Selling Pork, Not Pigs

Establishing value of market hogs has gained accuracy and sophistication in recent years. Capturing the most value for the hogs you sell remains the biggest challenge and, perhaps, the biggest opportunity.

Before 1990, most pork producers fed pigs to a target live weight, called packers to get price bids and then delivered the pigs to the highest bidder.

During the '90s, packers adopted systems to estimate carcass lean. Target weights and lean content were established and premiums were paid on a sliding scale. These changes resulted in greater variation in carcass value.

The number of packers has declined in recent years, leaving producers with fewer marketing options. Market access and establishment of pig value are key issues that have prompted producers to reconsider their marketing strategies, focusing on selling pork rather than simply selling pigs.

Current trends are for cooperatives, niche marketers and integrators to maintain control of products through slaughter. Some do further processing to add value to pork cuts. Along with these changes, producers are attempting to establish the value of the components represented in the total carcass.

Packers are paid for weight of primal cuts in the dissected carcass, but each may cut carcasses differently. Few current, reliable market value reports exist for carcass components. The USDA Agricultural Marketing Service is responding with market reports of wholesale cuts and byproducts in addition to values for carcasses. (See sidebar: “Market Reports from USDA.”)

Carcass Merit Value Systems

In most U.S. markets, producers are paid for their pigs based on carcass weight and predictions of fat-free lean from on-line measurements of backfat or a combination of backfat and loin depth. But packers use several different instruments to predict fat-free lean in a carcass, and each packer uses a unique grid to establish discounts or premiums, according to their fat-free lean estimates.

Producers have often questioned whether the prices paid on these different grids reflect real carcass value. They point out that pigs have different values on different packer grids, noting that these differences are related to weight and backfat thickness.

Therefore, to help producers determine optimum marketing strategies, it is important to establish value of slaughter pigs and to evaluate different packer grids for their ability to predict value. These questions can be answered only by comparing predictions of value from different grids with the value based on the weights of primal cuts.

An objective was to make such comparisons by first determining value of carcasses of different weights and backfat thicknesses, then comparing these values with values predicted by different packer grids.

Carcass Separation Data Gathered

The carcass separation data came from a sub-sample of the 1,964 pigs included in the Quality Lean Growth Modeling Project (1996-1998), the Genetics of Lean Efficiency Project (2000-2001) and the 1996 and 2000 National Barrow Show Sire Progeny Tests. Data collection was made possible through pork checkoff funds allocated by the National Pork Board.

The pigs represented in the data were a mixture of purebreds and crossbreds from U.S. breeds and breeding companies, typical of pigs marketed today.

Data available on all pigs included carcass weight and both live animal, real-time ultrasound measurements (SCAN) and chilled carcass measurements of 10th rib backfat thickness and longissimus muscle area (CARCASS).

Hot carcass backfat thickness and loin depth were recorded on-line in the plant with a Fat-O-Meater (FOM) and an Automated Ultrasound System (AUS), and last rib midline backfat thickness was measured with a ruler (RULER).

As all 1,964 carcasses were not evaluated by all procedures, a sub-sample of 441 carcasses that had been evaluated by all procedures was used.

After evaluation in the plant, half of each carcass was transported to a central location and dissected into primal cuts according to Institution Meat Purchase Specifications (IMPS) standard procedures. The fat and other lean left after cutting to IMPS standards was priced as trim. The distribution, by live weight and backfat thickness, is shown in Table 1.

Dissection Standardized

The IMPS standards include an exacting set of protocols for dissecting carcasses into both bone-in and boneless primal cuts, and subsequently, how each is to be trimmed. Their purpose is to provide processors, downstream fabricators, distributors and retailers with a common language as they engage in the trade of primal cuts.

For example, Loin 410 is a loin with the bone in and trimmed to ¼ in. of backfat with the tenderloin included. The specifications describe how the loin is to be separated from the other primal cuts and how each area of the loin is to be trimmed. As a result, everyone engaged in the wholesale trade knows exactly what they will get with the Loin 410.

A list of IMPS primal cuts and specifications includes:

Ham 401 — Bone-in, all weights;

Loin 410 — Bone-in, ¼-in. trim, all weights;

Picnic 405 — Smoker trim, regular shank;

Boston Butt 406 — Bone-in, ¼-in. trim;

Sparerib 416 — Fresh; and

Belly 409 — Seedless, skinless, all weights.

Establishing Actual Carcass Value

In this study, the value of each cut for each pig was defined as the weight of IMPS primal cut multiplied by wholesale price. Average weekly weighted pork wholesale primal and trim prices from the USDA Market News Service 2001 National Carlot Meat Trade Review were used (Table 2). Value of carcass byproducts was also established using USDA reported prices of commonly sold byproducts. (See “Establishing Byproduct Values,” page 42).

Evaluating Packer Grids

Considerable variation in average backfat and loin depth, estimated by different instruments, existed in the sample (see Table 3).

For example, the average 250 lb.-pig with 0.96 in. 10th rib backfat had 0.82 in. 10th rib backfat on the FOM and 1.16 in. last rib backfat using the RULER. This only points out that one cannot compare averages from kill sheets from different plants. The important question is how well the instruments predict carcass value and whether there is a bias due to weight or backfat class.

The sub-sample of 441 carcasses evaluated by all instruments was used to calculate comparative carcass measures among the systems. Live and carcass measures were used.

Comparative Value

Total carcass value was determined by evaluating the average pig at each weight by a sample of processor grids (Table 4). Predictions from grids are from equations unique to each processor and determine value of the carcass paid to the producer. Processor grids included those using the FOM, AUS and RULER.

Carcass component value is the sum of the subprimal cuts and trim in each of the four primals, plus a byproduct value. The costs of slaughter, cutting, packaging and marketing must be deducted from the carcass component value before it can be compared with values determined by packer grids.

For example, an average 250-lb. market pig in this sample was worth $113.40 when sold to a packer using a Fat-O-Meater grid. That same pig had a value of $139.35 when valued by carcass components. But packer costs must be subtracted to determine net value.

Opportunity

Producers involved in systems that sell pork instead of pigs must efficiently manage slaughter, cutting, packaging and marketing costs if they are to increase net returns. All carcass components, including byproducts, must contribute income. Likewise, costs of all pork preparation activities must be minimized. This is the challenge and opportunity that some producers are now facing.