Today's low hog prices and high feed costs are squeezing producers' margins, and analysts have again called for lowering market weights to reduce supply, says John Lawrence, Iowa State University Extension livestock economist.
“Slaughter weight is a variable under the producer's control and, unlike the number of hogs coming to market, is one that can be adjusted in the short run,” Lawrence explains.
“It is also a dilemma for producers. Lowering market weights does reduce supplies, but to have a price impact, a large number of producers must participate,” Lawrence explains.
Reducing market weights by 5 lb. from 265 to 260 lb. is a 1.9% reduction in total pork supply. All other conditions equal, this reduction could result in a 5-6% price increase, or about $2.50/cwt., carcass, in a $50/cwt. market.
“If producers are still selling hogs at the same weight as they did when hogs were $75/cwt., carcass, and corn was $2/bu., it's time to reevaluate the optimal market weight. The most profitable weight at which to sell is when the additional cost of the next pound is equal to the revenue of that pound,” Lawrence states.
The problem with this simple marketing rule, however, is that reality dictates the cost of adding weight at an increasing rate and changes with feed prices.
Adding weight may also impact the lean premium and sort loss, which could impact the price of all pounds, not just the added pounds.
For help in making marketing decisions, visit the Iowa Pork Industry Center's Web site, www.ipic.iastate.edu.