounts that you will have and the value of those products.”
One thing producer groups tend to overlook when they start out is that even with a market for byproducts and specialty meats, challenges involved with those products still exist. The modeling program will illustrate how much of a specific byproduct you will need to put together a shipment of that product.
“If you don’t have a market for some of the smaller cuts or byproducts, you either have to find some way to market them or account for extra storage costs and time,” says Lacy. “Finding cold-storage space isn’t always easy.”
The same scenario of storage costs and time could come into play for some wholesale cuts, too. Meat wholesalers, retailers and foodservice suppliers all want a consistent product. If you can’t provide that – in appropriate amounts – you will need to find other markets that will accommodate your product.
“One of the helpful things this program does is show the effects of animal and carcass weight variations in pounds of the different cuts,” says Lacy. “Just because you know your hogs average 250 to 260 pounds, doesn’t mean you know how many 23-pound hams you will get. Once you account for the weight variations, it can really impact the amount of product you have available to market.”
While the program is designed primarily for those interested in selling a further-processed product, there may be some value to other independent producers as well. The program could provide you with more information about how pork performs further along the chain. That in turn could improve communication between packer/processors and producers.
“If a producer is bringing in very consistent sets of hogs with a small weight range, the program might allow him to show the packer/processor the value he’s providing,” says Lacy. That could give you more bargaining power when it comes time to negotiate a marketing contract.
As with any modeling program, the Whole-Hog-Value Calculator is used to provide you with more information, it does not automatically insure or even predict success or failure.
“The first thing to remember is that the program provides an estimate for products and returns, but it is not exact,” says Lacy. “There’s still a lot of variation when you deal with live animals. Also, remember that prices are never guaranteed, unless you have some kind of contract with your partners along the pork chain.”
When, Where and How to Get with the Program
The Whole-Hog-Value Calculator modeling program will be a valuable tool for producers looking to move into further processing one day, but it’s not ready yet.
Curt Lacy, University of Georgia agricultural economist, is developing the program and hopes it will be done sometime this spring.
The program will eventually be available through the National Pork Board at www.porkboard.org or the University of Georgia web site. To get to the program you will go to www.agecon.uga.edu, then click on “Extension,” and then click on “Computer Decision Making Aides,” which is where the program will appear once it is completed.
You may also call the NPB at (515) 223-2600 or (800) 456-PORK.