Dr. Phil Rincker, Elanco Swine Business, 2014 Pork Management Conference, June 17-20 in Tampa, Florida.

1. Maximizing Return
Marketing At The Right Weight
Phil Rincker

2. 2
What weight should I market at?
• Not a one size fits all answer
• Too many variables at play
• Disclaimer:
– All data and grids contained in this presentation are
completely fictional. The actual numbers presented here
will not apply to your situation.

3. 3
How Heavy Can I Go…?
• Genetics
• Stocking Density
• Marketing Strategy
• Space Needs
• Seasonal impacts
• Feed Cost
• Carcass Price
• Packer
• Transportation
• Risk
– Will not include discussion on risk management

4. 4
Genetics
• Commercial vs. Maternal vs. Specialty
• What is the growth potential?
• What is the FC at different weights?
• What happens from a lean perspective?

5. 5
Genetics
• What does a 200 lb carcass look like? 230lb?
• What is your animal depositing at these weights?

6. 6
Stocking Density
• Initial stocking density will influence late
finishing performance
– K-value or K-factor
– Caused by declining amount of space available
• This is also responsible for the increase in
growth and feed efficiency after first cuts are
removed

7. 7
Stocking Density
• K-Values (Gonyou, et. al.; 2006)
– Performance declines when pigs reach a given weight per unit of space
– 0.033 meters2/kg metabolic body weight (aproximately 26-28 lbs/ ft2)
– Pigs stocked at 6.5 ft2 will hit this at a lighter weight than pigs stocked at
7.5ft2

8. 8
Stocking Density
• Initial stocking density and the subsequent decrease in
performance may dictate when to take first cuts
• In order to take pigs heavier, initial stocking density
may need to be adjusted
• Need to balance stocking density, target weight, and
performance
Estimated weight at 27 lbs per ft2
and different initial stocking densities
Stocking Density (ft2
/pig) 7.9 7.6 7.3 7.0 6.7 6.4 6.1
Average Pig Weight (lbs) 231 218 205 193 181 169 157
Top 20% Aveerage Weight (lbs) 269 254 239 224 210 196 183

9. 9
Marketing Strategy
• # of cuts / site visits
– Precision vs. Simplicity
– Biosecurity
• Acceptable Variation
– How narrow is the target on my grid?

10. 10
Space Needs
• When do I need to empty this barn so other
pigs can enter?
• Do I have enough time to hit my desired
weights?
• Managing pig flow with today’s health
challenges…

11. 11
Seasonal Impacts
• Cool season
– Maximum intake
– Maximum growth rate
– Easier to hit target weight
• Hot season
– Reduced intake and growth
– Space needs may dictate marketing weight
rather than an optimal weight

12. 12
Transportation
• Bigger pigs will require more trucks to empty
a site
– Should try to keep lbs/ft2 constant
Measurement 67.9 64.8 61.5 58.2 55.0 51.7
Dead on arrival at plant, % 1.37a
0.81ab
0.11c
0.09c
0.00c
0.32bc
Non-ambulatory at plant, % 1.46ab
1.08abc
1.76a
0.89bc
0.13c
0.66c
Total Losses at plant, % 2.84
a
1.88
ab
1.87
ab
0.98
bc
0.13
c
0.98
c
Effects of loading density on transport losses at the plant
1
.
Loading Density (lbs/ft2
)
1
Means within a row with different superscripts differ (P < 0.05)
Adapted from Ritter et. al. 2007

13. 13
Transportation
• Bigger pigs also show a tendency for
increased chance of DOA or fatigued animals
– May need to modify handling and loading SOP’s
– Follow TQA guidelines for ventilation, showering,
etc.

14. 14
Risks
• Markets could change
• Morbidity and Mortality
• Wear and tear on facilities and equipment

15. 15
What is the goal?
• Minimize sort loss/discounts
– Packers grids are pretty stable
• Maximize revenue
– Heavier pigs will bring a bigger check
• Maximize return (profit)
– Targets will fluctuate depending on different
economic scenarios
– Carcass price, fixed and variable costs, other
influences

16. 16
Minimize Sort Loss
• Typical Weight and Lean Grid
• No sort loss area highlighted in green and white

17. 17
Maximize Revenue
• Biggest check is highlighted in green

18. 18
Maximizing Return
• Fixed Costs – hard to influence short term
• Variable Costs (feed, labor, utilities, vetmed…)
– Largest contributor is Feed Cost
– Where is the animal on its growth curve?
– What is the Feed Conversion
• Carcass Price
– Open market, contracts, formulas…
• Packer Grids

19. 19
Maximizing Return
• Need to understand how all of these fit
together…Can be complicated
• Simplified
– Is there positive return on additional pounds of gain
– Is Carcass Price > Additional Feed Cost
– What is my maximum achievable return?
– Every profitable lb of gain increases return

20. 20
Simplified Examples
• Additional considerations
– Facility, labor, etc.
– Packer discounts at heavier weights/fatter pigs
Carcass Price
($/lb)
Feed Cost
($/ton) Feed:Gain
Feed Cost/lb
Carcass Gain1
Return
$1.00 $220.00 3 $0.44 $0.56
$1.00 $220.00 3.5 $0.51 $0.49
$1.00 $320.00 3 $0.64 $0.36
$1.00 $320.00 3.5 $0.75 $0.25
$0.70 $220.00 3 $0.44 $0.26
$0.70 $220.00 3.5 $0.51 $0.19
$0.70 $320.00 3 $0.64 $0.06
$0.70 $320.00 3.5 $0.75 -$0.05
1
Assumes a 75% carcass yield

21. 21
What drives the decision?
• 18 months ago…
– Higher feed cost, Lower carcass prices
– Driven primarily by feed cost and feed conversion
• Today…
– Lower feed cost, Higher carcass prices
– Additional gain is profitable…to a point
– Driven primarily by packer grids

22. 22
Carcass Price
($/lb)
Feed Cost
($/ton) Feed:Gain
Feed Cost/lb
Carcass Gain1
Return
$1.00 $220.00 3 $0.44 $0.56
$1.00 $220.00 3.5 $0.51 $0.49
$1.00 $320.00 3 $0.64 $0.36
$1.00 $320.00 3.5 $0.75 $0.25
$0.70 $220.00 3 $0.44 $0.26
$0.70 $220.00 3.5 $0.51 $0.19
$0.70 $320.00 3 $0.64 $0.06
$0.70 $320.00 3.5 $0.75 -$0.05
1
Assumes a 75% carcass yield
If I feed to a heavier weight, where do I land on the grid
and how will I handle the discounts?

23. 23
Margin Over Feed Cost (MOFC)
• Revenue – Input Costs = Return
– hopefully profit
• Feed costs can account for nearly 73% of wean-finish
production costs1
• Revenue – Feed Cost = MOFC
– Pretty good indicator of return
1 Iowa State University Cooperative Extension Service. 2014. “Estimated returns for
farrowing and finishing hogs or producing weaned pigs in Iowa.” Addendum to M-1284c.
Accessed 5/2/14. < http://www.econ.iastate.edu/estimated-returns/files/FWF/FWF14.pdf >.

24. 24
Margin Over Feed Cost
• Assumed
– $220/ton ave diet cost
– $1.00/lb carcass price
• Excludes fixed costs

25. 25
How does Sort Loss compare to MOFC?
Sort Loss Grid
MOFC Grid

26. 26
Targeting Maximum MOFC
• My pigs average 54% lean, not 58% lean
• So I should target 240 – 250 lb carcasses (320-333
lb pigs)?
• Only if you sell one pig at a time

27. 27
Single Pig vs. Population Model
• Really dealing with a distribution of weights, so
where should I center that distribution?
• To far in either direction is sub-optimal

28. 28
Margin Over Feed Cost Curve
Distribution of individual carcasses
160 170 180 190 200 210 220 230 240
HCW
MarginOverFeedCost
At some point, return starts to decrease due to
poor feed efficiency, packer discounts, or both.
The goal is to minimize the damage done by the
tails of the distribution and maximize the return
where the majority of the pigs land on the grid.

29. 29
A distribution of carcasses
0
2000
4000
6000
8000
10000
12000
Ave HCW = 205.5 lbs; Std Dev = 19.6 lbs

30. 30
A distribution of carcasses
Ave HCW = 205.5 lbs; Std Dev = 19.6 lbs
Most profitable weight category
at 54% lean
•How far to the right can I afford to shift this distribution of pigs?
•5 – 10 lbs?
Carcass Weight (lbs) <149 150-159 160-169 170-179 180-189 190-199 200-209 210-219 220-229 230-239 240-249 250-259 260+ Total Count
48% 1 7 22 53 45 35 18 3 2 186
49% 1 3 14 52 31 14 8 3 126
50% 3 8 46 61 89 102 121 99 66 15 13 4 627
51% 6 17 39 42 156 202 289 301 217 151 35 22 8 1485
52% 12 180 300 223 486 652 721 932 712 213 108 56 29 4624
53% 9 153 189 607 1193 1896 2012 2568 2312 705 305 108 44 12101
54% 51 308 286 702 2286 3213 4483 3153 2861 805 275 115 39 18577
55% 23 283 189 302 1236 1536 2243 1583 1463 403 159 75 24 9519
56% 13 98 75 189 831 1069 1492 793 689 201 86 35 12 5583
57% 9 32 8 23 54 42 8 3 179
58% 0
Total Count 115 1043 1105 2179 6362 8756 11445 9519 8367 2549 983 424 160 53007

31. 31
A new distribution
0
2000
4000
6000
8000
10000
12000
14000
16000
Ave HCW = 205.5 lbs; Std Dev = 15.2 lbs

32. 32
The same new distribution
Ave HCW = 205.5 lbs; Std Dev = 15.2 lbs
•How about this distribution?
•15-20 lbs?
Carcass Weight (lbs) <149 150-159 160-169 170-179 180-189 190-199 200-209 210-219 220-229 230-239 240-249 250-259 260+ Total Count
48% 0
49% 0
50% 61 89 102 121 99 66 538
51% 156 202 765 301 217 151 3 1795
52% 120 280 670 700 1045 1234 870 133 37 5089
53% 189 306 1193 1896 2976 2568 2312 348 45 11833
54% 286 489 2286 3213 4867 3153 2861 647 74 17876
55% 189 407 1236 2238 2876 2234 645 445 34 10304
56% 189 831 1069 1553 953 723 128 26 5472
57% 23 54 18 5 100
58% 0
Total Count 0 0 784 1671 6433 9430 14238 10582 7732 1918 219 0 0 53007
Most profitable weight category
At 54% lean

33. 33
What Causes Variation at Marketing?
• Fill Time vs Marketing Period
• Health Status/Challenges
• Marketing Strategy and Timing (tops)
• Short Space
• Pig Selection and Loading

34. 34
Reducing variation allows us to target a more
profitable weight for the entire populationMarginOverFeedCost
HCW

35. 35
How much more weight?
As much as is profitable for the entire population
135
125
120
115
110
105
100
95
90
85
80

36. 36
Margin Over Feed Cost

37. 37
What weight to market at?
• Understand your playing field
– Prices (feed, pigs, etc.)
– Packer grid
– Marketing strategy
– Expected HCW variation
• Identify the correct weight for your system
– Maximize MOFC for the entire group, not the
individual pig

38. 38
Measure and Review
• Important to review these decisions and
evaluate execution
– System and site level
– Immediate and longer term
– Did we have the appropriate target weight?
– Did we execute our marketing strategy and get the
right pigs on the right truck?
– What should we do differently?

39. 39
Thank You
Questions?