There are a lot of hogs coming to market in 2008, which means a lot of pork. But beef and poultry supplies aren’t lightening up either, so as some analysts have said, “there’s a wall of meat headed for the market this year.”

With pigs already on the ground or gestating inside female swine, there’s not much a producer can do to lighten the load — except for reducing market weights. Of course, there’s the packer factor to consider, as he may put some limitations on that strategy.

“While there’s often a call for all producers to reduce market weights to reduce the supply, the real issue is what works for the individual,” says John Lawrence, Iowa State University agricultural economist. “If you’re still marketing hogs at the same weight that you did when corn was $2 a bushel and live hogs were near $60 per hundredweight, it’s time to re-evaluate your decision.”

Certainly, record feed costs alone would suggest the need to re-align your marketing plans, but the year’s projected lower hog prices are coming in with a one-two punch on your bottomline. Of course, after years of marketing heavy-weight hogs, finding the right weight and reprogramming your staff to sort for that lighter weight will take some adjustment.

Lawrence emphasizes that the most profitable weight to sell your hogs is when the cost of adding the next pound is equal to the revenue of that pound. “The concept is simple, but it’s more complicated in practice,” he notes. That’s because the cost of adding weight changes with feed prices, and the additional weight can impact lean premiums, sort loss and whether your hogs hit the packer’s preferred spot. 

Lawrence and his colleagues have developed some examples for producers to look at, as well as a spreadsheet calculator to help you determine what’s best for your operation.

There are two versions of the spreadsheet calculator — “basic” and more detailed  — that you can use to find your own marketing sweet spot. They are available to producers at no charge through the Iowa Pork Industry Center Web site at www.ipic.iastate.edu/. You can download the spreadsheets onto your own computer for continued use.

Walking through the process would be an informative exercise for a staff-meeting. That way everyone has a clearer perspective of the challenges and options that your business faces in the year ahead — and it’s best to keep everyone informed.

Run the Numbers

Here’s an example of Iowa State University’s spreadsheet calculator that you will find at the Iowa Pork Industry Center Web site at www.ipic.iastate.edu/ to determine what market weight is right for your herd today. It addresses both live and carcass selling options. There’s also a more basic version available on the site.

Expected return from selling at a later date

 

Live

 

Carcass

 

Current weight of animals (pounds)

 

270

 

 

Number of days

 

7

 

 

Expected average daily gain (pounds per day)

 

1.88

 

 

Expected Added Gain (A)

 

13

 

 

Percent yield

 

 

75%

 

Expected market weight

 

283

 

212.37

 

Current base price (per hundredweight)

 

$30

 

$40

 

Expected price change (per hundredweight)

 

-$0.23

 

-$0.30

 

Change in packer premium (per hundredweight)

 

-$0.44

 

-$0.59

 

Price per pound of feed

 

$0.0750

 

 

Expected feed efficiency

 

4.530

 

 

Added feed cost per head

 

$4.47

 

 

Opportunity cost of space

 

0

 

 

Downer/dead percentage

 

0.3%

 

 

Cost of downer/dead

 

$0.20

 

 

Cost of added weight

 

$4.67

 

 

Cost of added weight (per hundredweight)

 

$35.51

 

$47.35

 

 

 

 

Change in return analysis:

 

 

 

Change in sort loss (per head)

 

-$0.50

 

 

Change in lean premium (per head)

 

-$0.75

 

 

Change in premium (per hundredweight)

 

-$1.25

 

 

 

 

 

Expected change in return from:

 

 

 

Selling at a later date (per head)

 

-$2.61

 

 

 

Source: John Lawrence, Iowa State University