Using $LOT to Determine Best Market Weight and Quantify Harvest Results - Dr. Mike Woltman, Illini Swine, from the 2016 Power Of The Past, Force Of The Future Customer Appreciation event, August 16, 2016, hosted by Rensselaer Swine Services and Bethany Swine Health Services, Jasper Country Fairgrounds, IN, USA.
More presentations at http://www.swinecast.com/2016-power-of-past-force-of-future-customer-appreciation
Dr. Mike Woltman - Using $LOT to Determine Best Market Weight and Quantify Harvest Results
1. Using $LOT to Determine Best
Market Weight and Quantify
Harvest Results
Mike Woltmann
Illini Farms
2. Discussion Points
•What is $LOT
•How can $LOT be used as a marketing tool?
•Projected profit per head next 12 months
•Using $LOT to project target market weights
4. What is $LOT
• The $ amount lost when a pig is marketed in any
weight category other than the best.
5. What is $LOT
• The $ amount lost when a pig is marketed in any
weight category other than the best.
• Best category is set at ‘0’ and $LOT is negative in all
other weight categories.
6. What is $LOT
• The $ amount lost when a pig is marketed in any
weight category other than the best.
• Best category is set at ‘0’ and $LOT is negative in all
other weight categories.
• Assumed there is unlimited time to reach the ideal
market weight category.
7. What is $LOT
• The $ amount lost when a pig is marketed in any
weight category other than the best.
• Best category is set at ‘0’ and $LOT is negative in all
other weight categories.
• Assumed there is unlimited time to reach the ideal
market weight category.
• Margin over feed drives what the best category and
$LOT for each weight category are.
18. How can $LOT be used as a
marketing tool?
•Project target weights
19. How can $LOT be used as a
marketing tool?
•Project target weights
•Determine current target weights
20. How can $LOT be used as a
marketing tool?
•Project target weights
•Determine current target weights
•Quantify marketing results with rapid feedback
to those involved in the day-to-day marketing
process
22. How Were Feed Costs And Market
Prices Determined?
• Based on 8-8-16 market close
• Hogs
• Futures prices
• Adjusted with historical basis
• Feed
• Corn = futures price adjusted for Northern Illinois
historical basis
• Meal = futures + $20
• DDGs = 115% of corn
23. Profit Per Head Cash
Cash
Lean Hog Price $65.50
Corn Price/Bu. $3.25
Meal Cost/Ton $355
Feed Cost/Ton $217
WF Cost/ lb. of gain $28.15
Live Breakeven $51.80
Carcass Breakeven $68.10
Profit/Loss Per Head -$5.65
Based off of 8-8-16 market close
24. Profit Per Head Fall/Winter 2016
October 2015 December 2015
Lean Hog Price $61.15 $53.82
Corn Price/Bu. $3.28 $3.13
Meal Cost/Ton $354 $352
Feed Cost/Ton $217 $213
WF Cost/ lb. of gain $28.27 $27.66
Live Breakeven $51.90 $51.20
Carcass Breakeven $68.30 $67.40
Profit/loss Per Head -$15.35 -$29.25
Based off of 8-8-16 market close. By lean hog contract period
25. Profit Per Head Winter/Spring 2017
February 2016 April 2016
Lean Hog Price $57.35 $63.35
Corn Price/Bu. $3.35 $3.47
Meal Cost/Ton $343 $341
Feed Cost/Ton $218 $222
WF Cost/ lb. of gain $28.40 $28.80
Live Breakeven $52.00 $52.50
Carcass Breakeven $68.40 $69.00
Profit Per Head -$23.85 -$12.20
Based off of 8-8-16 market close. By lean hog contract period
26. Profit Per Head Summer 2017
June 2016 July/August 2016
Lean Hog Price $75.58 $74.05
Corn Price/Bu. $3.63 $3.72
Meal Cost/Ton $342 $341
Feed Cost/Ton $227 $229
WF Cost/ lb. of gain $29.50 $29.75
Live Breakeven $53.20 $53.50
Carcass Breakeven $70.00 $70.40
Profit Per Head $6.60 $9.10
Based off of 8-8-16 market close. By lean hog contract period
28. What Measurements Are We Looking At
To Determine Best Market Weight?
•Margin over feed
•Cash or Future Hog Price
•Feed price - cost per pound of gain
•Mid-point of the best approximate 60-pound
range.
35. Day-to-Day Marketing Feedback
• Timely
• Return to farm day after marketed
• Simple
• Weight
• Variation
• Presented in 6 categories across all packers
• Focus on % in best category – narrow variation
• $LOT
36. Day-to-Day Marketing Feedback
• Timely
• Return to farm day after marketed
• Simple
• Weight
• Variation
• Presented in 6 categories across all packers
• Focus on % in best category – narrow variation
• $LOT
• This is integrated into a close-out program
37. Marketing Feedback Example
FARMLAND HEAVY
Load 1 Load 2 Load 3 Load 4 Load 5 Load 6 Total % of total
6/1/16 6/8/16 6/10/16 6/16/16 6/23/16 6/24/16
149 156 158 164 171 172 162
0 0 0 2 0 0 2
2 0 0 1 0 1 4
$2.14 $1.31 $1.16 $1.44 -$2.01 $1.13 $0.86
287 285 292 287 294 281 288
218 222 223 219 226 214 220
$77.38 $79.28 $80.68 $82.46 $84.29 $84.69 $81.47
< 164 < 215 0 0 0 0 1 2 3 0.3%
164 to 177 215 to 232 0 0 0 2 5 2 9 0.9%
178 to 207 233 to 271 26 26 17 25 19 49 162 16.8%
208 to 237 271 to 310 125 115 117 118 83 95 653 57.5%
238 to 252 311 to 330 6 21 21 17 35 10 110 9.7%
> 252 331+ 1 1 2 2 17 2 25 2.2%
Total 158 163 157 164 160 160 962
$LOT/pig $2.34 $3.70 $3.55 $3.88 $9.81 $6.00 $4.88
Farm
Group
Date
Days PW
Truck dead
Down or subject
Sort G/L
Live wt
Carcass wt
Carcass base
38. Marketing Feedback Example
Farm
Site Load 7 Total % of total
Date 8/10/16
Days PW 170 162
Truck dead 0 1
Down or subject 0 1
Sort G/L $0.27 $1.44
Live wt 293 280
Carcass wt 224 215
Carcass base $68.42 $72.23
< 164 < 215 1 1 0.1%
164 to 177 215 to 232 2 10 1.0%
178 to 207 233 to 271 10 317 30.8%
208 to 237 271 to 310 116 628 61.0%
238 to 252 311 to 330 18 58 5.6%
> 252 331+ 8 15 1.5%
Total 155 1029
$LOT $831 $4,918
$LOT/pig $5.36 $4.78
42. Upcoming Market Considerations
• Fall growth approaching
• Markets are falling
• Pull pigs ahead to get better markets?
• Target market weights are lower
• OR if not lower the loss for being over target weight is higher
than being under target
43. For Projected Fall Markets Lower $LOT Loss If
Lighter Than Target Versus Heavier
Base $54.25
Carcass
Value
$Lot
Versus Top
Category
0 150 -$38.29
151 160 198 209 $67.0 -$28.96
161 165 211 216 $83.3 -$21.57
166 170 217 223 $91.1 -$17.58
171 180 224 236 $100.3 -$6.61
181 200 237 262 $108.8 -$1.16
200 215 262 281 $121.5 -$1.83
216 235 283 308 $127.6 $0.00
236 240 309 314 $125.7 -$5.67
241 245 315 321 $123.5 -$25.30
246 250 322 327 $111.1 -$31.01
251 255 329 334 $98.7 -$36.95
256 335 0 $104.3 -$52.28
Carcass
Weight Range
Est. Live Wt.
Range
IPC
44. Upcoming Market Considerations
• Fall growth approaching
• Markets are falling
• Pull pigs ahead to get better markets?
• Target market weights are lower
• OR if not lower the loss for being over target weight is higher
than being under target
• Shackle Space/Scheduling?
45. Upcoming Market Considerations
• Fall growth approaching
• Markets are falling
• Pull pigs ahead to get better markets?
• Target market weights are lower
• OR if not lower the loss for being over target weight is higher than being
under target
• Shackle Space/Scheduling?
• All of the above say get into barns earlier rather than later