Kansas State University (KSU) offers two different tools that can help pork producers determine optimal market weights for their hogs – factoring in current high feed costs, according to Mike Tokach, KSU Extension swine specialist.
The first tool is a KSU market weight predictor and the second tool calculates feed efficiency and marginal costs at heavy weights. Both can be found by going to the KSU Web site, www.ksuswine.org and clicking on Marketing Tools.
“Review the instruction page for the spreadsheet and put in your past finishing closeout data, and it will alter the incremental feed efficiency for every 5-lb. change in late finishing. So for example, from 210 to 300 lb., it will adjust your feed efficiency automatically for each market weight in that weight range,” Tokach explains.
The feed efficiency marketing tool includes three sections: one for margin over feed costs, a second for margin over feed costs and mortality and a third column for feed, mortality and facilities.
“What this tool shows is that even if you are in a contract situation, where you have to pay for facilities no matter what, or you own facilities, at today’s market price of around 70 cents a pound on a carcass basis, you don’t even cover your feed costs right now once you get past about 220 lb. market weight,” Tokach stresses. The spreadsheet doesn’t take into account the packer matrix.
Of course, producers must consider packers’ grids and how their buying programs impact producers’ marketing decisions. “If you sell hogs at 220 lb., you may get a substantial reduction in your price, but it depends on the packer and it depends on what kind of contract you have,” Tokach points out.
The second tool, the market weight predictor, incorporates the packer grid. Plug in your diet costs and market price and the spreadsheet will estimate what your optimal market weight should be.
The two spreadsheets were built to help producers with these marketing decisions and take all these factors into account. “Actually, we built these spreadsheets at a time when we needed to get producers to market their pigs heavier. It just so happens that now is a much, much more critical time to be looking at the other side of it, and just how light should you really take the pigs and still not get too much of a hit,” he says. The goal now is to market your hogs at as light a weight as the packer will allow without obtaining substantial price discounts.
“For instance, if your packer is Hormel, and your price drops 15-20% if you are 20 lb. under the optimal window, obviously, you can’t take them that light. But if you are on practically any other normal packer contract situation, you can probably market hogs closer to 240-260 lb., depending on which grid you are on,” Tokach says.
The KSU animal scientist says he is surprised that a lot of producers don’t realize just how negative profit margins are at heavy weights when feed costs are high. “They know they are operating at a loss – but they still think that you need to market hogs at 280-285 lb., and that is just simply not the case today,” he adds. Each producer needs to evaluate his/her own price and cost structure to determine the best marketing program.
Withholding feed the last 18 hours or so in late finishing can save producers some feed and not affect carcass weight as long as the time period doesn’t exceed 24 hours.
Reducing protein levels in late finishing is a big temptation right now, but it ends up costing people money instead of saving them money, Tokach warns.